Japanese companies are experiencing a more than 20% increase in rare-earth procurement costs due to China's export restrictions, a survey indicates. This situation highlights ongoing supply chain vulnerabilities for Japan, despite some diversification efforts.
The rising cost and restricted access to rare earths underscore Japan's ongoing vulnerability to geopolitical supply chain disruptions, impacting key industries like electronics, defense, and electric vehicles, and highlighting the broader economic risks of over-reliance on a single supplier.
The cost of procuring rare earths for Japanese companies has surged by over 20% in the past year, according to a recent survey, largely due to China's export restrictions. This situation highlights persistent supply chain vulnerabilities for Japan, despite some progress in diversification since the 2010 rare earth shock.
China's latest measures have effectively limited Japan's access to several heavy rare earths and related materials, including dysprosium, terbium, yttrium oxide, and gallium. These materials are critical components for advanced technologies such as high-performance magnets, electronics, defense systems, and electric vehicles. While China continues to export finished rare earth magnets, its control over critical supply chain chokepoints remains a significant concern.
Experts like Yasuyuki Todo, a professor at Waseda University, note that while Japan's overall reliance on China for imported parts has decreased since 2011, it remains high in certain sectors, such as auto parts and electrical/electronic products. Although China's share in Japan's rare earth imports has fallen from previous highs to around 40%, this level is still considered high, and specific materials may still show near-total dependence on China. Todo cautions that Japan has handled the rare earth issue "reasonably well" through diversification and technological development, but this does not equate to complete security, as demand for these materials is expected to rise sharply with electrification and advanced manufacturing.