Japan says China’s dual-use export ban ‘unacceptable’, rare earths in crosshairs
by Satoshi Sugiyama and Rocky Swift
TOKYO, Jan 7 (Reuters) – Japan’s top government spokesman said on Wednesday that China’s ban on exports of dual-use products to the country was “absolutely unacceptable and extremely regrettable” as a diplomatic row between Asia’s two largest economies escalated.
Dual-use products are products, software, or technologies that have both civilian and military applications, including some rare earth elements needed to make drones and chips.
Japanese Prime Minister Sanae Takaichi touched on the dispute with Beijing late last year, saying China’s attack on democratically governed Taiwan could be considered an existential threat to Japan. China considers Taiwan to be part of its territory, but the island denies this claim.
Beijing demanded that he retract his remarks, which he did not do, prompting a series of countermeasures; The latest of these was Tuesday’s ban on the export of dual-use products for military use.
“Such a measure targeting only our country is significantly different from international practices, is completely unacceptable and deeply regrettable,” Japan’s Chief Cabinet Secretary Minoru Kihara said at a daily press conference on Wednesday. he said.
It declined to comment on the possible impact on Japanese industry, saying it remained unclear exactly which elements would be targeted.
Market reaction to the news was relatively muted, although Japanese stocks were lower on Wednesday; This negatively affected the global trend that brought US and European benchmark indices to record high levels.
Japan’s broad Topix stock index fell 0.55%, while the subindex for mining stocks led the decline, falling 3.2%.
THEN RARE EARTH RESTRICTIONS?
China Daily, a newspaper owned by the ruling Chinese Communist Party, reported Tuesday that Beijing is considering more broadly tightening licensing scrutiny of rare earth exports to Japan, citing sources with knowledge of the matter.
Analysts say such a move could have far-reaching effects on the manufacturing powerhouse, including the core automotive sector.
Although Japan has sought to diversify its supply of rare earths since China last restricted mineral exports in 2010, about 60% of its imports still come from China.
A three-month restriction on China’s rare earth exports, as seen in 2010, could cost Japanese businesses 660 billion yen ($4.21 billion) and cut 0.11% of annual gross domestic product, Nomura Research Institute economist Takahide Kiuchi said in a note Wednesday.
He added that a one-year ban would reduce GDP by 0.43%.
So far, Chinese Customs data has shown no signs of a decline in rare earth exports to Japan, although the data is being released with a slight delay. In November, the last month for which data is available, exports rose 35% to 305 mt; This was the highest number last year.
($1 = 156.6800 yen)
(Reporting by Satoshi Sugiyama, Kantaro Komiya, Tim Kelly and Rocky Swift in Tokyo; Liz Lee and Lewis Jackson in Beijing; Writing by John Geddie; Editing by Michael Perry)
