Japan: China rare-earth ban could hurt economy

September 28, 2010 By MARI YAMAGUCHI , Associated Press Writer

(AP) -- China's ban on shipments to Japan of rare-earth metals that are crucial for advanced manufacturing threatens to undermine the Japanese economy, a top finance official said Tuesday amid a territorial row between the rival Asian powers.

Japanese trading company officials say halted exports to last Thursday of rare earths - exotic metals that are used in magnets, computer disk drives, components for and other high-tech products. China's Ministry of Commerce denied there was a ban.

China produces more than 95 percent of the world's supply of rare earths. Australia also has rich deposits of the metallic elements but production is at a small-scale.

"The de-facto ban on rare-earths export that China has imposed could have a very big impact on Japan's economy," Economic and Fiscal Policy Minister Banri Kaieda told a news conference. "We need to restore Japan-China ties, especially economic exchanges, as soon as possible."

Japan and China are squabbling over the sovereignty of small islands in the East China Sea, a dispute reignited by the arrest of a Chinese fishing captain in early September after his vessel collided with two Japanese patrol boats near the islands.

To protest the captain's detention, China responded by suspending high-level contacts and cultural exchanges. Japanese prosecutors released the captain last Friday with the case still pending, but there was little sign of improvement in their troubled ties.

On Monday, logistics companies said China has stepped up customs inspections of goods shipped to and from Japan, slowing trade.

Japan's Finance Minister Yoshihiko Noda acknowledged growing concerns among businesses about the ban on rare-earth exports and delayed customs clearance for shipments to and from Japan.

Noda said Japan has submitted a statement to Beijing asking it to clarify the situation.

Japan and China are bound by multibillion-dollar ties of trade, investment and aid despite rivalry for regional leadership and lingering Chinese anger over Japanese wartime aggression.

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