Japan, France Sign Rare Earth Pact to Counter China Supply Risk

Japan and France's signing of a critical minerals cooperation roadmap, anchored by the Caremag rare earth refining facility due to open in late 2026, reflects accelerating efforts by major economies to build supply chain alternatives to China, which controls 91% of global rare earth refining capacity and has imposed successive export restrictions since April 2025. For Mexico, which holds the 2026 Pacific Alliance presidency and is actively seeking access to 13 strategic minerals through bilateral and multilateral engagement, this realignment creates openings to position domestic resources within diversified global supply chains serving automotive, clean energy, and advanced manufacturing sectors.

Japan and France have agreed to strengthen cooperation on rare earth and critical mineral supply chains, signing a roadmap during French President Emmanuel Macron's three-day visit to Japan for talks with Prime Minister Sanae Takaichi. This is the latest coordinated effort to reduce dependence on China.

A central element of the agreement is securing raw material supplies for Caremag, a rare earths refining facility under development in southern France. The project counts the state-owned Japan Organization for Metals and Energy Security and gas firm Iwatani among its Japanese investors, alongside the French government. Caremag is scheduled to begin operations in late 2026. Japan plans to source approximately 20% of its future demand for dysprosium and terbium from the plant, heavy rare earth oxides used in magnets for electric vehicle motors, offshore wind turbines, and electronic components.

The agreement comes as Japan faces direct pressure from Beijing. In February, China prohibited exports of dual-use items to 20 Japanese entities it identified as supplying Japan's military, following comments by Takaichi about Taiwan in November that drew a sharp response from Beijing. The restrictions cover seven rare earths and associated materials on China's dual-use control list, including dysprosium and yttrium, along with other controlled critical minerals.

"China is pursuing a strategy of using rare earths as a diplomatic card, and if US-China and Japan-China relations improve, exports could recover quickly," said Kotaro Shimizu, Analyst, Mitsubishi UFJ Research and Consulting.

Japan has been working to reduce its exposure to Chinese supply since a 2010 diplomatic incident in which Beijing restricted rare earth exports to Tokyo. That episode prompted a sustained diversification effort that has brought Japan's reliance on China down from 90% to 60%. Investments in overseas projects have been a key part of that strategy, including trading house Sojitz's partnership with Australia's Lynas Rare Earths and a push to expand rare earth recycling and alternative manufacturing processes.

In the latest moves, Japan's Mitsubishi Materials agreed this week to acquire a stake in US-based ReElement, a company active in rare earth recycling. Japan and the United States are also considering the joint development of rare-earth-rich seafloor mud deposits near the remote Minamitori Island, and Japan is in talks with India to jointly explore rare earth resources in the desert state of Rajasthan.

The France-Japan pact also extends to space, with companies from both countries expected to sign memorandums of understanding on 12 joint projects, including space debris removal and rocket launches.

Global Push Strengthens Critical Minerals Supply Chains

The bilateral agreement is part of a broader realignment in critical mineral diplomacy. China controls the refining of 19 of 20 key minerals, averaging 70% of the global market, and holds 91% of rare earth refining capacity, according to the International Energy Agency's 2025 Global Critical Minerals Outlook. Its share of permanent magnet production, essential for electric vehicles, wind turbines, industrial motors, defense systems, and data centers, has grown from 50% two decades ago to 94% today.

China's export controls have compounded supply risks. In April 2025, Beijing restricted exports of seven heavy rare earths and related products, causing shortages for United States and European manufacturers and driving European prices up to six times domestic levels. By October, restrictions had expanded to cover foreign-made products containing Chinese-sourced rare earths, additional elements including holmium, erbium, and ytterbium, and critical processing equipment.

The response from other major economies has been swift. On Feb. 4, 2026, the United States hosted the Inaugural Critical Minerals Ministerial, bringing together 55 nations to establish a preferential trade zone for strategic materials, incorporating price supports, standards, subsidies, and guaranteed offtake agreements. 

Recently, Brazil and India signed a separate cooperation agreement on critical minerals and rare earths during President Luiz Inácio Lula da Silva's visit to New Delhi, with Indian Prime Minister Narendra Modi calling it "a major step towards building resilient supply chains." Brazil holds the world's second-largest rare earth reserves, estimated at 21Mt, and has received nearly US$500 million in financing from the US International Development Finance Corporation for Serra Verde, the country's only active rare earth producer.

Mexico, holding the 2026 pro tempore presidency of the Pacific Alliance, is also positioning itself within this reconfiguration. Minister of Economy Marcelo Ebrard said Mexico is seeking access to 13 minerals it lacks or produces in limited quantities while remaining a top global producer of antimony, barite, copper, fluorite, graphite, lead, silver, and zinc. Mexico plans to raise critical minerals trade at the WTO's XIV Ministerial Conference and is engaging with Latin America, Ibero-America, India, and Canada to secure supply.