Corporate Japan’s rare-earth warnings get louder as China keeps the spigot closed
By Satoshi Sugiyama and Hina Suzuki
TOKYO, July 7 (Reuters) – A shortage of critical minerals is starting to impact the Japanese economy broadly, according to recent corporate filings, creating a sense of urgency for Prime Minister Sanae Takaichi’s government to find alternatives to China’s cut exports.
China dominates the global market for rare earths, which are vital to making products from electric cars to weapons, and uses these materials as a diplomatic cudgel.
Since Takaichi angered Beijing with comments about defending Taiwan in November, Beijing has halted shipments of some key minerals to Japan.
Back-to-back records in the Nikkei stock index and recent gains due to buoyant corporate sentiment in the Bank of Japan’s Tankan survey indicate that the economy is on the rise. However, the unprecedented increase in corporate companies’ reporting on critical minerals in Japan provides a warning signal for the coming quarters.
Japan’s economy took a hit of about 0.9% of GDP during China’s trade restrictions in 2010, but the impact could be worse this time due to the increasing importance of rare earths in various supply chains, said Takeshi Higashifukasawa, chief economist at Mizuho Research Institute.
“With the development of artificial intelligence, rare earths are being used in a wide range of products and throughout supply chains,” Higashifukasawa said, noting that electric vehicles have since entered the discussion. “Companies cannot afford to be optimistic.”
Chinese customs data last month showed no exports of terbium or dysprosium oxide to Japan from November to May and minimal shipments of yttrium oxide since December, cutting off supplies critical to making powerful magnets.
Over the past decade, fewer than 40 rare earths were mentioned per month in regular filings with the Tokyo Stock Exchange; most of these were concentrated in the materials and industrial sectors. But such notifications have doubled since May and are now increasingly cited as a risk by consumer and electronics firms.
More than two-thirds of nearly 200 submissions mentioning rare earths in May and June said export controls had negatively affected their business or could do so in the future.
“If restrictions on the export of rare earth elements or similar measures continue for a long time, this could affect the group’s production activities and financial performance,” watchmaker Citizen Watch said in a June 23 warning.
In response to questions from Reuters, Citizen Watch said rare earths are used mainly in engines, but they do not impact production or earnings, adding that it does not expect to revise its earnings forecasts at this time due to rare earth-related supply risks or China’s export controls.
