Japanese stocks faced significant pressure on Wednesday, January 7, 2026, with the Nikkei 225 index closing 1.06% lower at 51,961.98 amid escalating trade tensions with China. The decline follows Beijing's announcement of stricter controls on rare earth exports to Japan, a move analysts warn could disrupt global supply chains for electronics and green energy technologies.
China's Ministry of Commerce confirmed Tuesday that exports of dual-use items to Japanese military entities or projects enhancing Japan's defense capabilities will be prohibited. The measures come after Japanese Prime Minister Sanae Takaichi drew criticism for recent comments perceived as interfering in China's internal affairs, further straining bilateral relations.
Market analysts note the "Takaichi-cost" – a term emerging in financial circles – reflects growing investor concerns about prolonged trade friction between Asia's second- and third-largest economies. Rare earth minerals remain crucial for Japan's automotive and technology sectors, with Chinese suppliers accounting for nearly 60% of global refined output.
