Beijing escalated its months-long pressure campaign against Tokyo on Monday, blacklisting four Japanese government defense research institutes and tightening export controls on dozens of additional entities.
China’s Ministry of Commerce added 20 entities to its export control list, including the National Institute for Defense Studies and research centers covering ground, naval, and air systems.
Several units under Mitsubishi Electric (6503.T) and Mitsubishi Heavy Industries (7011.T) were also targeted in the latest round of restrictions.
Domestic exporters and overseas organizations are prohibited from transferring Chinese-origin dual-use items to any named entities, with the ministry ordering all ongoing activities to stop immediately.
In a separate action, China added another 20 entities to a watch list requiring enhanced licensing scrutiny, including Mitsui E&S Co., drone maker Terra Drone Corporation, nuclear fuel processors, and multiple units of OKI Electric Industry (6762.T).
The ministry stated that exports involving Japanese military users, military applications, or any end-use that could strengthen Japan’s defense capabilities would not be approved under any circumstances.
The escalation traces back to January, when Beijing first banned dual-use exports to Japan, including rare earth elements, permanent magnets, and other critical minerals essential to defense technologies.
In February, China added subsidiaries of Mitsubishi Heavy Industries, IHI Corp., and Kawasaki Heavy Industries to its export control list, with Subaru Corp., TDK Corp., and FUJI Aerospace Technology placed on the watch list.
Beijing’s pressure intensified after Japanese Prime Minister Sanae Takaichi suggested in November that a hypothetical Chinese attack on Taiwan could trigger a military response from Tokyo.
A commerce ministry spokesperson said Monday that Japan had shown no remorse since the February listings and had instead “accelerated” its push toward what Beijing characterizes as “new-style militarism,” including deploying offensive weapons and launching missiles overseas.
Beijing urged Japan to “turn back from the wrong path,” while insisting the measures would not affect normal bilateral economic and trade activities and that “law-abiding Japanese firms have no reasons to worry.”
Market reactions were mixed following the announcement, with Mitsubishi Electric declining around 1.4% and Howa Machinery falling approximately 4.6%, while Mitsubishi Heavy Industries gained 4.9% and Terra Drone Corp rose 1.7%.
Gracelin Baskaran, director of the critical minerals security program at the Center for Strategic and International Studies, noted in a January report that China has sought to leverage its dominance over critical mineral supply chains as a tool of deterrence against political behavior it opposes.
Countries that have expressed support for Taiwan remain particularly exposed to this strategy, Baskaran added, underscoring the geopolitical dimension driving Beijing’s escalating trade measures.
Japan has worked to reduce its dependence on Chinese rare earths since 2010, but remains deeply entangled in supply chains relying on China and Vietnam, spanning mining to permanent magnet manufacturing.
Koki Akimoto, an economist at Daiwa Institute of Research, estimated in December that a one-year cutoff of Chinese rare earth imports combined with sustained component supply constraints would reduce Japan’s real GDP by approximately 1.3%, or roughly 7 trillion yen, equivalent to $43.3 billion.
