Key facts
- China expanded export controls to include 20 more Japanese entities, including units of Mitsubishi Electric, Mitsubishi Heavy Industries, and Komatsu.
- Canada is actively seeking to partner with Japan on critical minerals supply chains, including joint mining ventures and off-take agreements.
- Japanese and Canadian companies signed over C$1 billion (US$705 million) in deals during a recent Canadian trade mission to Tokyo.
- Japan has reduced its reliance on Chinese rare earths, but China still holds significant leverage.
- The G7 has initiated a critical minerals alliance to diversify supply chains away from single non-G7 suppliers.
China has intensified its trade pressure on Japan by adding 20 more entities, including subsidiaries of major Japanese corporations like Mitsubishi Electric, Mitsubishi Heavy Industries, and Komatsu, to its export control list. This move occurred just days after Canada concluded its largest-ever trade mission to Japan, where it actively pitched Ottawa as an alternative partner for critical minerals supply chains.
International Trade Minister Maninder Sidhu, who led the Canadian delegation, stated that discussions with Japan involve joint mining ventures, off-take agreements, and shared stockpiles for minerals such as graphite and gallium. He highlighted an existing deal between Canadian firm Nouveau Monde Graphite and Panasonic Energy for anode material supply, noting that the agreement was expanded to potentially cover all of NMG's future Phase 2 output, demonstrating Japanese manufacturers' efforts to secure graphite supplies independent of China.
The trade mission resulted in significant commercial activity, with Japanese and Canadian firms signing over C$1 billion (US$705 million) in deals. Global Affairs Canada reported a total of 14 commercial deals worth more than $1.7 billion during the week-long trip, setting a record for a Canadian trade mission.
Japan has been working to reduce its dependence on Chinese rare earths, trimming imports to around 58% from a peak of nearly 90%. However, China still retains considerable leverage, having previously disrupted rare earth shipments to Japan in 2010. The current trade friction appears linked to a November comment by Japanese Prime Minister Sanae Takaichi regarding a potential Chinese attack on Taiwan, which provoked a strong reaction from Beijing.
Canada's pitch also includes energy, with discussions about expanding partnerships with Mitsubishi to increase natural gas shipments to Japan. This comes at an awkward time for Mitsubishi, whose subsidiaries are now on China's blacklist.
Diplomatically, the G7 leaders launched a critical minerals alliance in June, aiming to ensure that no single non-G7 supplier accounts for more than 60% of rare earths and magnets by 2030, with plans for coordinated stockpiling of lithium and nickel. While building Western alternatives to China's dominant refining capacity, which stands at about 70% for tracked minerals, will be a long-term endeavor requiring substantial capital, each new entity added to China's export list strengthens Canada's argument for Tokyo to diversify its supply chains, starting with Ottawa.