As Japan mobilizes its national capabilities to reorganize rare earth supply chains, the results are emerging one after another.
Japan suffered a supply chain shock in 2010 when, after a collision between a Chinese fishing boat and vessels near the Senkaku Islands (Diaoyu Dao), the Chinese government restricted rare earth exports. Industry estimates say Japan's dependence on Chinese rare earths, which exceeded 90% at the time, fell to around 60% to 70% last year. Even so, Japan is treating rare earths as a strict industrial security task, with major companies, materials makers, general trading houses, the government, and allied nations moving in concert.
On the 18th (local time), the Nihon Keizai Shimbun reported that automaker Nissan has reduced by more than 90% the amount of rare earths used in the drive motor of the new Leaf electric vehicle compared with the first 2010 model. EV drive motors must withstand high temperatures. To achieve that, heavy rare earths such as dysprosium and terbium were considered essential in neodymium magnets. Based on International Energy Agency (IEA) statistics, China holds a 94% share of production of permanent magnets for EVs. Nissan said it developed proprietary technology to reduce motor heat generation, cutting the use of these heavy rare earths.
Protechnical Materials, a materials maker supplying Nissan's finished vehicles, went a step further. In July last year, it developed a rare-earth-free neodymium magnet for EV drive motors that uses no heavy rare earths at all. According to Nikkei, the company completely removed dysprosium and terbium while maintaining performance such as density and magnetic force at existing levels. Observers say a clear trend is forming across the auto industry—from finished-vehicle makers to materials suppliers—toward moving away from heavy rare earths.
Major corporations representing Japan are joining an urban mining project to extract already-used rare earths, pushing it into full commercialization. Daikin Industries, Shin-Etsu Chemical, Hitachi, and Tokyo Eco Recycle announced on the 14th that they have launched a joint project to remove rare earth magnets from commercial air conditioner compressors and return them to magnet raw materials. The corporations have automated the entire process of dismantling magnets containing rare earths from AC compressors and extracting the raw materials, using AI image recognition and robots. It is the first circular system based on commercial air conditioners in Japan, with commercial operation targeted for 2027. Observers call it the first step in extending the urban mining concept to industrial equipment. Earlier, in December last year, Hitachi activated a recycling network to extract and reuse rare earths from magnet motors used in old elevators.
Overseas procurement networks once left to the private sector have also shifted to national projects. The Japan Organization for Metals and Energy Security (JOGMEC), a government-affiliated public institution, formed the joint venture JARE with general trading house Sojitz and on the 10th of last month completely overhauled its existing supply contract with Australia's Lynas. Lynas is the only major rare earth company outside China with vertical integration from mining and refining to sales.
Japan secured a committed volume of 5,000 tons per year of neodymium-praseodymium (NdPr) oxide from Lynas through 2038, 12 years from now, and Lynas promised to allocate 75% of the heavy rare earths it produces for Japanese industrial use. The deal also includes a condition that if the price Japan pays for rare earths exceeds $150 per kilogram, Lynas will return 30% of the excess to JARE, with an annual refund cap of $10 million. The move is a security strategy to maintain non-Chinese producers, even with state funds, without relying on China's rare earth supply chain. Amanda Lacaze, Lynas' chief executive officer (CEO), said the deal will ensure stable supplies of strategically important rare earth products to Japanese industry and apply fair market prices to reduce volatility.
Japan has also directly invested government funds not only in private Australian companies but in refining facilities in allied nations such as France. On the 1st, Japan's Prime Minister Sanae Takaichi and France's President Emmanuel Macron agreed on a roadmap for cooperation on rare earth supply chains during his visit to Japan. Under the leaders' agreement, the Caremag rare earth refining plant in Lac, southern France, will begin operations at the end of this year, eight months from now. JOGMEC is participating on behalf of the Japanese government, and gas company Iwatani Corporation and the French government have joined as co-investors. Japan plans to source around 20% of future dysprosium and terbium demand from this plant. French Finance Minister Roland Lescure said in an interview with public broadcaster NHK that they cannot rely on a particular country, especially China, for rare earths.
At the same time, Mitsubishi Materials is partnering with U.S. company ReElement to consider a joint recycling business to separate and refine rare earths from secondary resources such as used magnets and tailings. Rather than insisting on a domestically centered push for localization as before, Japan is weaving together technologies from allied countries in the United States and Europe to build an ecosystem that bypasses China.
Recently, Japan has even reached below its own waters to prepare for a worst-case scenario in which alliances with friendly nations could break. Since January, the Japan Agency for Marine-Earth Science and Technology (JAMSTEC) has been conducting a demonstration to lift rare-earth-bearing mud from the seafloor at a depth of 6,000 meters near Minamitorishima at the country's easternmost tip, and achieved its first recovery in early February. Since 2018, the Japanese government has invested 40 billion yen (about 3.8 billion won) in the project. The mud there is understood to contain large amounts of dysprosium, neodymium, and terbium. Shoichi Ishii, director of the Cabinet Office's marine development program, told Nikkei that building a domestic rare earth supply chain to stably supply minerals essential to industry is a key mission.