Rare-earth processing equipment at an industrial facility.
By Salini Krishnan
Japan’s Ministry of Economy, Trade and Industry has proposed allowing the state-owned Japan Organization for Metals and Energy Security (JOGMEC) to invest in overseas critical-minerals projects without the participation of a Japanese company, a policy shift aimed at accelerating supply diversification as China tightens its grip on rare earths and other strategic metals.
The proposal, presented to an expert panel on mining policy on Thursday, would remove a constraint that has shaped Japan’s overseas resource strategy for years. JOGMEC currently must invest jointly with a Japanese company or commit to transferring project rights to a Japanese firm at a later stage.
Under the proposed framework, JOGMEC could invest alongside foreign resource companies where waiting for a Japanese corporate partner risks delaying project development or losing access to a strategic deposit.
The change would apply to the 20 minerals designated as essential materials under Japan’s Economic Security Promotion Act, according to reporting by Reuters.
The move comes as Japanese manufacturers face uncertainty over China’s export controls on rare earths and metals. It also reflects intensifying competition for new projects, including growing support from the United States for a Brazilian rare-earths producer and wider efforts by governments to secure supply outside China.
Why Japan is changing the rules
Japan has limited domestic mineral resources and depends heavily on imports for metals used in permanent magnets, batteries, electronics, defense equipment and advanced manufacturing.
The exposure is particularly acute for heavy rare earths such as dysprosium and terbium. Both are used in high-performance permanent magnets, including magnets installed in electric-vehicle motors, industrial machinery and other applications requiring resistance to high temperatures.
China has retained a dominant position across rare-earth mining, separation, refining and magnet manufacturing. While Japan has invested in alternative sources, recycling and stockpiling, the development of non-Chinese supply has not kept pace with the speed at which governments and manufacturers are seeking diversification.
That gap has become more visible since Beijing introduced tighter export licensing requirements for several rare earths and related products. Dysprosium and terbium were included in export controls imposed in April 2025, and those controls remain a central concern for buyers dependent on Chinese supply.
A separate suspension of broader Chinese export restrictions is due to expire on Nov. 10, 2026. The expiry is not necessarily an automatic embargo date, but it could allow wider controls introduced in October 2025 to return unless they are extended, modified or replaced.
For Japanese automakers, magnet producers and technology companies, the policy risk is not limited to the physical availability of ore. Supply-chain exposure also extends to separation capacity, processing technology, licensing approvals, magnet alloys and the ability to secure long-term contracts.
Japan’s proposed response is to give JOGMEC greater freedom to act before a Japanese company is ready to commit capital.
JOGMEC’s proposed powers versus the current system
JOGMEC was established to help Japan secure stable supplies of oil, gas and metals. Its metals activities include exploration support, project finance, equity participation, technical assistance and stockpiling.
The organization has often entered overseas projects during the exploration or feasibility phase and later transferred its interest to a Japanese company. That structure can help reduce early-stage risk for private firms, but it can also limit JOGMEC’s ability to move quickly when a project is commercially or geopolitically significant.
| Area | Current approach | Proposed approach |
|---|---|---|
| Japanese company participation | JOGMEC generally invests jointly with a Japanese company | JOGMEC could invest without a Japanese company participating at the outset |
| Ownership of project rights | Rights acquired independently are generally tied to a later transfer to a Japanese firm | JOGMEC could retain or manage its position under scheme-specific conditions |
| Foreign partners | Cooperation is structured around eventual Japanese corporate participation | JOGMEC could invest alongside foreign resource holders |
| Timing | Investment may depend on finding a suitable Japanese partner | JOGMEC could act earlier when delay creates supply risk |
| Policy scope | Overseas resource support under existing JOGMEC rules | The proposed flexibility would target 20 designated essential minerals |
| Strategic objective | Support Japanese companies and eventual domestic supply | Secure access even when private-sector participation is unavailable or delayed |
The proposal would not necessarily eliminate Japanese corporate involvement. Rather, it would allow the state body to take a position first, potentially preserving access to a deposit until a Japanese company, trading house, manufacturer or consortium is ready to participate.
Namibia project highlights the existing model
The proposed change follows a recent JOGMEC-backed heavy rare-earth project in Namibia, where the organization worked with Canada-based Namibia Critical Metals and later brought in Toyota Tsusho.
