A rare earth mine in China [AP=Yonhap News file photo] 

The Japanese government, which is striving to reduce its dependence on China for critical minerals such as rare earths, plans to allow the government to independently acquire stakes in overseas mine development and smelting projects, the Nikkei reported on the 21st.

Japan's Ministry of Economy, Trade and Industry proposed this initiative at a subcommittee meeting of the Industrial Structure Council, an advisory body, held the previous day.

Under the current system, the Japan Organization for Metals and Energy Security (JOGMEC) is required to co-invest with Japanese private companies when funding overseas mining or smelting projects.

However, the government intends to amend laws, including the JOGMEC Act, to allow JOGMEC to invest directly in overseas mining companies on its own, without requiring the participation of Japanese firms.

JOGMEC plans to explore options to sell the acquired stakes to private companies, primarily Japanese firms, within 10 years of the start of mining operations.

This move is seen as a response to the growing importance of securing critical minerals, coupled with the recognition that private companies often find it difficult to make such investment decisions on their own.

The development of critical minerals carries significant risks, such as political instability or policy shifts in resource-rich countries, and is often characterized by limited market size and high price volatility. Therefore, the government is stepping in to directly acquire these stakes.

Japan has been working to diversify its rare earth supply chain and reduce its dependence on China in response to Beijing's export restrictions.

While Japan heavily relies on China for rare earth imports, China banned the export of dual-use materials for military purposes, including rare earths, last January following remarks by Sanae Takaichi implying Japan's potential involvement in a Taiwan contingency.

Consequently, China's exports of rare earths to Japan have declined.

According to data released by Chinese customs authorities the previous day, exports of rare earth magnets, which are used in electric vehicle motors and other applications, to Japan fell to 111 tons, a 52.2% decrease compared to the same month last year.