China tightens export controls on dual-use Items, potentially dealing a heavy blow to Japanese manufacturing and straining household budgets

Editor's note: Yang Hangjun is a professor & executive dean at the University of International Business and Economics. The article reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.

China's Ministry of Commerce on Tuesday issued an announcement prohibiting the export of all dual-use items for Japanese military end users, for military purposes, and for any other end-user purposes that could enhance Japan's military capabilities. These dual-use items cover approximately 1,100 products across multiple categories, including rare earths, chemicals, industrial goods, and materials. 

This move is a resolute response to the reckless actions of Japan's right-wing forces and a direct warning against the extremely inflammatory and egregious remarks recently made by Japanese Prime Minister Sanae Takaichi, brazenly interfering in China's internal affairs and fabricating pretexts for military expansion. China's decision to tighten export controls at this juncture is intended to sever the material foundations sustaining a resurgence of militarism and constitutes a necessary step to safeguard regional peace and the postwar international order.  

The deeply intertwined civilian and military attributes of modern industrial systems mean that such controls will inevitably affect the core arteries of Japan's economy. Take rare earths as an example, according to the latest assessment by Japan's Nomura Research Institute (NRI), although the country's overall dependence on China for rare earths has fallen to around 60 percent, yet in critical, high-end areas, this reliance remains absolute. In particular, for heavy rare earth elements such as dysprosium and terbium, Japan's dependence on exports remains at nearly 100 percent. This implies that once China tightens the tap, Japan's pillar industries, including automobiles, electronic components, wind power, medical devices, and aerospace, will face the risk of disrupted supplies of essential raw materials. Such a supply-side shock would impose an exceptionally heavy burden on the Japanese economy. 

NRI estimates that if restrictions on the exports of dual-use items last for three months, economic losses would reach approximately 660 billion yen ($4.2 billion), dragging down real GDP by 0.11 percent. Should the situation continue for a full year, losses would swell to 2.6 trillion yen, resulting in a 0.43 percent decline in real GDP. Against the backdrop of an already sluggish global economic recovery, these figures reflect production halts triggered by supply-chain ruptures and a sharp squeeze on corporate profitability.

More troubling still, upstream disruptions will transmit downward along industrial chains and translate into added cost pressures on Japanese household budgets. Economic theory on the price pass-through mechanism suggests that when manufacturing input costs surge and supplies become highly unstable, firms, underpressure to survive, will inevitably shift additional costs onto end consumers. A pronounced round of cost-push inflation can therefore be expected in automobiles, household appliances, and high-end consumer electronics. 

For ordinary Japanese citizens, this would amount to an undeserved calamity. At a time when real wage growth has long stagnated, rising consumer prices will directly squeeze household disposable income. Whether among middle-class families planning to purchase automobiles or younger generations whose daily lives rely heavily on electronic products, consumers will acutely feel the pain of consumption downgrade.

Such pressure on livelihoods is, in essence, the price Japanese citizens are paying for the erroneous statements and actions of their politicians. What China is cutting off is the fuel for military expansion, not the lifeblood of normal trade. However, if politicians like Takaichi insist on hitching the Japanese people to the wagon of an anti-China agenda and are determined to revive militarism, then economic recession and a declining standard of living will be the bitter consequences Japan must bear. Confronted with potential losses of trillions of yen and intensifying inflationary pressures, the Japanese government must be soberly aware that any attempt to prop up its military ambitions on a fragile industrial foundation is nothing more than a futile gesture. Only by genuinely reflecting on history, halting dangerous provocations on China's sovereignty, and returning to a path of peaceful development can Japan restore the smooth functioning of supply chains, prevent its manufacturing sector from suffocation, and ensure that ordinary households are no longer forced to pay for perilous political gambles.