Japan and the U.S. face challenges in economic security discussions

Economic security has been an ever-present element in trade talks between Japan and the United States, and an area of broad agreement between the two countries. They both want to work toward ensuring a steady supply of critical materials, and cooperation is seen as a way to achieve that.
Beyond the basics, not much progress seems to have been made. Details remain scarce despite frequent references to the theme of economic security by Japanese and U.S. negotiators.
Observers say that any initiatives will take years to materialize. Importantly, they note, an agreement on economic security does little to get Japan what it really wants, which is a full removal of the heavy duties imposed by Washington since March.
'It will take time, but I think this is the part where there's the least disagreement,' said William Chou, deputy director of the Japan Chair at Hudson Institute. 'It's just a question of how quickly we can move together to find a good solution in cooperation from both sides.'
To a great extent, economic security is about rare earths and about China's dominance of the mining and processing of them.
Japan imported nearly 60% of its rare earth materials from China in 2022, down from over 80% in 2009. When it comes to heavy rare earths crucial to the manufacturing of defense equipment and electric vehicles, the reliance remains 100%, according to economy ministry data .
Japanese negotiators are careful not to single out any country or any specific material in discussing economic security, preferring to limit what they say to general comments about building resilient supply chains.
Informed observers argue that the target and the concerns are obvious.
'I think the trade talks — at least when it talks about economic security — have been with China very much in the foreground,' said Chou.
In 2012, researchers discovered a vast trove of mud rich in rare earths 6 kilometers underwater in Japan's exclusive economic zone off of the Ogasawara Islands. But the technology needed to tap the resources is still under development.
'So, ultimately, the dependence on China doesn't change much. That's why we have to develop mining and processing capabilities outside of China,' said Kazuto Suzuki, a director at the Institute of Geoeconomics and a professor at the University of Tokyo.
Efforts have been well underway since the 2010s, with Sojitz Corp. and Japan Oil, Gas and Metals National Corp. making several investments in heavy rare earth production projects in Australia.
In 2023, the two companies signed a supply agreement with Lynas Rare Earths, under which they will receive up to 65% of the heavy rare earths — dysprosium and terbium — produced from the Mount Weld mine in Western Australia. This output will cover an estimated 30% of Japan's domestic demand.
The United States is adapting a different approach, and one that might not bode well for cooperation with Japan.
'Basically, the U.S.'s current economic security policy is very self-centered — it assumes the U.S. can handle all production on its own. But in reality, it can't. Yet it continues to impose tariffs, trying to create a self-contained supply chain within the U.S.,' Suzuki said. 'This is no longer about U.S.-Japan cooperation. The U.S. is not seeking partnership — it's aiming for 100% self-reliance in its supply chains. That leaves very little room for collaboration.'
'There's a huge disconnect between what the U.S. is demanding and the actual reality, so there are a lot of problems — honestly, too many,' Suzuki added.
Last Wednesday, China and the United States reached a framework trade deal in London. The deal restores U.S. access to China's rare earths, which had been suspended due to growing trade friction.
Chou listed five ways in which Japan can contribute to solving the broader supply-chain problems: investment in U.S.-based mining and processing projects via Japanese trading houses; partnerships with third countries to diversify the supply chain; offering processing capacity in Japan; acting as a 'canary in the coal mine' to signal China's economic coercion; and exploring deep-sea mining as a future area of cooperation.
'I do think that the Trump administration does have a larger economic strategy where tariffs, economic security, foreign investment and technological innovation all are playing, are all interacting with each other,' Chou said. 'It's not just about tariffs.'

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