Japanese Prime Minister Sanae Takaichi has led her Liberal Democratic Party (LDP) to a sweeping victory in a snap election over the weekend, securing 316 seats and a two-thirds majority in the Japanese House of Representatives. While major foreign media outlets have rushed to report on the landslide, Chinese state media has remained eerily silent, reflecting the reality of economic sanctions failing to achieve their intended political outcome.
In November last year, Takaichi’s statements on “a Taiwan contingency” elicited a multipronged response from Beijing in which it advised its citizens against traveling to Japan, barred aquatic product imports, deplatformed Japanese artists and weaponized rare earth supply chains. The approach has not only failed to undercut support for Takaichi, but served to highlight the importance of supply chain security for Japanese society as a whole.
According to a Feb. 6 report from Japan’s Kyodo news agency, after China tightened export controls on “dual-use” items with potential military uses at the start of the year, it has now relaxed restrictions for several rare earth exports. However, trade between the two nations continues to experience customs delays. This curious transformation could be interpreted as a gesture of goodwill from Beijing for Takaichi’s government in the run-up to the election, and an attempt to open up room for dialogue. Yet, by keeping supply flowing even as companies are made acutely aware of supply chain precarity, Beijing retains leverage for ongoing pressure.
Japan is far from inexperienced when it comes to these issues. Since China placed restrictions on rare earth exports to Japan following a 2010 boat collision incident near the disputed Diaoyutai Islands (釣魚台) — also known as the Senkaku Islands in Japan — Tokyo has been steadily reorganizing supply chains over the past 15 years. Beyond investing in Australian mines and French refineries, and developing alternative technologies such as amorphous alloys, 2022 saw the implementation of the Act on the Promotion of Ensuring National Security through Integrated Implementation of Economic Measures, together amounting to a multifaceted defense strategy of diversification, technological autonomy and institutional protections.
With the government taking on investment risk through its administration of the Japanese Organization for Metals and Energy Security and the private sector focusing on operational efficiency, reliance on China for metallic rare earths has dropped from 90 to 60 percent. However, challenges persist, with China expanding its rare earth export controls to include gallium, germanium, graphite and hundreds of other key materials late last year. It has further prohibited re-exports via third countries in an assertion of long-arm jurisdiction, presenting a major challenge that Tokyo urgently needs to overcome.
Japan has shown that if businesses and the government can offer alternative solutions and build strategic resilience, vulnerabilities to overreliance in supply chains can be significantly reduced. For Taiwan, there are three key takeaways.
First, supply chain reorganization is a long-term commitment. Requiring upwards of 10 years, it must establish dedicated institutions, and integrate resources from industry, the government and academia for strategic investment.
Second, technological advancements are the key to breaking away from overreliance. Taiwan should accelerate technological development programs for alternative materials, particularly the rare earth compounds and specialty gases required in semiconductor manufacturing.
Finally, regional cooperation is an important component of risk distribution. Working with like-minded emerging supply chain partners for refinement processes should be a priority. Supply chain security must be integrated into broader national strategic thinking; only when there is strategic autonomy can long-term industrial competitiveness and economic security be ensured.
Chiang Tai-chin is the director of the Japan Center at the Chung-Hua Institution for Economic Research.
Translated by Gilda Knox Streader
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