Japan is tightening its grip on foreign investment in domestic industries related to exploration and mining of rare metals including rare earths, of which supplies are critical for the country in its energy transition push towards its 2050 decarbonisation goal.
The country's finance ministry, jointly with the ministries of industry, transport and education, yesterday placed for public consultation a draft amendment to foreign exchange and foreign trade legislation that proposes to add rare metals-related sectors to the list of the country's key industries that should be protected from foreign takeovers to ensure national security. The law's revision is targeted to minimise the vulnerability to the country's supply chain of a designated 34 critical rare metals including lithium, cobalt and rare earths.
Japan in June last year implemented an amended foreign exchange law that tightens control over foreign investment in some 500 firms that conduct business in 12 key sectors, including oil, power and gas utilities, as well as nuclear power. Foreign investors under the revised law acquiring a share of 1pc or more in such companies will be pre-screened compared with 10pc previously. Tokyo has since added drugs and medical equipment to the key sectors, boosting the number of firms under the law's control to more than 700.
The proposed amendment of the foreign exchange law is expected to be enforced later this year following a month-long public consultation period until 16 September.
The sectors to additionally fall under the law's protection include metals mining, including those that operate mineral exploration vessels and carry out onshore/offshore surveys, manufacturing of mining devices and their maintenance services, along with mineral component analysis services. The ministries have also proposed to add the construction services sector involving the maintenance of port facilities on the remote islands of Minamitorishima and Okinotorishima where major mineral deposits have been discovered.
The government wants to secure stable supplies of critical minerals, of which demand is growing globally as production of electric vehicles (EVs), renewable power generation equipment and electronic devices expand to enable energy transition and digitalisation. It is also vital for the country to maintain exploration capability of mineral resources in territorial waters in efforts to reduce the country's dependence on imports and enhance resource security, Tokyo said.
Japan is accelerating its energy transition process, pushing a shift to passenger EVs by 2035 as part of its green growth strategy action plan for 2050 carbon neutrality.
