Japan is eyeing a ‘China-free’ supply chain for defence equipment. Is it feasible?

Japan could build a “China-free” supply chain for defence equipment, but doing so would be costly and could take years as Tokyo tries to reduce its reliance on a strategic rival, analysts have said. The debate gained urgency after Defence Minister Shinjiro Koizumi last week said Tokyo should consider creating a “China-free” supply chain for defence equipment, following Beijing’s ban on exports of dual-use items to Japan. Speaking during a Lower House Budget Committee session, Koizumi said reducing reliance on Chinese exports was important. Koizumi citied his observations from a recent visit to Los Angeles, saying American drone companies did not use parts manufactured in China, and noting the importance of boosting “self-reliance”. Grant Newsham, a senior research fellow at the Japan Forum for Strategic Studies, said a “China-free” supply chain was feasible as the Japanese government was better able to influence the behaviour of private companies. “If the ‘will’ exists and the shift is done with a focus on specific key equipment and hardware … relatively fast progress is possible. This can have a snowball effect,” Newsham said. He noted that while progress could be seen within a year, fully delinking from Chinese supply sources could take about five to 10 years. “Of course, if there is a fight with China, the move towards ‘China-free’ supply chains could happen overnight,” Newsham said. While defence costs could increase, Newsham said the potential “cost” of being dependent on one’s “avowed enemy” to produce defence equipment and weaponry would be far greater than sourcing components and key materials from elsewhere. Newsham said the ongoing Middle East war and Beijing’s role in backing Iran and Russia had made it even clearer to Japan that the China threat was imminent. “Koizumi’s call for China-free defence supply chains is timely and also viewed by most Japanese as ‘common sense’.” Japan is rapidly accelerating domestic defence production, targeting a 2 per cent gross domestic product budget by 2027 for indigenous development of missiles, aircraft and naval vessels. It is also developing indigenous hypersonic glide vehicles for coastal defence, with deployment planned for 2026 to 2030. But it remains heavily reliant on China for critical materials, with more than 60 per cent dependency on Chinese refined rare earths which are crucial for defence electronics and magnets, and 70 per cent of high-end titanium alloy for submarines. The Taigei-class submarines of Japan’s Maritime Self-Defence Force use lithium-ion batteries, whose production relies on negative electrode materials from China. In January, Beijing banned exports of dual-use items to Japan, including rare earths, following remarks on Taiwan by Prime Minister Sanae Takaichi. Takaichi said in November that a Chinese military attack on or naval blockade of Taiwan could constitute a “survival-threatening situation” for Japan, potentially triggering Tokyo’s right to collective self-defence and allowing for troop deployment. Beijing sees Taiwan as part of China to be reunited by force if necessary. Most countries, including the US, do not recognise Taiwan as an independent state, but Washington is opposed to any attempt to take the self-governed island by force and is committed to supplying it with weapons. Yoichiro Sato, a professor at Japan’s Ritsumeikan Asia-Pacific University, said China’s export ban on dual-use items against Japanese entities had “alerted” Tokyo to the implications for defence-related supplies. “Substituting rare earth supply is not easy where China’s global share is high,” he said, referring to the country’s 90 per cent dominance of refined rare earth output. To secure critical minerals, Sato said Japan was looking to South America, Africa and Central Asia, in addition to accelerating domestic exploration of seabed resources. In December, Takaichi held Japan’s first-ever summit with the leaders of all five Central Asian nations: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. During the summit, Japan announced a five-year, US$19 billion initiative for projects in the region, focusing on developing oil, gas and critical rare earth minerals. However, Sato warned that pushing “economic nationalism” too far in the name of security would “rob one’s own economic vitality”. Ryosuke Hanada, a doctoral candidate in security studies at Macquarie University, said China’s repeated economic coercion was pushing Japan further towards decoupling. “This, in turn, weakens China’s leverage,” he said, but added that completely severing economic ties with the world’s second-largest economy was unrealistic. “The path forward seems to be decoupling in fields like AI, quantum technology and semiconductors”, while reducing the use of Chinese components in defence, nuclear reactors and critical infrastructure, Hanada said. He noted that price competitiveness and transport costs meant Japan had to secure alternatives in South or Southeast Asia. But it “remains unclear” whether the Ministry of Defence had the relevant expertise to build supply chains independent of China, as such efforts were currently carried out by the Ministry of Economy, Trade and Industry under the pretext of economic security, he added. Tom Corben, a research fellow at the United States Studies Centre at the University of Sydney, said Koizumi’s remarks reflected broader concerns across US-allied countries. “[They are concerned] that China or other potential adversaries could lean on supply chain bottlenecks in a crisis to disrupt those countries’ militaries or economies,” Corben said. He noted, however, that many modern defence supply chains included suppliers and items not explicitly focused on the defence market. “Companies in the defence industrial base produce items or materials that are just as relevant across commercial or civilian products as they are to defence – think rare earths or even something mundane like ball bearings,” Corben said. Addressing those challenges required a clear sense of which items were most essential or sensitive, he added.

Japan is eyeing a ‘China-free’ supply chain for defence equipment. Is it feasible?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Tokyo’s bid to boost ‘self-reliance’ may be costly and could take years given China’s dominance in critical materials, analysts say

Tokyo’s bid to boost ‘self-reliance’ may be costly and could take years given China’s dominance in critical materials, analysts say