Author: Neha Mishra, Research Associate, Centre for Air Power Studies
Keywords:Shinzo Abe, Rare Earth, Foreign Policy, Japan
The legacy of former Japanese PM Shinzo Abe has been more than the world acknowledges. Besides his famous ‘Abenomics’ and ‘Free and Open Indo-Pacific strategy’ (FOIP), Abe has also directed Japan’s critical minerals and rare earth industries since he joined the office in 2012.
Prior to the Senkaku-Island dispute in 2012, Japan was heavily dependent on the Chinese rare earth supply. However, the export embargoes by China in response to the detention of a Chinese fishing trawler captain affected Japan’s auto industry, which is its major sector dependent upon rare earth for manufacturing. Japan had high-REE import reliance on China, reported more than 82 per cent till mid-2012, for the production of defence equipment, electronic warfare capabilities, and other high-tech industry.
When Abe came to office in 2012, he had a goal to foster the economic development of Japan, which was facing a recession due to Chinese export embargos. He implemented multiple policies and strategies, majorly framed as ‘Abenomics’, focusing on monetary, fiscal policy, and structural reforms. Although the major feature of Abenomics remained to promote inbound FDI, Japan also began outward FDI to enhance and secure its rare earth sources. It should be noted that Japan doesn’t have any rare earth reserve capacity, unlike other major players like the US or Australia, thus the solution was either to diversify sources or find alternatives.[i] Under Abe’s administration, the Japanese Ministry of Economy, Trade, and Industry (METI) began investing in partnerships in rare earth reserve countries to diversify its import sources. Under METI and Japan’s rare earth procurement strategy, Japan Oil, Gas, and Metal National Corporation (JOGMEC) took the major responsibility, although it was established in 2004, after China’s embargo to focus on the rare earth industry.
The major rare earth projects or investments under Japan’s umbrella began in countries like Australia, the USA, Canada, India, Jamaica, and Kazakhstan. The most important investment partnership started in 2012 with Lynas Corporation of Australia in which Japan provided a US$ 325 million loan. As per the agreement, Lynas was expected to supply approx. 8,500 tons of rare earth metals annually for the next ten years (2012-2022). In the case of India, Toyotsu Rare Earths India private limited (TREI) was established under the investment of Toyota Tshsho Corporation to boost rare earth production in India. In addition, a rare earth deal was inked between Indian Rare Earth Limited (IREL) and Japan, as part of which Japan was supposed to transfer technology to India, and IREL’s Odisha sand complex will export 2,500 tons of processed rare earth to the Toyota plant in Vizag, India. Toyota also developed a venture with Lavreco Rare Earth Company of Vietnam. Japan’s ITOCHU Corporation began investing in Burma (now Myanmar), which has now developed as an important interest and source of rare earth minerals for China in the past five years. JOGMEC also established a joint investment venture with Canada in the Lofdal rare earth mining project in Namibia to secure the supply of heavy rare earth metals. The two major companies in Japan-Mitsubishi Chemical and Kawasaki heavy-industries play an important role in the outbound FDI of Japan. Moreover, Mitsubishi is working on a clean-up project worth US$ 100 million at the Bukit Merah rare earth processing site in Malaysia, which can enhance Japan’s presence in the Malaysian industry.[ii]
Besides investment, Japan has also begun to follow the strategy of investing in research and development and has developed recycling technologies. For instance, Hitachi began separating rare earth metals from air conditioner compressors and using them to manufacture batteries for Toyota’s hybrid Prius. In 2013, the first full-scale rare earth recycling operation was launched in Japan under an industry-government-academic collaboration led by Fukuoka Prefecture, a small town in Japan. This recycling operation extracts rare earth metals from fluorescent light tubes to reuse them for the production of new tubes. Other companies, like Nissan Motors Co. Ltd., began working on designs to reduce the use of heavy rare earth elements in motor magnets and began using simpler and cheaper manual disassembly methods to remove the rare earth metals and recycle them.[iii]
The rare earth industry of Japan flourished to a great extent under the ruling years of Shinzo Abe and became the fifth largest exporter (as per 2020 data) of rare earth metals without even having any rare earth reserves.[iv] Abe’s historic address titled ‘Confluence of Two Seas’ guided the introduction of the Quad concept in the Indo-Pacific in 2007, whose 2.0 version since 2017 has turned into a major base of rare earth cooperation and collaboration among Quad members- Australia, Japan, India, and the US. The demise of Shinzo Abe is unfortunate for not only Japan but the whole Indo-Pacific region. The Japanese rare earth industry will remain grateful to his contributions and innovative ideas and will flourish even more as the trends reflects.
[i] Marc Schmid, “Mitigating supply risks through involvement in rare earth projects: Japan’s strategies and what the US can learn”, Resources Policy, Vol. 63 (C), 2019. https://econpapers.repec.org/RePEc:eee:jrpoli:v:63:y:2019:i:c:33. Accessed on 18 July 2022.
[ii] Michael Mazza, Dan Blumenthal, and Gary J. Schmitt, “Ensuring Japan’s Critical Resource Security: Case Studies in Rare Earth Element and Natural Gas Supplies”, American Enterprise Institute, July 2013. https://www.thefreelibrary.com/Ensuring+Japan%27s+critical+resource+security%3A+case+studies+in+rare…-a0345461096. Accessed on 19 July 2022.
[iv] Observatory of Economic Complexity, “Rare Earth Metals, Scandium and Yttrium, in Japan”, https://oec.world/en/profile/bilateral-product/rare-earth-metals-scandium-and-yttrium/reporter/jpn?redirect=true. Accessed on 19 July 2022.