Rare Earth Shortage Threatens Japanese Economic Boom

China's dominance in the global rare earth market is being leveraged through export restrictions, now impacting Japan's economy. Despite a recent upswing indicated by stock market records and corporate sentiment, an unprecedented number of corporate notices signal future risks. These minerals are crucial for manufacturing electric cars, weapons, and AI technologies, making their supply chain vulnerabilities significant.

Recent data shows China has significantly reduced or halted exports of essential rare earths like terbium and dysprosium oxide to Japan. This situation is particularly concerning as rare earths have become more critical to global supply chains since a similar trade restriction incident in 2010. Companies are increasingly citing export controls as a geopolitical risk alongside other global conflicts.

In response, Tokyo is accelerating efforts to secure stable mineral supplies. This includes investments, subsidies, and collaborations with allies like the United States, focusing on joint stockpiling and supply arrangements. Japan is also exploring rare-earth recycling and potential deep-sea deposit development, though commercial-scale output remains years away. The government aims to manage the issue to prevent panic and avoid conceding an early advantage to China.