Japan is well known for its upstream critical material value chains from automotive OEMs, battery makers, ferroalloys, to technology metals.

Japan’s industry is heavily reliant on imported raw materials to meet its consumption needs given a lack of domestic raw material potential.  Together with Australia, India and the USA, Japan forms the inaugural members of the 2007 Quadrilateral Security Dialogue (QUAD), which was viewed as a response to increased Chinese economic power and the group has expanded to include South Korea, New Zealand and Vietnam (QUAD+) and is investing critical minerals supply chains. In 2023, Japan (via JOGMEC) enhanced cooperation with the European Union on critical raw materials supply chains through a new Administrative Arrangement. Also this year, Japan and the USA signed an agreement strengthening critical minerals supply chains. And in October 2023, the UK and Japan agreed on a memorandum of cooperation establishing a new partnership on critical minerals.

These cooperation agreements with Western states point to both long-standing concerns in Japan over its import dependence, and anxiety about reliance on China for critical materials. In 2010, in an incident that has since attained near-mythic status, China halted exports of rare earth elements to Japan. The trade ban was, it was widely reported, a response to Japan's navy arresting a Chinese fishing boat captain near disputed islands in the East China Sea.

The extent to which China’s export suspension was linked to the territorial dispute remains unclear more than a decade on. Some have argued that the decline in rare earth exports to Japan was more likely the result of an earlier August 2010 decision in Beijing to cut rare earths exports worldwide anyway. Whatever the case, the incident is now commonly cited as an example of Chinese policy-makers using critical materials for geopolitical purposes. And this narrative, where hostile foreign powers pull economic levers and restrict raw material access, endures, and has become increasingly global in its appeal. 

Speaking to automotive OEMs last week in Japan, auto manufacturers and their supply chains shared a cautious view over global forecasts for high EV penetration rates with Project Blue. With a large export market to Europe and North America, Japanese OEMs see pressure to ramp up EV production to maintain the country’s global presence in the automotive industry. And raw material dependence creates risks to this requirement.