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China’s Export Controls on Dual-Use Items to Japan and Implications for South Korea |
| February 19, 2026 |
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Byung Chul LEEVisiting Research Fellow, Sejong Institute | bcclee65@naver.com
- In early 2026, the security and economic environment in East Asia is entering a phase of structural tension. Following remarks made by Japanese Prime Minister Takaichi Sanae on November 7, 2025, before the House of Representatives Budget Committee, in which she stated that a Taiwan contingency could constitute a “survival-threatening situation” for Japan, China has escalated its retaliatory measures in a graduated fashion. These measures have included travel advisories discouraging visits to Japan, bans on Japanese films and performances, the cancellation of resumed seafood imports, and the imposition of export controls on dual-use items. Dual-use items refer to goods that can be utilized for both civilian and military purposes, with representative examples including semiconductors, rare earth elements, advanced materials, and precision machinery. Because such items simultaneously determine the competitiveness of advanced industries and national security, the activation of export controls delivers immediate and wide-ranging shocks across industrial supply chains. The present case is qualitatively distinct from the informal measures employed during the Senkaku (Diaoyu) Islands dispute, in that it constitutes a comprehensive, legally codified system of controls over the export of dual-use items. This paper analyzes China's retaliatory measures against Japan, with a focus on dual-use items, and seeks to derive policy implications for the Republic of Korea.
- Following Prime Minister Takaichi's remarks on November 7, 2025, China characterized them as a serious violation of the "One China" principle and demanded their retraction. When Japan refused, China escalated its retaliatory measures in a graduated fashion. On January 6, 2026, China's Ministry of Commerce issued and immediately implemented the "Announcement on Strengthening Export Controls on Dual-Use Items to Japan (2026, No. 1)." According to the announcement, "the export of all dual-use items to military end-users in Japan, for military end-uses, and to any end-users or end-uses that could contribute to the enhancement of Japan's military capabilities is prohibited." Of particular note is the secondary boycott provision. The announcement explicitly states that "any organization or individual in any country or region that transfers or provides relevant dual-use items originating from the People's Republic of China to any organization or individual in Japan shall be held liable in accordance with the law," thereby making clear the intent to block circumvention through third-country transshipment routes.
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Japan depends on China for a significant portion of its rare mineral imports. Approximately 60 percent of Japan's rare earth imports originate from China, and its dependence on China for heavy rare earth elements, specifically (dysprosium and terbium), approaches nearly 100 percent. China controls approximately 69 percent of global rare earth production (270,000 metric tons in 2024) and approximately 90 percent of global refining capacity.
Japan's dependence on China extends beyond rare earths to other strategic minerals as well. China controls 98 percent of global gallium production, rendering short-term substitution effectively impossible, while China's dominance in germanium refining similarly presents significant supply risks. Approximately 90 percent of Japan's natural graphite imports are sourced from China, and given that China accounts for more than 85 percent of global magnesium production, any supply disruption would inevitably deliver an immediate shock. With respect to tungsten, approximately 55 percent of Japan's imports originate from China; while alternative suppliers such as Vietnam and Australia exist, China's share of global production exceeds 80 percent, meaning that vulnerability persists. China also accounts for 95 percent of global production of high-purity manganese sulfate, a critical material for next-generation batteries.
