Canada Sees Opening as China Widens Export Controls on Japan
Ottawa's push for critical minerals partnership with Japan gains leverage as Beijing expands its trade blacklist to 20 more Japanese entities.
China added 20 more Japanese entities, including units of Mitsubishi Electric, Mitsubishi Heavy Industries and Komatsu, to its export control blacklist on Monday (2026-06-29), widening a trade dragnet that Canada's government believes undermines Beijing's argument that Tokyo has nowhere else to turn.6
The timing helps Ottawa. Three days earlier, Canada wrapped up a trade mission to Japan that produced a record haul: 14 commercial deals worth over $1.7 billion, according to Global Affairs Canada, with Japanese and Canadian companies signing more than C$1 billion, or US$705 million, in commercial agreements during the visit alone.6
The deals are the visible layer of a deeper pivot. Canada quietly offered its G7 partners first dibs on its critical minerals stockpile in the run-up to the leaders' summit in mid-June, with Ottawa writing to allied governments to offer priority access. Canada and Japan are now considering joint critical mineral projects and a potential plan for joint stockpiling of key metals as the two G7 economies look to reduce China's dominance in the market.4,5
That dominance is stark. Although many rare metals are found in Australia, Brazil, Greenland and South Africa, about 90% of the world's capacity for refining them sits in China. A full embargo would trim some $3.1 billion a year from America's output, a figure that helps explain why Washington and its allies are moving on multiple fronts.1
The Quad grouping of the U.S., Japan, Australia and India launched a joint framework on Tuesday (2026-05-26) aimed at countering China's control of global mineral markets, vowing to mobilize up to $20 billion in government and private sector financing. That framework overlaps with what Canada and Japan are now exploring bilaterally, and both tracks depend on building processing capacity outside China.3
Canada sees a structural opening. Its producers are ten times more reliant on Chinese inputs than comparable Western economies, a dependency that makes the case for domestic refining capacity more urgent than for allies with smaller exposure. The recent trade pressure on Japan, which has already suffered from Chinese manipulation of metals markets, sharpens the argument.1
Japan has been here before. In 2010, China imposed an unofficial ban on rare-earths exports to Japan during a row over disputed islands. That experience made Japan the most active G7 economy in state-backed mining efforts, and it now has a partner in Canada that is pursuing a complementary approach structured around its Defence Industrial Strategy's build-partner-buy framework.2,7
The money is following. Canada's strategy allows for direct company investment and, in some cases, government equity participation, a model that mirrors what Washington is doing at home. In January, the U.S. government declared an intent to provide $1.6 billion in backing for Round Top, a Texas rare-earth project, sending the share price of its sponsor, USA Rare Earth, surging.7,2
Australia is moving on a similar track, spending somewhat more than Europe but mostly at home. The shared problem is that mining capacity is not the bottleneck; smelting and refining are. Building those facilities takes years and requires off-take commitments that governments are now providing.2
The unresolved risk is whether the demand side will cooperate. Central Asian countries with critical mineral deposits are pressing for foreign investments to come with developmental dividends such as technology transfer and local processing capacity, a negotiating position that could slow Western efforts to secure supply chains.8
For Canada, the window is now. Beijing's expansion of its blacklist on Monday (2026-06-29) gives Tokyo a fresh reason to deepen ties with Ottawa, and the C$1.7 billion deal haul gives both governments commercial momentum to build on. The test will come when the memorandums need to become mines, refineries and long-term supply contracts that can actually break China's refining grip.