(Jan 7): Japan’s response to China’s latest export controls is likely to be cautious, reflecting both limited options for retaliation and a lack of appetite to escalate an already fraught relationship with its largest trading partner.
Beijing’s ban on exporting any dual-use items to Japan for military use — as well as a separate threat to step up rare-earths curbs — strike at well-known vulnerabilities in Japan’s supply chains. China dominates the global processing of many critical minerals and has used that leverage before to pile pressure on trading partners, including Japan and the US.
Any tit-for-tat response from Tokyo would risk compounding economic woes, especially for Japanese carmakers that require Chinese-source inputs to produce electric vehicles.
In the near term, Japan’s most credible counterweight lies across the Pacific. President Donald Trump has previously offered to give Takaichi “anything”. Just days ago, Takaichi said she had an “extremely meaningful” call with Trump and would visit the US later this year. Closer coordination with Washington could give Japan added leverage, whether through joint pressure on China or deeper cooperation on critical minerals and industrial policy.
Takaichi’s first instinct will likely be to coordinate closely with the US, Japan’s most important security ally. Shortly after Tokyo lodged a protest with Beijing over the latest export curbs, a senior Japanese diplomat held a call with his US counterpart on Wednesday to reaffirm close coordination between the two.
Takaichi is preparing for a visit to Washington, which could come as early as March. Back in November when tensions between China and Japan started to flare, Trump held back-to-back calls with President Xi Jinping and Takaichi — an effort to preserve the trade truce Washington has with Beijing while simultaneously reassuring Tokyo of US support.
See also: Japan seeks support as fears rise over China’s rare earth grip
Takaichi said at the time: “He told me I’m a very close friend and that I could call him any time.”
China holds far more economic leverage over Japan, but Tokyo is not without options. Japan is China’s second-largest market, accounting for about 4% of Beijing’s total exports and serving as an important outlet at a time when global trade frictions are squeezing Chinese manufacturers, Bloomberg Economics said.
See also: Japan bond futures hold gains after 30-year sale allays concerns
Japan is also China’s third-largest source of imports, supplying 6.3% of total inbound goods over the same period, with machinery and electronic equipment making up around 52% of those shipments.
More importantly, Japan holds dominance in some areas where China remains vulnerable. It controls around 90% of the market for advanced photoresist and certain packaging materials that are crucial for making cutting-edge semiconductors.
Any move to curb exports in this segment would hit at China’s ambitions to build a self-sufficient chip industry — one of the few levers Tokyo has that could inflict real strategic pain, especially if coordinated with the US and the Netherlands.
Doing so, however, would almost certainly provoke retaliation from Beijing and could backfire on Japan’s own economy, given China’s far greater capacity to absorb and deploy economic pressure.
With China also considering tighter export licence reviews for certain rare earth-related items to Japan, Tokyo could use that threat to rally support from other countries facing similar risks as the world remains heavily dependent on Beijing for critical minerals.
While Japan’s reliance on Chinese rare earths is still significant, it has made some progress in reducing that exposure since a slump in shipments during a dispute with China more than a decade ago.
After the 2010 embargo, Japan moved to diversify its sources of rare earths. It provided financial backing to Lynas Rare Earths Ltd — now the single biggest source of mined supply outside China — and looked for alternative resources including recycling, and built up stockpiles to cushion against supply shocks.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
Rather than absorbing Beijing’s pressure alone, coordinating with other nations allows Japan to strengthen its bargaining power and accelerate efforts to build alternative supply chains, even if those efforts will take time to fully bear fruit.
On the diplomatic front, Japan is expected to press its case through established platforms such as the Group of Seven
(G-7) and the United Nations, even as China works to court other countries to bolster support for its own position.
Japan is a core member of the G-7 and uses the forum to align positions with other advanced economies on trade, supply chains and economic coercion. Raising concerns about China’s export controls there would be an easy sell, since other members share similar concerns about critical minerals and industrial security.
Even so, Tokyo is likely to tread carefully. Its broader strategy is focused on avoiding adding fuel to the fire, prioritising de-escalation and seeking a resolution through dialogue with China rather than retaliation.
Uploaded by Evelyn Chan