The Nomura Research Institute (NRI) estimates that if China's rare earth export controls were to persist for three months, the resulting decline in Japan's industrial output would amount to approximately 660 billion yen, equivalent to a 0.11 percent reduction in GDP, and that a duration of one year would result in a decline of approximately 2.6 trillion yen, equivalent to a 0.43 percent reduction in GDP. Furthermore, NRI analysis indicates that should China expand controls to encompass dual-use items more broadly, approximately 42 percent of Japan's total imports from China, valued at 25.3 trillion yen, would fall within the scope of impact, including semiconductors and electronic components and telecommunications equipment (7.7 trillion yen), personal computers and related products (2.4 trillion yen), precision machinery (0.4 trillion yen), and chemicals (0.2 trillion yen). The Daiwa Institute of Research (DIR) projects that if supply constraints were to persist for one year, Japan's real GDP would decline by 1.3 percent, equivalent to 7 trillion yen, and employment would decrease by 1.3 percent, equivalent to 900,000 workers. Should import controls be extended to cover rare minerals beyond rare earth elements, DIR further estimates that the magnitude of decline would expand to 3.2 percent of real GDP, equivalent to 18 trillion yen, with a corresponding reduction of 3.2 percent in employment, equivalent to 2.16 million workers. -
During the 2010 Senkaku (Diaoyu) Islands incident, Japan acceded to China's demands by releasing the detained fishing vessel captain, and the situation was resolved within a matter of days. In the present case, however, Japan has refused to retract Prime Minister Takaichi's remarks, and the situation has entered a prolonged standoff. Drawing on the lessons of the 2010 incident, Japan has over the past fifteen years reduced its dependence on China for rare earths from 90 percent to 60 percent through a combination of supply source diversification, development of alternative technologies, expansion of national stockpiles, enactment of the Economic Security Promotion Act (2022), and deep-sea rare earth extraction initiatives. It is precisely this prior preparation that has enabled Japan to sustain a protracted confrontation even as Chinese pressure has reached unprecedented levels.
The first measure is supply source diversification. Following the Senkaku (Diaoyu) Islands incident, Japan invested 250 million dollars in Australia's Lynas Rare Earths in 2011, securing an annual supply of 8,500 metric tons of rare earths. In 2023, the Japan Organization for Metals and Energy Security (JOGMEC) and Sojitz Corporation made an additional investment of approximately 18 billion yen, securing up to 65 percent of Lynas's production of heavy rare earth elements (dysprosium and terbium). Between 2024 and 2025, Japan also moved to secure refining capacity within Europe, investing a total of 210 million euros in the French refining company Caremag.
The second measure is the development of alternative technologies. In 2017, Hitachi became the first company in the world to commercialize an industrial motor that uses amorphous metal and requires no rare earths. In 2018, Toyota developed a heat-resistant magnet that reduces neodymium usage by up to 50 percent, replacing costly heavy rare earth elements with less expensive lanthanum and cerium while maintaining equivalent heat resistance. Such reduction and elimination technologies are structurally lowering demand-side dependence on China. TDK, Shin-Etsu Chemical, and other companies are likewise mitigating the impact of export controls through technologies that reduce heavy rare earth content in permanent magnets.
The third measure is the strengthening of national stockpiles. Through JOGMEC, Japan centrally manages 34 mineral categories at a national stockpile facility of approximately 37,000 square meters located in Takahagi City, Ibaraki Prefecture. While the previous target was a 60-day domestic supply (42 days of government stockpile combined with 18 days of private sector stockpile), the Ministry of Economy, Trade and Industry raised the stockpile target for high-risk minerals to a maximum of 180 days in its "New International Resource Strategy" released in March 2020. According to the Nikkei, current rare earth stockpiles amount to between six months and one year of supply, providing substantial buffer capacity against short-term supply disruptions.
The fourth measure is the utilization of "urban mining (都市鉱山).“ Urban mining refers to the concept of recovering rare minerals from discarded electronic products as a resource. According to the National Institute for Materials Science (NIMS), Japan's domestic accumulated stock amounts to approximately 16 percent of global gold reserves and approximately 22 percent of global silver reserves. Mitsubishi Materials processes approximately 2.3 million discarded home appliances annually across six factories nationwide and has developed technology to recover rare earth magnets from motors, in which rare earth elements such as neodymium and dysprosium account for approximately 30 percent of the magnet's weight. As the rate of rare earth motor adoption in home appliances and hybrid vehicles continues to rise, the company is pursuing commercialization with a target of recovering tens of tons annually by around 2026. In November 2025, DOWA Holdings commenced a demonstration test in Akita Prefecture for the recovery of neodymium magnets following the processing of waste motor elements.
