Japan’s Rare Earth Supply Chain Construction Off the coast of Minami-Torishima Island Requires 340 Billion Yen

Japan’s rare earth development plan off the coast of Minami-Torishima Island in the Ogasawara Islands has been launched. Successful seabed mining has been achieved, marking a step towards the Japanese government’s goal of achieving domestic production by fiscal year 2028. Can Japan establish a counter-axis against China? What are the conditions for Japan to transform itself into a rare earth superpower?

The seabed off the coast of Minami-Torishima Island is located approximately 1950 kilometers southeast of central Tokyo. At a depth of about 6000 meters, the water pressure per square centimeter reaches 600 kilograms. It is claimed that the sea mud dredged from such a harsh environment is rich in “heavy rare earth” rare earth elements, which are almost entirely monopolized by China.

The Nikkei Shimbun independently estimated the total investment in the rare earth supply chain off the coast of Minami-Torishima Island. To develop new mining methods, the Cabinet Office conducted a trial mining operation in February. The Nikkei Shimbun, based on data from the Ministry of Economy, Trade and Industry (METI), which uses a different method than the Cabinet Office, compiled interviews with researchers in the resources and materials field, companies, and the University of Tokyo, and calculated the investment amount. Existing technologies can be applied.

Japan needs to spend approximately 340 billion yen (about 147.135 billion yuan) to build the entire supply chain from mining to refining. The benchmark is the profit margin estimated by Japan’s Ministry of Economy, Trade and Industry—3,500 tons of rare earth mud per day. On an annual basis, this could meet about 10% of Japan’s annual rare earth consumption.

The supply chain is roughly divided into three stages: “mining,” “dehydration and beneficiation,” and “separation and refining.” The mining stage requires the largest investment, approximately 250 billion yen. Funding is needed for vessels used to recover deep-sea mud and for drilling equipment. Professor Kentaro Nakamura of the University of Tokyo stated, “Existing offshore oilfield development technologies can be applied.”

Dehydration and beneficiation remove water and excess materials from the mud dredged onto ships. Because mud residue will remain, facilities for processing and temporarily storing this mud need to be built on Minami-Torishima Island. This stage requires approximately 40 billion yen.

After rare earth elements are transported to Japan by merchant ships, they need to be separated and refined to further break them down into usable forms. The mining and refining process often generates excess mud or waste liquid containing radioactive materials, resulting in high treatment costs. The rare earth mud near Minamitorishima Island is considered to be largely free of such hazardous substances.

Mitsui Metals and Shin-Etsu Chemicals are engaged in rare earth refining operations in Japan. They can support mass production through expansion and additional equipment, requiring an investment of approximately 50 billion yen.

The Japanese government will compile a survey of the results and economic benefits of mining operations near Minamitorishima Island by the end of fiscal year 2027, based on the Cabinet Office’s findings. The goal of industrialization is set for after fiscal year 2028.

Japan is outlining its blueprint.

However, ensuring a stable supply of rare earth elements is now imperative for Japan.

On February 24, China’s Ministry of Commerce listed 20 Japanese companies and organizations as prohibited export entities for dual-use items. Rare earth elements may be included in the scope of dual-use item controls.

The Japanese government plans to strengthen its national rare earth reserves, but the current reserve size has not been disclosed. Kohei Okazaki, chief market economist at Nomura Securities, points out that “the reserves are probably only enough for six months to a year.” Any change in Chinese policy could disrupt the supply chains of Japan’s core industries.

Eliminating dependence on China has been a long-standing challenge for Japan. Japan’s annual rare earth demand is approximately 20,000 tons, the vast majority of which is imported. Data from the Japan Energy and Metals Mineral Resources Agency (JOGMEC) shows that in 2024, 70% of Japan’s rare earth imports came from China. In the heavy rare earth sector, essential for manufacturing industrial magnets, China accounts for almost 100% of the market share.

The production cost of rare earths near Minami-Torishima Island is higher than in China. Yoshikiyo Shimamine, a senior researcher at Dai-ichi Life Research Institute, estimates that “the cost per ton is about 11 million yen, roughly 20 times that of China.”

Even so, the approximately 340 billion yen needed to establish a rare earth supply chain near Minami-Torishima Island is still lower than the trillions of yen required for semiconductor factories. From an economic security perspective, establishing a sizable supply chain near Minami-Torishima Island, where Japan can secure globally scarce heavy rare earth resources, is of great significance.

While profitability cannot be completely ignored, facing pressure from China, Japan seems to have reached a stage where it needs to mobilize the entire nation to promote domestic production.

Japan currently has several options, such as brainstorming solutions for breaking the deadlock through public-private partnerships in funding, exploring new procurement channels through international cooperation, and establishing a rare earth recycling system. Japan is working on a comprehensive blueprint for a sustainable rare earth supply chain.