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China has threatened Japan with harsh economic sanctions if Tokyo further limits the sale and servicing of chip-making equipment to Chinese companies.
People familiar with the matter spoke to Bloomberg today, and this warning comes amid ongoing tensions as the US pushes its allies to tighten controls on China’s access to advanced semiconductor technology. In June 2023 Japan and the Netherlands, known US allies, announced a semiconductor export controls deal, which experts interpreted as restrictions aimed at curbing China’s semiconductor advancements.
Japan’s recent decision to limit exports of 23 types of semiconductor manufacturing equipment, which became effective in July, is part of this broader strategy. According to Reuters, these restrictions aim to prevent high-level technology from being used by China for military purposes, although Japan has not explicitly named China as the target.
The potential for economic retaliation from China poses a serious risk for Japan, whose major corporations like Toyota depend on crucial minerals for automotive production. This concern is informed by past incidents, such as when China temporarily halted rare earth exports to Japan in 2010 following a territorial dispute.
The rising tensions between China and Japan have intensified in recent years, and are driven primarily by geopolitical and security concerns. China had previously banned all Japanese seafood imports in 2023 over concerns about treated wastewater from the Fukushima nuclear plant.
Despite these conflicts, China remains Japan’s largest trading partner, while Japan is a major technology and investment provider to China. However, China continues to perceive the growing US-Japan security alliance as a security challenge, further straining relations.
Given this level of geo-political rivalry playing out between both countries, managing these tensions while maintaining economic cooperation poses a significant challenge for both Asian powerhouses.
