The Tamesis
Asia’s two largest economies are again at loggerheads after China’s ban on dual-use items intensified a dispute with Japan.
Dual-use items refer to goods, software, technology or commodities that have both civilian and military uses. Rare earth elements, for example, are crucial in making drones and chips.
Japan’s top government spokesman said on Wednesday that China’s actions were “absolutely unacceptable and deeply regrettable.”
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Japanese Prime Minister Sanae Takaichi sparked a row with Beijing late last year, saying China’s attacks on democratically governed Taiwan could be seen as an existential threat to Japan. May trigger a collective self-defense response.
However, Chinese President Xi Jinping considers Taiwan part of its territory, a claim that most island residents appear to reject.
Beijing asked Gao to retract her remarks, but she failed to do so, triggering a series of countermeasures, the latest of which was a ban on exports of dual-use items on Tuesday.
“Such a measure that targets only our country is very different from international practice, is absolutely unacceptable, and is deeply regrettable,” Japan’s Chief Cabinet Secretary Minoru Kihara told a daily news conference on Wednesday.
He declined to comment on the impact this might have on Japanese industry, saying it was unclear exactly which projects would be targeted.
Although Japanese stocks were lower on Wednesday, bucking a global trend that saw U.S. and European benchmarks hit record highs, the market reaction to the news was relatively muted.
Japan’s Topix stock index fell 0.55%, with the mining sub-index leading the decline, falling 3.2%.
Rare earth ban could hit auto industry
China Daily, a newspaper owned by China’s ruling Communist Party, reported on Tuesday that Beijing was considering tightening licensing reviews of Japan’s rare earth exports more broadly, citing people familiar with the matter.
Analysts said the move could have wide-ranging implications for the manufacturing powerhouse, including its key automotive industry.
Although Japan has been seeking to diversify its rare earth supply since 2007 China last restricted mineral exports in 2010about 60% of imports still come from China.
Nomura Research Institute economist Takahide Kiuchi said in a report on Wednesday that a three-month restriction on China’s rare earth exports, like the one in 2010, could cost Japanese companies 660 billion yen ($4.21 billion) and reduce annual gross domestic product by 0.11%.
He added that a one-year ban would reduce GDP by 0.43%.
So far, Chinese customs data has shown no sign of a decline in rare earth exports to Japan, although there has been some delay in releasing the data. Exports in November (the latest month for which data are available) rose 35% to 305 tons, the highest level last year.
- Reuters Additional editing by Jim Pollard
See also:
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China says it will approve “civilian” license for rare earths
China ramps up trade pressure on Japan over Taiwan comments
Japan signs rare earth and nuclear power deals with Trump
China restricts rare earth exports to defense companies and chipmakers
China-Japan dispute hampers efforts to join CPTPP trade bloc
China ramps up trade pressure on Japan over Taiwan comments
China holds a “heavy” card in the high-stakes rare earth power game
Auto exports decline in third quarter, Japan’s economy shrinks
