China’s Rare Earth Export Restrictions Could Cost Japan Up to $26 Billion

China’s Military and Civilian Export Controls Hit Japan’s Economy Hard

As China tightens export controls on seven military and civilian goods, concerns are growing about the potential impact on Japan’s economy. Takuhide Kiuchi, an executive economist at Nomura Research Institute, estimates that if China restricts a broad range of these exports, Japan could face annual economic losses of roughly $107 billion.

Estimating the Economic Impact of Rare Earth Restrictions

Specifically focusing on rare earth elements, historical data from 2010 suggests that if export bans last for three months, Japan could see economic damages of around $6.6 billion, which would decrease the country’s gross domestic product (GDP) by about 0.11%.

What’s more worrying is the possibility of these restrictions lasting longer. If export controls continue for a full year, the losses could reach approximately $260 billion, reducing Japan’s GDP by roughly 0.43%.

Supply Chain Constraints for Companies

China has also signaled that it may restrict supply routes through third countries, which could further limit the ability of Japanese companies to procure essential materials. In response, Finance Minister Satsuki Katayama is scheduled to participate in discussions at the upcoming G7 summit in Washington on January 12, as well as meetings of the Critical Minerals Finance Ministers, to coordinate international responses.

Urgent Need for International Cooperation

The Japanese government is prioritizing stronger international collaboration to secure stable supplies of critical minerals like rare earths. Building partnerships with multiple countries is key to minimizing economic damage and ensuring supply chain resilience amid rising geopolitical tensions.