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The Japanese government will move in March to bolster the nation’s reserves of rare earth elements and other rare metals, The Sankei Shimbun learned on March 14. The move is seen as being partly motivated by a desire to reduce overdependence on China that has been highlighted by the ongoing coronavirus crisis.

The soon-to-be-finalized Strategy for International Resources will call for increases in stockpiles of these substances, from the current uniform 60 days of reserves to up to 180 days, depending on the substance. Existing laws will also be amended to further protect the interests of Japanese companies.

Demand for rare earth substances is expected to increase, due to factors like the increasing popularization of electric vehicles (EV). However, as things now stand, Japan is heavily reliant on imports from China. The risk to that supply has come into stark relief as a result of the spread of the novel coronavirus. (RELATED ARTICLE: Newly-Discovered 16 Million MTs of Rare Earth Minerals Can Make Japan Independent of China)

Japan Needs Its Own Stable Supply

In light of the intensifying competition for natural resources, Japan is also eager to secure stable supplies and extricate itself from dependence on China.

The Japan Oil, Gas and Metals National Corporation (JOGMEC) is responsible for maintaining the nation’s rare metal reserves. In normal times, individual businesses handle their own procurement. With rare metals, however, as the name “rare” indicates, since the volume extracted is low and refining is difficult, procurement can quickly become challenging as the result of strained diplomatic relations and other variable conditions.

Therefore, a mechanism is in place whereby if supplies become tight, JOGMEC can, at the request of the Minister of Economy, Trade and Industry and under certain other circumstances, release reserves for use.

Current regulations provide for maintaining reserves at the equivalent level of 60 days’ demand for the 34 rare metals, including those in the private sector. These regulations are to be revised so that the reserves will be set at up to a 180-day supply for some metals. Reserve quotas will differ for each individual metal, taking into account factors such as emergency supply concerns.

Target: Halve Dependence on China in Five Years

In addition, the system under which the JOGMEC has been responsible for the quantity of reserves is to be changed, subject to approval by the Ministry of Economy, Trade and Industry (METI). (RELATED ARTICLE: Japan’s Strength in Resource Diplomacy Lies in Its Ocean Floor)

A METI official emphasized, “The national government will assume more direct responsibility compared to how things were handled up to now.”

The government intends to submit legislation for amendment of the relevant laws during the ongoing regular session of the Diet. Under the proposal, when trading companies and other businesses invest in refinement facilities for rare metals and rare earths, the government — via the JOGMEC — can provide financing and loan guarantees.

Actually, financing for mining activities is already possible. But, under the revised regulations, the scope of eligible activities will be expanded. The aim is to increase procurement from companies in the United States and Australia.

Take the example of cobalt, one of the rare metals. The Republic of Congo is the largest producer, but most of the facilities for smelting cobalt are located in China — an estimated 60% on a capacity basis.

In fact, Japan is dependent on China for 58% of its rare earth supplies. The government aims to reduce that ratio to less than 50% within five years.

As things now stand, there can be no doubt that Japan is vulnerable. That was amply demonstrated in 2010 when China restricted exports of rare earths to Japan amidst severe bilateral tensions in the wake of Tokyo’s nationalization of the Senkaku Islands.

Dependency on China for supply of these elements remains a major problem.

For one thing, these elements are used in the manufacture of missiles and other weapons. Reportedly, as trade tensions with the United States have worsened, Beijing has considered export restrictions on these materials.

Then, too, the impact of the novel coronavirus has increased concerns about stagnation of refining activities and shipments abroad. Japan can no longer afford to ignore risk.

Click here to read the related article in Japanese.

Author: The Sankei Shimbun