China imposes export controls on 40 Japanese entities as tensions with Tokyo rise

On June 29, 2026, China's Ministry of Commerce issued announcements adding 20 Japanese entities — including the National Institute for Defense Studies and un...

What Happened

On June 29, 2026, China's Ministry of Commerce issued announcements adding 20 Japanese entities — including the National Institute for Defense Studies and units of major industrial conglomerates — to its Export Control List, prohibiting Chinese and foreign exporters from selling dual-use items to these entities.
Simultaneously, another 20 Japanese entities including Mitsui E&S, Subaru Corporation, Itochu Aviation, and Mitsubishi Materials Corporation were added to a watch list — meaning exporters cannot verify end-user or end-use for dual-use items destined to these firms.
This brings to 40 the total number of Japanese entities subject to Chinese export control measures announced on that date.
The measures build on a February 24, 2026 action, in which China had already added 20 Japanese entities (including multiple divisions of Mitsubishi Heavy Industries' shipbuilding and aero engines units) to the Export Control List.
The restrictions effectively cut targeted companies off from seven rare earth elements and associated materials on China's dual-use control list, as well as other controlled critical minerals including dysprosium, terbium, yttrium oxide, and gallium.

Static Topic Bridges

China's Export Control Law (ECL) 2020

China's Export Control Law was promulgated in October 2020 and came into effect on December 1, 2020. It is the overarching framework governing exports of dual-use items, military products, nuclear materials, and other goods related to national security or China's international obligations. The law creates two key instruments: the Export Control List (mandatory prohibition on supply) and a Watch List / Entity List (heightened due diligence required). Under the ECL, both Chinese entities and foreign entities can face penalties for supplying controlled items to listed parties, giving the law extraterritorial reach.

Enacted: October 2020; effective: December 1, 2020
Regulates: dual-use items, military products, nuclear-related goods, technologies, and services
Tools: Export Control List (outright ban) and Watch/Entity List (due diligence obligation)
Extra-Mural reach: foreign companies are also bound if they re-export Chinese-origin controlled items to listed entities
Implementing regulations and updated dual-use item catalogues were issued in 2024, further aligning with international standards

Connection to this news: The June 2026 designations are direct exercises of the ECL's Entity List provisions, deployed as a geopolitical signalling instrument against Japan's defence rearmament trajectory.

Dual-Use Items and the Wassenaar Arrangement

Dual-use items are goods and technologies that have both civilian and military applications — semiconductors, precision machinery, advanced materials, rare earths, and certain chemicals fall into this category. The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies is the key multilateral export control regime with 42 member states, including the United States, Japan, and most European nations. China is not a member of the Wassenaar Arrangement but is a member of only the Nuclear Suppliers Group among major export control regimes. China has structured its dual-use control lists to be partially analogous to Wassenaar categories.

Wassenaar Arrangement established: 1996 (successor to the Cold War-era COCOM)
Members: 42 states; excludes China, Russia, and most developing nations
China's export control lists are being revised using a coding system similar to Wassenaar but not identical
China is also not a member of the Australia Group (chemical/biological), Missile Technology Control Regime (MTCR), or the Zangger Committee
Japan is a member of all four major regimes: Wassenaar, Australia Group, MTCR, and Nuclear Suppliers Group

Connection to this news: Japan's position inside the Wassenaar framework and China's position outside it is a structural asymmetry that China is now exploiting through its own unilateral ECL, targeting Japanese defence and industrial firms.

Critical Minerals and Rare Earths as Strategic Leverage

Rare earth elements (REEs) comprise 17 metallic elements (lanthanides plus scandium and yttrium) critical for advanced manufacturing — from electric vehicle motors and wind turbines to jet engines, missile guidance systems, radar, and MRI machines. China controls approximately 60% of global rare earth mining and a dominant share of global processing capacity. This concentration gives China a structural leverage point in technology supply chains. Key elements targeted in China's Japan restrictions include dysprosium and terbium (used in permanent magnets for defence and EV applications), yttrium oxide, and gallium (used in semiconductors and solar panels).

China controls ~60% of global rare earth mining; much higher share in processing
Seven rare earth categories are currently on China's dual-use control list
Japan had been heavily import-dependent on China for these materials
Japan's responses in 2026 include: deep-sea rare earth mining tests near Minamitori Island (6,000 m depth), a Japan-US critical minerals action plan (March 2026), and a proposed G7 coordinated rare earth stockpiling initiative (June 2026)

Connection to this news: The June 2026 export controls weaponise China's rare earth dominance against named Japanese entities in the defence and aerospace sectors, marking an escalation from broad restrictions to surgical, entity-level targeting.

China-Japan Relations: Structural Tensions

China-Japan relations involve a complex mix of deep economic interdependence and historical, territorial, and strategic rivalries. Key flashpoints include competing claims over the Senkaku/Diaoyu Islands in the East China Sea, Japan's security alliance with the United States, and Japan's gradual move toward a more active defence posture. Japan's December 2022 National Security Strategy revised its constitution-based constraints by endorsing counterstrike capability. China has characterised Japan's defence build-up as "remilitarisation" and linked export controls explicitly to this framing, demanding retraction of remarks by Japanese leaders on Taiwan's security.

Japan–US Security Treaty (1960) remains the cornerstone of Japan's alliance; the alliance increasingly frames China as a strategic competitor
Japan's 2022 National Security Strategy endorsed counterstrike capability — a significant shift from post-war pacifist norms
East China Sea territorial dispute over Senkaku/Diaoyu Islands: administered by Japan, claimed by China and Taiwan
China's export restrictions since early 2026 are specifically targeted at Japanese entities involved in shipbuilding, aero engines, defence research, and nuclear-adjacent industry

Connection to this news: The export controls are a dual-use policy instrument serving geopolitical ends — using economic leverage to impose costs on Japan's defence expansion without direct military confrontation.

Key Facts & Data

Entities added to Export Control List on June 29, 2026: 20 (including National Institute for Defense Studies)
Entities added to Watch List on June 29, 2026: 20 (including Mitsui E&S, Subaru Corp, Itochu Aviation, Mitsubishi Materials Corp)
Total Japanese entities under Chinese export controls (cumulative, 2026): 40+
First round of 2026 controls: February 24, 2026 (20 entities, including Mitsubishi Heavy Industries divisions)
China's Export Control Law: promulgated October 2020, effective December 1, 2020
Wassenaar Arrangement membership: 42 states; China is not a member
China's sole major export control regime membership: Nuclear Suppliers Group
Critical minerals restricted: dysprosium, terbium, yttrium oxide, gallium, and 7 rare earth categories
China's share of global rare earth mining: approximately 60%