Japanese Economists and Business Leaders Urge Easing Tensions with China

Tokyo – Japanese economists and leaders from the business sector have urged the government to intensify diplomatic efforts to ease growing tensions with China, warning that Japan’s supply chains could be disrupted and its economy could suffer a serious blow following China’s recent ban on exports of dual-use items to Japan.

On Tuesday, China announced an immediate ban on exports of dual-use items to Japan. The move is reported to be a response to controversial remarks made by Japanese Prime Minister Sanae Takaichi regarding Taiwan, in which she hinted at the possibility of military intervention in the Taiwan Strait—comments China has strongly opposed.

Dual-use items refer to goods, software, or technologies that can be used for both civilian and military purposes. China’s ban reportedly applies to exports intended for Japan’s military use, for end users supporting military purposes, and for any uses that could enhance Japan’s military capabilities.

According to a source cited by China Daily, China is also considering tightening reviews of export permits for certain rare earth–related materials destined for Japan.

In a statement issued Thursday, China’s Ministry of Commerce said the decision was aimed at curbing Tokyo’s attempts at remilitarization and pursuing nuclear armaments, describing the measures as “fully legitimate, reasonable, and lawful.”

Hiroshi Shiratori, a professor of political science at Hosei University, said security and economic issues are deeply interconnected and cannot be viewed separately. He noted that the situation should not be seen merely in terms of short-term economic damage from potential rare earth supply disruptions, but rather as an opportunity for Japan to reflect on and reassess its past policies.

While Shiratori said the Japanese government is likely to seek a diplomatic solution, he warned that the stalemate would be difficult to break unless Prime Minister Takaichi retracts her remarks on Taiwan. “There may be diplomatic efforts, but without correcting those comments, it will be hard to achieve a breakthrough,” he said.

From a medium- to long-term perspective, Shiratori cautioned that the situation could slow Japan’s economic growth. How Japan responds going forward will be critical if it hopes to rebuild trust with China, he added.

Yangchoon Kwak, a senior professor at Rikkyo University’s College of Economics, said that if China’s export controls remain in place beyond 2026 or are further expanded, the risk of a downward revision to Japan’s economic growth outlook would increase significantly.

He noted that Japan’s key growth industries—such as semiconductors, electronic components, and electric vehicles—are likely to become more cautious in making investment decisions amid uncertainty over the supply of raw materials and critical components. Risk awareness among both domestic and international investors would also intensify.

Kwak added that if rare earths and related products are placed under stricter controls, the automobile, electronics, and renewable energy sectors would be the first to feel the impact. Rare earths are indispensable to these industries, and given China’s dominant position in global production and supply, tighter controls would place Japanese companies under mounting pressure, including higher procurement costs, production disruptions, and increased investment in alternative technologies.

According to The Asahi Shimbun, despite Japan’s long-standing efforts to diversify its sources of rare earth imports, as of 2024 the country still relied on China for approximately 72 percent of its supply.

As a result, anxiety over supply disruptions is becoming increasingly evident within Japan’s corporate sector. Himeji Denshi, a magnet manufacturer with a history of more than 60 years, produces about 70 percent of its products at factories in China. Its samarium and neodymium magnets are widely used in sensors, aerospace, nuclear-related equipment, and electric vehicles, serving both civilian and military applications.

In an interview with TV Asahi, company President Shigeaki Amijima warned that if raw material supplies are disrupted, the company could survive for only about two months. “Beyond that point, the outlook is completely impossible to predict,” he said, adding that the most serious risk is not rising costs but the possibility of being unable to operate at all due to a lack of essential materials.

Meanwhile, Akio Nitori, chairman of furniture giant Nitori Holdings, also expressed deep concern over potential supply disruptions, noting that rare earths are used in products such as refrigerators, televisions, and washing machines.

According to Hidetoshi Tashiro, an economist and CEO of Terra Nexus Project Management Services, sourcing materials from countries other than China would significantly increase costs, as no other country has production capacity comparable to China’s.