The fifth measure is the development of domestic marine resources. On the seabed of the EEZ surrounding Minamitorishima Island (南鳥島) lie deposits of “rare earth-rich mud (レアアース泥)” of the highest grade in the world. A research team from the University of Tokyo discovered this rare earth-rich mud in 2013 at a depth of approximately 6,000 meters on the seabed, with a grade approximately 20 times higher than that of Chinese onshore mines, and in 2018 announced estimated deposits of approximately 16 million metric tons.
On February 1, 2026, the Japan Agency for Marine-Earth Science and Technology (JAMSTEC) research vessel “Chikyu (ちきゅう)” achieved the world's first successful lifting (揚泥) of rare earth-rich mud from a depth of approximately 6,000 meters. The Cabinet Office's Cross-ministerial Strategic Innovation Promotion Program (SIP) aims to demonstrate the recovery of 350 metric tons per day during full-scale mining trials in 2027, with commercialization targeted for fiscal year 2028 and beyond.
In response to China's export controls on dual-use items, Japan has pursued a multifaceted approach combining diplomatic protest with economic impact assessments. On the diplomatic front, Vice Foreign Minister Funakoshi summoned Chinese Ambassador to Japan Wu Jianghao to lodge a strong protest and demand the withdrawal of the measures, while the Chief Cabinet Secretary issued a statement declaring them "wholly unacceptable and inconsistent with international practice." -
Should Korea-China relations deteriorate, or should tensions between China and allies such as the United States and Japan intensify, Korea is highly likely to face the same form of economic coercion as Japan. China's comprehensive export controls against Japan and Japan's response carry several policy implications for Korea.
The first implication is that long-term supply chain diversification is essential. Following the urea solution crisis of 2021, Korea reduced its dependence on Chinese-sourced urea solution to 66 percent, only to see it revert to 88 percent by 2023. Korea's dependence on China for eight critical battery minerals also surged by 23 percentage points, rising from 36 percent in 2010 to 59 percent in 2020. Subsequently, as the Korean government actively pursued diversification of urea solution supply sources, dependence on China fell to 27 percent by 2024. The question is whether such efforts can be sustained. Breaking the vicious cycle of "crisis→discussion on diversification→re-dependence“requires sustained effort through institutional mechanisms such as the establishment of dependence ceilings and tax incentives for diversification investments. This is not a matter to be left to market forces; it requires active government intervention.
The second implication concerns the development of alternative technologies and reduction of material consumption. As examined above, efforts to structurally reduce demand at the source are also necessary. Korea would benefit from greater attention to the development of alternative materials and process technologies in key industries such as secondary batteries, semiconductors, and electric vehicles. The utilization of urban mining to recover minerals from spent batteries and discarded electronic products is likewise an urgent priority. A single electric vehicle contains approximately 8 to 10 kilograms of lithium, 10 to 15 kilograms of cobalt, and 30 to 40 kilograms of nickel; recovering and recycling these materials can reduce dependence on new extraction. Minerals extracted from spent batteries in particular are notable for their high purity and are attracting attention as a new resource category under the designation "black mass."
Korea's current resource recovery rate for critical minerals stands at an average of 7 percent, with the rate for rare earths at virtually zero. This stands in stark contrast to the European Union's target of a 25 percent rare earth recycling rate by 2030 and Japan's already having surpassed 10 percent. The Korean government has set a target of meeting 20 percent of demand for ten strategic critical minerals through resource recovery by 2030. To this end, it should operate a critical mineral resource recovery forum and expand budgetary support for resource recovery facilities and equipment.
