MAY 18 — Japan’s latest push to diversify its rare earth and critical mineral supply chains away from China is not merely an economic adjustment.
It is a geopolitical recognition that both Southeast Asia and Latin America now constitute two of the most important strategic depth zones in the emerging contest over critical minerals, advanced manufacturing and technological sovereignty.
For decades, China dominated the processing and refining of rare earth elements, controlling between 70 to 90 per cent of global refining capacity across multiple strategic minerals.
This dominance was not accidental. It emerged from decades of state support, industrial planning, environmental tolerance and strategic foresight.
Yet the rise of economic security as a core doctrine among advanced industrial powers — especially Japan, the United States and the European Union — has fundamentally altered the geopolitical map of resource competition.
Japan now increasingly sees Asean and Latin America not as peripheral commodity suppliers but as indispensable strategic partners in securing resilient supply chains for the future global economy.
This explains why Japanese companies are aggressively deepening investments across Southeast Asia.
Sumitomo Metal Mining is increasing scandium production by 20 percent in fiscal 2026 using ore sourced from the Philippines. The scandium is then refined in Hyogo Prefecture for fuel-cell applications.
At the same time, Sojitz Corporation is developing rare earth and mineral ventures in Vietnam and Malaysia.
This shift reflects a deeper strategic reality.
Rare earths are no longer simply industrial commodities.
They are the foundational materials underpinning artificial intelligence infrastructure, electric vehicles, quantum technologies, advanced semiconductors, missile systems, aerospace engineering and green energy transitions.
The sudden explosion in AI-driven data centers has further intensified global demand.
Scandium, once considered a niche mineral, is now increasingly important for fuel cells that lower operating temperatures while enhancing durability. Demand reportedly doubled in 2025 alone due to the exponential expansion of AI infrastructure worldwide.
Japan understands this trend acutely.
Under the Economic Security Promotion Act introduced in 2022, Tokyo designated critical minerals as “specified critical products.” This transformed rare earth policy from a purely commercial concern into a national-security imperative.
Japan’s strategy is comprehensive.
It includes stockpiling, upstream extraction, midstream processing, recycling and financial guarantees through Japan Organization for Metals and Energy Security (JOGMEC).
Tokyo has also backed projects extending from Australia’s Lynas rare earth processing facilities to Europe’s Caremag project in France.
But Asean and Latin America increasingly occupy the center of this diversification strategy because they possess something advanced economies lack: geological abundance.
Vietnam holds some of the world’s largest rare earth reserves outside China. The Philippines possesses major nickel and cobalt deposits.
Malaysia continues to develop downstream processing capabilities. Indonesia already dominates global nickel production essential for EV batteries.
Meanwhile, Latin America forms the second pillar of this strategic reconfiguration.
The so-called “Lithium Triangle” — encompassing Argentina, Bolivia and Chile — contains more than half of global lithium reserves.
Brazil possesses substantial reserves of graphite, nickel and rare earths. Peru remains critical for copper production vital to electrification.
Together, Asean and Latin America are becoming the twin anchors of the post-China diversification strategy.
This does not mean China is collapsing strategically.
Far from it.
China still retains overwhelming advantages in refining capacity, industrial ecosystems, logistics integration and processing expertise.
Building alternative supply chains outside China will take many years and enormous financial investments.
Indeed, one of the greatest ironies in the current geopolitical transition is that many countries can mine rare earths but still depend on China to process them.
This is precisely why Japan’s approach is notable.
Tokyo is not merely seeking raw materials. It is trying to build entire ecosystems of extraction, refining, recycling and advanced manufacturing outside excessive dependence on any single power.
This strategy is also less confrontational than some Western approaches.
Japan recognizes that complete decoupling from China is unrealistic.
Instead, it seeks diversification, redundancy and strategic resilience.
Asean benefits enormously from this approach because Japan traditionally prefers partnership-building over overt geopolitical coercion.
For Southeast Asia, this creates major opportunities. Countries like Malaysia, Vietnam, Indonesia and the Philippines can move beyond the old model of merely exporting raw materials.
The real challenge is whether Asean can capture more value-added activities such as refining, component manufacturing, battery ecosystems and AI-related industrial infrastructure.
Latin America faces a similar strategic choice.
Will it remain trapped in commodity extraction cycles, or can it leverage Japanese, European and Asian investments to move into higher-end industrial processing and technological ecosystems ?
This question will define the next phase of global industrial competition.
The geopolitical significance is profound.
Control over rare earths increasingly resembles the strategic importance oil once held in the twentieth century.
But unlike oil, rare earths are deeply intertwined with digital supremacy, AI competition and military-technological dominance.
Japan’s recognition of Asean and Latin America as strategic mineral partners therefore reflects more than economic pragmatism.
It reflects an emerging multipolar industrial order where technological resilience requires diversified geoeconomic partnerships across the Global South.
For Asean especially, the opportunity is historic.
The region is no longer merely a manufacturing hub caught between major powers. It is becoming one of the indispensable foundations upon which the future global technological order may be built.
* Phar Kim Beng is a professor of Asean Studies and director, Institute of Internationalisation and Asean Studies, International Islamic University of Malaysia.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
