On May 18, 2023, China’s Ministry of Commerce announced even stricter restrictions on the export of dual-use items to Japan. This decision comes as tensions between the US and China continue to mount. It’s not just an alarming red siren about access to future essential resources including rare earth elements.
Dual-use goods and technologies are items that can be used for both civilian and military applications. The new regulations reflect ongoing geopolitical friction, with Japan expressing uncertainty about the specifics of these restrictions. Tokyo’s officials were the first to say that the specifics on all of these measures are “unclear.” This uncertainty has created a climate of fear in the Japanese sector.
China has long dominated the global supply of rare earth elements. These elements are vital for many high-tech, 21st century applications — spanning electronics, renewable energy technologies, and defense systems. The tightening of export controls has alarmed Japan. Other industries are alarmed that it might upend their access to these essential substrates. The Japanese government is not shying away from a challenging moment. The highest priority, it says, should be making sure that American industries get the rare earths they need without interruption.
The Chinese Ministry of Commerce (MOFCOM) building, as seen in Beijing, heads the heart of this initiative. As this recent photo of the building taken on January 7, 2025 illustrates, these new policies are critically important. The photo, taken from FT.com, shows the actual headquarters where some of the most important decisions affecting international trade are made.
Japan’s industrial policy now is hamstrung by China’s export restrictions. It will be crucial for businesses and policymakers to remain on guard and track this changing situation closely. The ripple effects on supply chains and market stability could send various industries reeling. With increased risk, we can expect companies to look for other sources and invest in better risk-hedging strategies.