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Tokyo's economic trade with China has come under fresh threat. China is threatening devastating economic repercussions for Japan in the event of Tokyo continuing to impose fresh restrictions on the sale and servicing of semiconductor manufacturing equipment to Chinese firms.
This is against the backdrop of US-led attempts to cut off China from access to state-of-the-art technology. The threat has been relayed by senior Chinese officials in recent meetings with their Japanese counterparts.
Toyota Motor, a major player in Japan’s chip policy is worried that China will strike back by withholding key minerals necessary to make cars in Japan. The stakes are indeed high, set against Toyota's investment in the new chip campus currently under construction and in development by Taiwan Semiconductor Manufacturing Company in Kumamoto.
The Biden administration has been pushing to get Japan and the Netherlands to align with US chip export controls while securing supplies of critical minerals at the same time. The lever that would regulate the sales of products made by using American technology the so-called foreign direct product rule has not been applied to Japan as yet.
In this regard, the consensus dialogue between the US and Japan looks complicated with the approaching US presidential election and the declared resignation of Japanese Prime Minister Fumio Kishida. The US is pressing to seal the deal with Japan before the year's end despite a growing number of complaints from congressional lawmakers and companies frustrated over the unilateral controls that hurt semiconductor innovation.
This move resembles a similar incident in 2010 when China cut exports of rare earth metals to scramble Japan's electronics industry. The US government is thinking of more restrictions on high-bandwidth memory chips, among other sundry types of chip-making equipment. Consensus negotiations have been going on to align international allies in support of such measures.
