As China has announced an export-control policy targeting Japan for dual-use (civilian and military) items including rare earths, it has begun to broadly restrict rare-earth exports to Japanese companies, the Wall Street Journal (WSJ) reported on the 8th (local time).

Citing two rare-earth exporters in China, the WSJ reported that China has begun restricting exports of medium-and-heavy rare earths and magnets containing them to Japanese firms. Reviews of rare-earth export-license applications bound for Japan have been suspended, and these licensing curbs are being applied not only to Japanese defense-industry companies but across Japanese industry as a whole, it added.

On the 6th, China banned exports of dual-use items intended for purposes that would help enhance Japan’s military capabilities, including Japanese military end-users, and even signaled a ‘secondary boycott’ targeting third countries that transfer Chinese-made dual-use items to Japan.

China Daily, the state-run English-language newspaper, also reported on the 7th, citing sources, that the Chinese government is considering tightening reviews of export-control licenses to Japan for seven medium-and-heavy rare earths that were designated for control in April last year. This raised the possibility that rare-earth exports for civilian use could also be restricted. At a regular briefing that day, Commerce Ministry spokesperson He Yadong said, “the civilian-use sector will not be affected,” but in practice it appears that not only rare-earth exports for military purposes but also those for civilian use are being squeezed.

In April last year, as the U.S.-China tariff war intensified, China defined seven medium-and-heavy rare earths among the 17 rare-earth elements samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium and related items as dual-use goods and has been managing them under export controls. To take these items out of China, a special export permit must be obtained after review, and China has regulated overall rare-earth exports by withholding permits or delaying procedures.

China effectively halted rare-earth exports to Japan when the two sides clashed in 2010 over the Senkaku Islands (called Diaoyudao in China), dealing a blow. Since then, Japan has tried to reduce its dependence on Chinese rare earths, but it still relies on China for around 60%. Nomura Research Institute predicted that if China restricts rare-earth exports for one year, Japan’s economic losses would amount to about 2.6 trillion yen (about 24 trillion won).

David S. Abraham, a rare-earth analyst who studied critical-minerals trade for Japan’s Ministry of Economy, Trade and Industry during the 2010 rare-earth crisis, said China’s rare-earth export restrictions would cause industrial disruptions in Japan that would ripple through global supply chains, saying, “the impact will seep in and spread.”

China ratcheted up pressure by pulling out the rare-earth export-restriction card roughly two months after remarks in November last year by Japanese Prime Minister Sanae Takaichi suggesting ‘intervention in the event of a Taiwan contingency’. Last year, China also issued an advisory urging its citizens to refrain from traveling to Japan, postponed the screening of Japanese films, and imposed a ban on imports of Japanese seafood.