At the Lofdal project in Namibia’s Kunene region, JOGMEC launched the project in 2020. In March 2026, it conducted an open competitive process to transfer part of its option interest, enabling Toyota Tsusho to join as a development partner.
In July, JOGMEC said it had decided to invest up to 47.668 million Canadian dollars, or approximately 5.5 billion yen, in a special-purpose company established by Toyota Tsusho for the project. The company is conducting a definitive feasibility study and aims to make a final commercialization decision during Japan’s fiscal year 2026.
The deposit contains heavy rare earths, including dysprosium and terbium, and JOGMEC has described it as Japan’s first rare-earth mine development project in Africa.
Exploration equipment in Namibia’s heavy rare-earth development corridor.
The Namibia project demonstrates how JOGMEC’s existing model can work when a Japanese company is ultimately available. The new proposal is designed for situations where that sequence may not be fast enough.
A project may have a foreign owner, an early-stage development opportunity or a competitive financing process that requires a rapid decision. Under the current system, JOGMEC may have to identify a Japanese participant or structure a future transfer before committing. The proposed rules would give it more room to secure an interest first.
The role of the Economic Security Promotion Act
Japan’s Economic Security Promotion Act provides the broader policy framework for reducing excessive external dependence on materials and technologies considered important to national security and economic activity.
The law allows the government to support measures including supply-source diversification, stockpiling, domestic production capacity, technology development and alternative materials.
The statutory framework is separate from JOGMEC’s operating rules, but the two systems are increasingly being used together. METI sets policy priorities while JOGMEC functions as one of the main vehicles for overseas resource investment and supply-chain development.
Japan’s Economic Security Promotion Act states that the government may designate critical products and their raw materials, equipment and components where external dependence creates a risk to national and economic security.
The proposed JOGMEC change would therefore connect direct state investment more closely to economic-security objectives. Instead of waiting for a private Japanese participant, the government could intervene at the project level when a mineral is strategically important and the opportunity is time-sensitive.
Mineral cargo moving through a Japanese port terminal.
Implications for the critical minerals supply chain in 2026
The proposal could strengthen Japan’s position in the critical minerals supply chain in 2026, but it will not by itself solve the country’s dependence on Chinese processing and refining.
Mining projects typically take years to advance from exploration to commercial production. Even if JOGMEC secures an interest quickly, the resulting supply may not reach Japanese manufacturers before the next disruption in exports or licensing.
The more immediate benefit would be strategic access. JOGMEC could help secure offtake rights, influence project development plans, support feasibility work and preserve a route to future Japanese participation.
That may be particularly important for heavy rare earths, where alternative supply is limited and new mines often lack integrated separation or refining capacity. A mine outside China does not automatically provide a non-Chinese supply chain if concentrate must still be processed through Chinese facilities.
The policy may also encourage Japanese trading companies, manufacturers and financial institutions to enter projects at a later stage, once geological, technical and commercial risks have been reduced.
However, direct state investment would raise questions about risk allocation and governance. The final scheme will need to clarify how JOGMEC selects projects, what return thresholds apply, how losses are handled and when the organization may retain an interest rather than transfer it.
It will also need to establish safeguards for projects involving foreign partners, sensitive technologies, environmental approvals and politically unstable jurisdictions.
What happens next
The expert panel will consider the proposal before METI finalizes the details of the investment scheme. Key issues are expected to include the precise conditions for independent investment, the treatment of project rights, reporting requirements and the circumstances under which JOGMEC could retain an interest.
The government will also need to determine how the new authority fits with existing JOGMEC legislation and the Economic Security Promotion Act’s support mechanisms.
For Japanese industry, the practical test will be whether the revised rules allow the state to move faster without creating an open-ended investment mandate.
For investors and mining companies, the change could make JOGMEC a more flexible partner in early-stage projects involving rare earths, battery materials and other designated minerals. It may also increase competition for assets as Japan joins the United States, Europe, South Korea and other governments in using public capital to secure supply.
The proposal does not guarantee new production or remove the risk of future shortages. But it signals that Japan is prepared to use its state resource agency more directly as the global race for critical minerals moves from policy planning to project acquisition.