China has begun applying fresh economic pressure on Japan in a move widely seen as a test of US President Donald Trump’s willingness to stand firmly behind Washington’s closest ally in Asia, months after Trump claimed he had “solved” the global rare earths issue through direct engagement with Beijing.
This week, Chinese authorities announced sweeping export controls banning all dual-use shipments for military purposes to Japan, a step that could affect as much as 40% of China’s exports to its neighbor. Almost simultaneously, Beijing signaled the possibility of tighter restrictions on rare earth elements that are critical to Japan’s automotive and electric vehicle industries. Hours later, China escalated further by launching an anti-dumping investigation into a key chipmaking material sourced from Japan, striking at another strategic sector of the country’s economy.
Taken together, the measures suggest that President Xi Jinping’s campaign to pressure Prime Minister Sanae Takaichi is intensifying, particularly after her recent remarks suggesting Japan could deploy military forces if China attempted to seize self-ruled Taiwan. The rare earth threat also lands as a direct challenge to Trump, who previously boasted that his engagement with Xi had secured continued Chinese supplies of critical minerals essential for advanced manufacturing, from fighter jets to missile systems.
For now, Tokyo is proceeding cautiously. While the Japanese government has formally protested China’s actions, it has avoided retaliatory measures that could provoke stronger counter-moves. The restraint reflects domestic economic realities: Japanese automakers remain deeply dependent on Chinese-sourced materials, especially for electric vehicle production.
“Japan’s default response is to avoid escalation while also avoiding concessions,” said Kurt Tong, a former senior US diplomat in Asia and now a managing partner at the Asia Group. “Tokyo’s strategy is essentially to wait, absorb the pressure, and hope Beijing eventually recalibrates.”
Tensions are not limited to trade. Japan has also lodged protests over China’s deployment of a mobile drilling vessel in a gas-rich area of the East China Sea. According to Chief Cabinet Secretary Minoru Kihara, the Japanese Coast Guard issued a navigation warning on Jan. 2, highlighting the growing maritime dimension of the dispute.
Backed by solid domestic approval, Takaichi has refused to retract her Taiwan-related comments despite repeated demands from Beijing. The standoff comes at a sensitive diplomatic moment. Trump is attempting to preserve a fragile truce with China to protect America’s own access to rare earths, while both sides are preparing for a high-profile summit scheduled for April in Beijing.
Japan, however, faces a long wait before its own next opportunity for top-level engagement with China. The next expected meeting between Xi and Takaichi is on the sidelines of the Asia-Pacific Economic Cooperation summit in Shenzhen this November, raising the prospect of months of economic uncertainty for Japanese industries.
“Traditionally, Japan would first secure the US relationship and then deal with China,” said Ryo Sahashi, a professor of international politics at the University of Tokyo. “But now US–China relations are relatively stable, so Japan can no longer rely on Washington to negotiate with Beijing on its behalf.”
That leaves Tokyo with limited options. “Either Japan seriously engages in diplomacy with China, or it rides out the pressure and avoids action for the time being,” Sahashi said.
Behind the scenes, Japan is keeping Washington closely informed. Takaichi recently described a phone call with Trump as “extremely meaningful” and confirmed plans to visit the United States later this year. After China announced the latest curbs, Japanese Foreign Ministry official Masaaki Kanai spoke with his US counterpart, with both sides reaffirming “close coordination,” though few details were disclosed.
“What Prime Minister Takaichi needs is a clear, public message from the Trump administration that supports Japan and criticizes China’s actions,” said Daisuke Kawai, director of the University of Tokyo’s economic security and policy innovation program.
China, meanwhile, appears to be seeking to exploit regional fault lines. The timing of the export controls coincided with a high-profile visit by South Korean President Lee Jae Myung to China, during which Lee was photographed warmly interacting with Xi. The optics contrasted sharply with the unity displayed less than three years ago, when Japan and South Korea joined then US President Joe Biden at the Camp David summit to launch a new trilateral partnership aimed at countering China and North Korea.
“For us, relations with Japan are just as important as those with China,” Lee said during his visit, underscoring the delicate balancing act facing US allies in the region.
Japan does have leverage if the dispute worsens. It dominates critical segments of the semiconductor supply chain, controlling up to 90% of the global market for advanced photoresist materials. Restricting those exports could severely hamper China’s chip ambitions, though analysts caution that retaliation would carry costs.
China analyst Tilly Zhang of Gavekal Dragonomics noted that Beijing’s demand for the most advanced photoresist may already be constrained by existing restrictions on high-end chipmaking equipment. At the same time, Japanese firms supplying less advanced semiconductor tools to China could suffer significant losses if tensions spiral.
The ultimate economic impact remains uncertain, as China’s export rules are broadly worded and allow Beijing significant discretion in enforcement. “This looks like a warning shot rather than a decisive strike,” said Cory Combs, associate director at Trivium China.
From Beijing’s perspective, stronger measures may still be necessary. Wu Xinbo of Fudan University’s Center for American Studies argued that previous diplomatic and economic pressure has failed to change Tokyo’s stance. “More forceful steps are needed to restrict Japan’s defense industry and reduce its ability to intervene on Taiwan,” he said.
As China tests both Japan’s resilience and Trump’s commitment, the coming months are likely to define the future balance among Asia’s most powerful players.
