Residual dependency after diversification: Japan, China and the midstream power of rare earths

From December 2025 through June 2026, China sharply curtailed exports to Japan of dysprosium, terbium, yttrium and the non-rare-earth strategic metal gallium, while substantial flows of finished rare earth magnets continued. The episode invites comparison with the 2010 Senkaku/Diaoyu shock. Yet the more revealing question is why Japan, which responded to 2010 more seriously than any other advanced economy, remains exposed more than fifteen years later. This article argues that Japan reduced direct dependence on Chinese rare earth imports without eliminating dependency because leverage is concentrated in the conversion system that makes mineral supply operationally usable: heavy rare earth separation, oxide-to-metal reduction, alloying, magnet manufacture and technical qualification. It develops two concepts. Residual dependency after diversification describes a condition in which measurable supplier diversification coexists with continuing exposure at harder-to-replace elements or stages. Midstream power describes the capacity to shape access, timing, price and downstream options through control of conversion and qualification. Chokepoint centrality is the general mechanism; midstream power is its rare-earth manifestation because several serial chokepoints cluster in the midstream and reinforce one another. Building on but departing from Yoshimatsu’s (Citation2026) account of Japan’s critical mineral diplomacy, the article distinguishes diversification as a policy strategy from system autonomy as an operational condition.