China has threatened economic retaliation against Japan if Tokyo insists on restricting the sale of chip manufacturing equipment to Chinese firms.
The US has been pressuring Japan for months to prevent firms from selling advanced chip tools to China in an effort to block Beijing’s progress in key industries, including artificial intelligence.
Faced with possible sanctions, Tokyo fears that its auto industry, which generates almost 3% of GDP, could be targeted and restrictions on minerals critical to Toyota’s car production in particular, Bloomberg reported.
According to Fortune, citing a JPMorgan report in June, China has a ‘near monopoly’ on the production of minerals critical for green transformation. As of 2022, much of the world relied on Beijing for access to these minerals, as China not only produces the vast majority of rare earth minerals used in magnet and battery production and graphite used for lubricants and electric motors, but also has a critical advantage in the processing of these minerals.
Increasing threats from China and general tensions in the region, such as in the East and South China Seas, have prompted Japan to improve its security strategy and seek an unprecedented defence budget, the Associated Press reported. A record $59 billion budget was approved at the end of August as part of a five-year plan to make Japan the world’s third-highest military spender behind the United States and China. Tokyo, which also faces challenges in terms of military recruitment, is focussing its efforts on surveillance and attack drones, the report said.
