China Just Cut Japan Off Again

On the morning of September 7, 2010, a Chinese fishing trawler collided with two Japanese coast guard patrol boats in the East China Sea, near a cluster of uninhabited islands both countries claim.

Japan arrested the captain, a fisherman named Zhan Qixiong, and took him ashore. Beijing wanted him back, and Tokyo wouldn't budge.

Two weeks later, Japanese companies that bought rare earths from China started hearing their shipments weren't moving.

Customs officers in Chinese ports had stopped clearing the paperwork, and dockworkers wouldn't load containers that were already packed.

China's commerce ministry said there was no ban, and kept right on saying it.

Japan released the captain on September 24. The rare earths didn't flow normally again until November 29.

So for about two months, the country supplying roughly 90% of Japan's rare earths just stopped shipping them, and never admitted it.

Japan Was Buying Half of China's Exports

In 2010, Japan took in 49% of all the rare earths China exported. Its electronics makers were flying emergency supplies in.

By the following summer, the price of neodymium, the metal in the magnets inside every hard drive and electric motor, had gone up about ten times.

The man running economic policy at Japan's trade ministry that year later admitted he had "zero knowledge about rare earths" when the shipments stopped.

Japan got educated in a hurry. The government put together a package worth a little over $1 billion to get the country off Chinese supply.

In 2011 a state agency and one of Japan's biggest trading houses put $250 million in loans and equity into a rare-earth company on the other side of the world, in exchange for first call on what it produced. The first big shipments showed up in 2012.

Fifteen years later, Japan gets about 60% to 70% of its rare earths from China instead of 90%.

A trade ministry official told the New York Times last December that the United States and Europe were only now waking up to the problem. Japan, he said, had learned its "painful lesson" fifteen years earlier.

I know a little something about painful lessons. I went bankrupt after the dot-com bust, and I can tell you the lessons that cost you something are the ones that stick. Japan's stuck.

Which is what makes this year so strange.

Four Tons Instead of Fifty-One

Since late last year, China has all but stopped selling Japan a metal called yttrium.

Don't feel bad if you've never heard of it. It's one of the 17 rare earths, a soft, silvery metal named after the Swedish village where it was first found. It isn't a magnet metal like neodymium. Most of it ends up as a white powder, yttrium oxide, and the whole world uses less than 8,000 tons of that powder a year.

That's about 400 truckloads, for the entire planet.

China separates about 98% of it.

From January through May, China shipped 14.1 tons of yttrium oxide to Japan, against 605.3 tons over the same five months a year earlier. In September, 4 tons went to Japan. The September before, 51. Through the first nine months of this year, Japan has received 18 tons of a powder it got 888 tons of last year.

That's a 98% cut, and this time around China isn't even bothering to deny it.

On January 6, Beijing banned the export of anything with a military use to Japan's defense industry.

On February 24, it put 20 Japanese companies on its export-control list by name, including an aero-engine unit of Mitsubishi Heavy Industries.

And on October 21, the day after the Financial Times reported that Japan was "months" from running out of yttrium, China's foreign ministry spokeswoman said the controls were meant to curb Japan's "remilitarization" and its attempts to acquire nuclear weapons.

Back in 2010 this was a two-month tantrum. Now it's official policy, and nobody in Beijing has said when it ends.

Japan Went to Washington

This time, Japan is asking for help, which it never had to do in 2010.

Tokyo has asked the U.S. government, and some of America's biggest companies, to press Beijing to let the yttrium move.

One Japanese official told the FT that if everyone ignored the problem, it would become a "systemic risk to the world economy." Another one said, "The timeline is not years, it's months."

In June, a Tokyo company that tracks supply chains surveyed 400 managers who buy rare earths for Japanese manufacturers. Two out of three said yttrium was hard to get. About one in six said a rare-earth shortage had already stopped a production line.

Now look at the price. A kilogram of yttrium oxide costs about $9 inside China, according to Argus, the commodity price agency. Outside China, the same kilo costs about $1,150.

Same white powder, roughly 130 times the price, depending on which side of the border it's sitting on.

Two years ago, the price outside China was in single digits too.

Why This Is America's Problem Too

Now, if you're reading this in the States, you might be wondering what any of this has to do with you.

On paper it's Japan's problem, same as in 2010. But Japanese companies build parts for American jets and radars, and the parts that need yttrium are the ones that go into jet engines, radar systems and the machines that make advanced chips.

Washington knows it, too.

Earlier this year, the Pentagon asked its suppliers for new sources of 13 critical minerals, with $100 million to more than $500 million on offer per project. Yttrium was on the list.

And the same FT story reported that U.S. officials have told Beijing they won't export the jet engines China's new airliner needs, because the yttrium squeeze has limited how many engines America can build.

So a metal most Americans have never heard of is already deciding what we can and can't sell. I'll go deeper on that Wednesday.

One Move Before You Buy Anything

Rare-earth stocks are going to move on every headline out of Tokyo and Beijing this week. If you own one, or you're tempted to buy one, here's the one thing I'd do first.

Pull up the company's latest quarterly report and look for a single number: how many tons of separated rare earths it sold last quarter. Sold, as opposed to mined or planned.

If there's a number, you own a business that gets paid more when prices go up.

If there's a plan and a drawing of a plant, you own a bet that the plant gets built before the money runs out. Those can work, and some of ours have.

But one of ours is down 74% in a year when the metals it was built to separate have soared outside China, and I'll be straight with Premium Members about it below.

If it were me, I'd want to know which kind I owned before Tuesday night's headlines, not after.

Who Gets Next Week's New Buy Alert

I've got three essays this week, and they all point at one new buy alert. Next week that decision goes out as an alert, with a name, a price and a watch price. Premium Members get it, and the free list doesn't.

Here's why it works that way.

Premium Members already own two companies in this story. The first went out in August 2025, and seven weeks later it had gone up 140% and paid back our entire stake.

The second went out in October 2025, and it's down 74%. Both get a review in today's Premium section, including exactly what I'm doing with each one right now.

And those two sit inside a bigger record.

We've closed 14 trades since Premium launched. All 14 made money.

The average gain was 83.5%. The S&P 500, over the same stretches, did 37.75%.

I'm not going to pretend every pick works. Six of our 29 open positions are riding on house money, meaning we already pulled the original stake back out of each one, and a few of the small ones are down big. You can see the whole thing, blurred tickers and all, in the screenshot below.

Free readers hear about our trades the way they'll hear about this one: after they're closed. Premium Members get the name the day I make the call.

Premium is $35 a month. If you want next week's alert the morning it goes out, this is the week to join.

Double D

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