The third implication is that strategic stockpiles must be expanded in a substantively effective manner. Immediately following the 2010 shock, Japan tripled its rare earth stockpile target from 60 days to 180 days of supply. Korea likewise announced its "Critical Minerals Securing Strategy" in February 2023, setting a target of expanding critical mineral stockpiles to 100 days of supply by 2031. As a result, stockpile levels improved from 42 days in 2023 to approximately 85 days by end of 2024, nearly doubling within the period. Nevertheless, stockpile levels for specific minerals remain far short of their targets, with lithium at only 5.8 days against a target of 100 days, and cobalt at 57.8 days against a target of 180 days. A critical mineral stockpile facility spanning approximately 179,000 square meters, equivalent to the area of 25 soccer fields, is currently under construction at Saemangeum and is scheduled for completion in 2027. This infrastructure investment is highly timely and deserving of commendation. It must be recognized, however, that not all minerals can be stockpiled equally. For items such as heavy rare earth elements, for which procurement from sources other than China is practically impossible, stockpile levels must be selectively and further increased.
The fourth implication is that Korea must actively participate in the restructuring of global supply chains away from China. The United States plans to invest more than 120 billion dollars in critical minerals over the next decade as part of its effort to reduce dependence on China. At the ministerial-level critical minerals conference hosted by the U.S. Department of State in February 2026, Secretary of State Rubio announced the establishment of the Forum on Resource Geostrategic Engagement (FORGE), the successor body to the existing Minerals Security Partnership (MSP).
Whereas the existing MSP functioned as a loosely structured consultative body focused primarily on information sharing and project identification, FORGE has taken on a significantly stronger character as a de facto trade bloc, incorporating measures such as guaranteed price floors among member states and the imposition of tariffs on low-cost minerals from outside the group. With 54 countries and the European Union participating, FORGE effectively institutionalizes the exclusion of Chinese critical minerals.
Korea has naturally succeeded from its role as MSP chair to that of FORGE chair and will serve in that capacity through June 2026. Given that Korea occupies a position in which it participates in shaping the rules governing the restructuring of the global critical minerals supply chain, it should make every effort to leverage this role as an opportunity to integrate Korean companies into that global supply chain. -
China's comprehensive measures against Japan serve as a case study in how states leverage supply chains as geopolitical instruments in an era of strategic competition. The central lesson of the Japanese case is not "crisis response" but rather "preparation before the crisis." Over the past fifteen years, Japan has pursued a multilayered approach in parallel, encompassing supply source diversification, development of alternative technologies, expansion of stockpiles, utilization of urban mining, and development of marine resources, and as a result has secured the buffer capacity to absorb the shock of sanctions. This demonstrates that economic security is not a matter of short-term policy, but rather the accumulation of long-term industrial and technological strategy.
Korea has likewise established an institutional framework through the enactment of the Framework Act on Supply Chain Stabilization Support for Economic Security in 2023, under which the Supply Chain Stabilization Committee was established with the Minister of Economy and Finance serving as chairperson.
The challenge is to ensure that the committee does not remain confined to monitoring and reporting functions, but instead serves a substantive role as a strategic platform that cuts across industry, trade, diplomacy, and security. The government and private sector must share supply chain information on an ongoing basis and, through regular consultations, jointly establish and review targets and implementation road maps for reducing dependence on specific countries for critical items. Only when public-private cooperation is institutionally underpinned can economic security function as a genuinely effective national strategy.
The message for Korea is clear. Supply chain dependence is not merely a trade issue but a question of national strategic autonomy. Ultimately, the essence of economic security lies not in "what will be done when a crisis arrives" but in "what has been done before a crisis arrives." The lesson of Japan's fifteen years is that only a well-prepared supply chain can preserve a nation's strategic autonomy in the face of geopolitical shocks.
| Introduction
| China’s Sanctions Against Japan
| Impact on Japan
| Japan’s Response
| Policy Implications for Korea
| Conclusion
※ The contents published on 'Sejong Focus' are personal opinions of the author and do not represent the official views of Sejong Institue
