China's Rare Earth Exports to Japan Plunge 51%, Down 28% to the U.S.
Miles Bennett
In H1 2026, China's exports of seven controlled rare earths fell 51% to Japan and 28% to the U.S. This means → Beijing is turning rare earths into a standing diplomatic lever, not a one-off retaliation tool.
What is being controlled, and how?
In April 2025, China's commerce ministry imposed an export-licence regime on seven rare earths including dysprosium and terbium — both essential for the permanent magnets inside EV motors.
The licence is not rubber-stamped: sources say permits for high-performance rare-earth magnets containing dysprosium are extremely hard to obtain.
In plain terms = "licensing" is the label; the reality is a valve Beijing opens and closes at will.
Why is Japan hit hardest?
Year-to-date exports of dysprosium and terbium to Japan have fallen to zero. In June alone, total rare-earth shipments to Japan plunged 81% year-on-year — the fourth straight monthly decline.
Yttrium — used in heat-resistant aerospace-engine coatings, semiconductor equipment, and cancer-treatment devices — also dropped to zero for Japan in June.
This reflects a multi-front squeeze: tighter dual-use export controls on Japan in January → detention of two Japanese employees at a Fuji Electric subsidiary in May → formal arrest in June, plus 20 Japanese firms added to a control list. Rare earths are one piece of the campaign.
Is the goal a full cut-off — or pressure?
Sources say Chinese authorities sometimes approve a licence only after learning that a disruption could shut down a car factory.
This means → Beijing does not want Japanese firms to stop buying Chinese rare earths entirely; it wants them dependent enough to lobby Tokyo for warmer ties with Beijing.
Context: after PM Takaichi Sanae made controversial remarks about a Taiwan contingency, Beijing escalated rare-earth pressure. Panasonic Holdings adviser Tetsuro Homma said in July: "There is no doubt that Japanese companies' activities are being closely watched."
What about U.S.-bound exports?
Shipments to the U.S. dropped sharply after the April 2025 controls, briefly rebounded around the Trump–Xi meeting in October, then turned persistently unstable.
The two leaders discussed rare earths again in Beijing in May 2026, yet June exports to the U.S. still fell month-on-month.
Treasury Secretary Scott Bessent said on July 30 — after a video call with Vice-Premier He Lifeng — that he had urged China to "fully honour its rare-earth commitments." Trump has invited Xi to visit on September 24; rare earths are expected back on the agenda.
Can alternative supply fill the gap?
China accounts for roughly 70% of global rare-earth production. Alternative sources cannot close the gap in the near term.
In plain terms = the bottleneck is not whether deposits exist elsewhere, but that the entire chain — mining through processing — is concentrated in China. Even new mines would need years to reach volume.
For Japan, until bilateral relations show real improvement, supply uncertainty will keep weighing on manufacturing output expectations across affected industries.
Content is for reference only, not financial advice.