US President Donald Trump and Japanese Prime Minister, Sanae Takaichi, signed a framework agreement on Tuesday to secure the supply of rare earths in an effort to reduce dependence on China for the critical minerals.
While no direct mention was made by the two leaders about China, which controls over 90 per cent of the world’s rare earth processing, there were statements made that indirectly decried China’s recent export curbs expansion.
The other countries to control global rare earth extraction include the US, which controls 12 per cent of the extraction, and Myanmar, which controls 8 per cent of the world’s rare earth mining, as per Eurasia Group. Malaysia has another 4 per cent of processing control, as does Vietnam, which controls 1 per cent of the rare earth processing.
The US-Japan trade agreement, which was essentially finalisation of the terms set previously, includes a pledge by Japan to invest $550 billion into the US economy, which would include purchases of power and liquefied natural gas (LNG), among other trade, said sources familiar with the talks.
Japan has increased its US LNG purchases in the last few years as it tries to diversify its key suppliers, which have been Australia and Russia so far.
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In June, JERA, Japan’s top LNG buyer, agreed to buy up to 5.5 million metric tonnes per annum of US LNG under 20-year contracts, with deliveries beginning in 2030.
Meanwhile, Japan’s Russian contract – Sakhalin-2 LNG project – which Mitsui and Mitsubishi helped launched in 2009, end in 2028-2033. Under the latest sanctions waiver, Japan buys less than 1 per cent of its oil imports from Russia, with the bulk of its oil purchases made in the Middle East.
Additionally, last week, Tokyo Gas, which is Japan’s biggest city gas supplier, signed a preliminary deal to buy 1 million metric tonnes per annum of LNG from the Alaska LNG project, even though it takes only a few days for the Russian Sakhalin-2 project to deliver LNG while Alaska takes at least a week and the US Gulf Coast about a month.
The other terms of the US-Japan trade agreement focus on using economic policy tools and investments to speed up the “development of diversified, liquid, and fair markets for critical minerals and rare earths,” the White House said.
The pact also says these investments aim to provide financial support to selected projects within the next six months as both countries would consider mutually complementary stockpiling arrangement to ensure supply chain management, the statement said.
Additionally, US Treasury Secretary, Scott Bessent, met his Japanese counterpart, Satsuki Katayama, and called for a “sound monetary policy”, his department said on Tuesday.
Bessent’s latest jab is seemingly aimed at the slow pace of interest rate hikes by the Bank of Japan (BOJ). The central bank’s two-day policy meeting starts on Wednesday, in which experts expect it to hold off on raising interest rates.
“Secretary Bessent highlighted the important role of sound monetary policy formulation and communication in anchoring inflation expectations and preventing excess exchange rate volatility,” the US Treasury Department said in a statement.
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