Japan to Increase Rare Earth Reserves

The Japanese government will strengthen the rare earth reserve system required for industrial products such as electric vehicles. The current rare metal reserves in Japan are guaranteed for 60 days of domestic consumption and plans to expand to more than 6 months in the future.

In the wake of supply disruptions of certain metals caused by the COVID-19 pandemic, Japan has decided to launch a series of measures to address potential supply risks from geopolitical instability or future pandemics. A report by market consultancy firm Argus states that one of such measures implies ramping up government control over strategic reserves of 34 rare metals and increasing inventories of some strategically important metals such as cobalt.

Rare metals are indispensable to Japan's cutting-edge industries, but they are currently heavily dependent on rare earth in certain countries such as China. Almost all of the minerals needed are imported. For example, about 60% of the metals for electric car engine magnets are imported from China. Japanese statistics from the Ministry of Economy, Trade and Industry show that in 2018, 58% of rare metals were imported from China, 14% from Vietnam, 11% from France, and 10% from Malaysia.

According to Argus, the Ministry of Economy, Trade and Industry presented a proposal to the central government where it asks for the State to take full control of strategic rare metals reserves by setting target levels for stocks, as well as plans for procurement and the release of supplies from the reserve.

Kyodo News reported that Japan's current rare metal reserve system for 60 days was set in 1986. The Japanese government is prepared to adopt a more flexible way to reserve rare metals. For example, the more important rare metals will ensure the reserves for more than half a year, while the less important ones will be maintained at less than 60 days. In order to avoid an impact on market prices, the Japanese government will not announce specific reserves.

In addition, although some rare earth minerals are produced in Africa, they need to be refined by Chinese companies. Therefore, the Japanese government intends to allow the Japan Oil, Gas and Metals and Mineral Resources Agency to contribute capital to the refinery, or to promote energy investment guarantees for Japanese companies so that Japanese companies can obtain financing from financial institutions.

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