China’s rare earth export ban leaves Japanese factories short of key metals
Japanese manufacturers are meeting only two-thirds of their rare earth needs after Beijing’s export controls cut off terbium and dysprosium shipments.
The terbium counter in Japan reached zero in the first half of 2026, and Chinese exports of terbium, as well as dysprosium shipments, stopped almost completely, Caixin Global reported on August 21.
Japan relies on these metals for the electric-vehicle magnets and semiconductor-equipment parts it still produces competitively. According to an Argus analysis released August 17 and carried by Caixin Global on August 21, Japanese manufacturers can now cover only about two-thirds of their rare-earth material needs. Operating with two-thirds of those inputs means Japanese factories are running out of time.
Prime Minister Sanae Takaichi’s government took a hard stance on Taiwan and worked to rebuild Japan’s defense industry. Beijing responded in early 2026 by imposing a ban on dual-use exports to military-linked Japanese entities and rare-earth controls on 40 defense, aviation and shipbuilding companies, plus 20 more on a watchlist, Caixin Global reported on August 21.
The underlying pressure predates 2026. After a fishing-trawler collision near the Senkaku islands in 2010, China withheld rare-earth shipments for about three months, prompting Japan to pledge never to rely on a single supplier. Yet Rare Earth Exchanges noted on August 14 that sixteen years later, China still supplies about 80 percent of Japan’s rare-earth imports because its material remained cheap and urgency faded. The lesson was learned—and then underfunded.
The current cutoff comes in a distinct form. Beijing began requiring licenses for seven medium and heavy rare earths in April 2025, expanded that list in October, and suspended the regime for the United States until November 2026 as part of a trade deal, Caixin Global reported on August 21. Japan received no pause: its dispute centers on Taiwan and rearmament, which Beijing refuses to negotiate. The licensing system simply ceased approving for Japan.
Magnet maker Proterial managed licenses through November 2025 but had none renewed as of July, TrendForce reported on August 17, summarizing Nikkei. Washington secured relief with soybeans and patience; Tokyo has nothing to offer for similar relief.
TrendForce reported on August 17, citing Nikkei data, that Japan imported only 13 tons of dysprosium in the first half of 2026, marking an 82 percent drop compared with the same period in 2024, with no arrivals at all in January, February, May or June.
Skillings reported on August 21 that yttrium imports, used as coating material for chipmaking parts, dropped 74 percent to roughly 204 tons.
European prices for dysprosium have surged sevenfold since controls began in April 2025, according to Nikkei figures cited by TrendForce on August 17. While China cut off Japan, it boosted shipments to the Netherlands by 121.4 percent year-on-year through June, keeping ASML supplied, Yonhap reported, citing China Daily via TrendForce on August 17. The supply is not broken; it is redirected.
TrendForce reported on August 17, citing Nikkei, that Mitsui Kinzoku built a Fukuoka production line for chipmaking-equipment materials using Chinese yttrium feedstock, but the shortage prevents serving export customers. The company opened a Liaoning sales office in April and may now close it. AGC, which uses yttrium in chipmaking components, continues production but is searching for alternatives (TrendForce, Aug 17).
A June survey by Resilire found that over 90 percent of 400 Japanese manufacturing executives lacked adequate supply of at least one rare-earth material, and on average relied on China for about 60 percent of procurement, Caixin Global reported on August 21. Inventory is the last safeguard, shrinking with each month of zero imports.
The 2010 squeeze delivers two lessons: while it lasted months—not years—and eventually eased, it drove Japan to invest in alternatives, including supporting Australia’s Lynas, which in March signed a deal with Japan Australia Rare Earths for 5,000 tons of NdPr alloy annually and a new 5,000-ton separation plant, Caixin Global reported on August 21. But the warning stands. Dysprosium and terbium—heavy rare earths China refines almost exclusively—were never replaced at scale by anything built after 2010.
The American deal offers a counterpoint. Controls prove reversible when a buyer gives Beijing something it wants. If Takaichi moderates on Taiwan, licenses for Japan could return within weeks, dissolving shortages faster than new mines can bridge them.
Proterial and Mitsui Kinzoku now ration exports and burn inventories. Automakers and chip-tool builders will face shortages later in 2026 and into 2027 because JOGMEC-backed alternative projects need one to two years to ramp up. Among them is a C$47.7 million July commitment to Toyota Tsusho’s Lofdal project in Namibia, Caixin Global reported on August 21.
The cost ends up in vehicle prices, equipment delivery timelines and supplier margins unable to pass on their losses. Beneficiaries are clear: Lynas, Namibian and Brazilian heavy-rare-earth projects, and Chinese refiners profiting from the dysprosium price jump in Europe.
At the center is the plant manager in Fukuoka or Anjo, forced to decide which customer’s order must be postponed.
Each manager bears the cost of relying on a single supplier—in this case, at sevenfold dysprosium prices—for the next round of procurement. That lesson, once learned, will not disappear when licenses resume.