German Chancellor Olaf Scholz and Japanese Prime Minister Fumio Kishida met in Tokyo on 18 March 2023 for the first joint cabinet-level talks ever held between the two G-7 powers. The six German ministers who flew in with Scholz spent the day with their Japanese counterparts hashing out a formal pact to shield critical supply chains from coercion, price shocks and the kind of weaponised trade Russia has used since invading Ukraine. The agreement, signed that evening, commits both governments to co-legislate on export controls, share intelligence on raw-material bottlenecks and open joint stockpiles of rare-earth minerals, microchips and lithium-ion batteries.
Why Berlin is looking east, toward Tokyo
Germany’s export-heavy economy still leans on China for 46 percent of its rare-earth magnets, 41 percent of its lithium and roughly one fifth of all automotive chips. Scholz told reporters that the pandemic and the Ukraine war “have made us acutely aware of the issues that might occur when there is too much economic dependency in vital areas.” The chancellor, who flew straight from a stormy EU summit on China policy, said Berlin would “respond to this” by diversifying “with Japan and other partners.”
Japanese officials briefed that Germany asked for priority access to a 1,800-tonne national stockpile of dysprosium and neodymium held in coastal depots from Hokkaido to Kyushu. In return, Tokyo wants German know-how on hydrogen-ready steel furnaces and recycled battery chemistry. Economy Minister Robert Habeck said the goal is to cut the China share of Germany’s critical mineral imports below 30 percent by 2027. Industry groups warn the timetable is tight: building a non-Chinese rare-earth separation plant inside the EU alone will take at least four years and cost €1.2 billion.
Semiconductors and batteries top the shopping list
The joint statement names semiconductors and batteries as “strategic areas” where the two countries will “share best practices to counter risks.” Japan controls 30 percent of the global market for photoresists, the chemicals needed to etch advanced chips, while Germany’s Infineon is Europe’s largest producer of automotive semiconductors. Under the pact, Infineon and Japan’s Rapidus will swap process data to speed up 2-nanometre nodes, and both governments will subsidise a bilateral pilot line in Dresden that is scheduled to tape out its first test wafers next year.
Battery cooperation is even more urgent. Europe’s planned 1.3 terawatt-hour battery demand by 2030 will require 400,000 tonnes of lithium; today Germany refines none. Japan’s trading house Sojitz and chemical giant Hanwa have agreed to underwrite a refinery in Hamburg that will import brine from Argentina and Chile, process it with Japanese membrane technology, and sell the carbonate to BMW and Tesla’s Berlin gigafactory. Kishida said the partners “want to increase cooperation in strategic areas … To build a resilient supply chain that is safe and sustainable.”
Security clause opens door to military logistics
Beyond economics, the accord sketches a “legislative framework for bilateral defence and security cooperation actions, such as offering logistical help and support.” Officials insist the language is not a back-door mutual-defence treaty, but it would let German navy tankers refuel at Japanese bases during Indo-Pacific patrols and allow Japanese Self-Defence Forces to use NATO airlift assets. The clause is modelled on Japan’s 2022 logistics pact with Australia and stops just short of intelligence sharing on Chinese troop movements.
Defence Minister Boris Pistorius called the arrangement “a natural extension of our shared interest in freedom of navigation.” His Japanese counterpart, Yasukazu Hamada, noted that Germany’s 2021 deployment of the frigate Bayern to the South China Sea “proved Berlin’s readiness to help balance Beijing’s assertiveness.” China’s foreign ministry responded within hours, warning that “exclusive groupings” would “increase confrontation and undermine regional stability.”
Auto giants brace for China pushback
Volkswagen, BMW and Mercedes-Benz, each of which sells more cars in China than at home, quietly lobbied against any clause that could trigger retaliation. In the end the text avoids explicit mention of China, but executives know the target is obvious. A senior VW board member told Nikkei Asia on background that “diversifying minerals away from China is necessary, yet we cannot replace the Chinese market; we need a dual-track strategy.”
Berlin promised carmakers a €9 billion fund to re-shore battery production, contingent on firms reducing China exposure. Japanese brands face similar arithmetic: Toyota makes one in three of its vehicles in China, while Nissan relies on Chinese partners for 55 percent of its cobalt. Both governments agreed to create an early-warning system for export bans, modelled on the EU’s 2022 silicon embargo alert, so factories can switch suppliers within 90 days.
Next steps and the China factor
The agreement now goes to both parliaments. Japan’s ruling coalition commands the votes needed; Germany’s three-party government must convince Greens and Liberals that subsidising overseas mines is compatible with climate targets. If ratified, joint teams will visit Canada, Australia and South Africa this summer to scout lithium, nickel and cobalt projects for co-investment. A follow-up summit is pencilled in for Munich in early 2024.
Scholz leaves Tokyo with a rare diplomatic win after months of criticism at home over his China stance. Yet the real test will be whether German and Japanese companies actually shift orders away from cheaper Chinese suppliers when recession risks are mounting. For now, the symbolism is clear: two export titans that once courted Beijing are locking arms to ensure the next shock, whether a Taiwan blockade or a fresh pandemic, does not stall their factories or their economies.
