VZCZCXYZ0000
RR RUEHWEB

DE RUEHKO #1741/01 2110723
ZNR UUUUU ZZH
R 300723Z JUL 09
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 5002
INFO RUEHBJ/AMEMBASSY BEIJING 0167
RUEHHI/AMEMBASSY HANOI 1137
RUEHUL/AMEMBASSY SEOUL 6808
RUEHBY/AMEMBASSY CANBERRA 3226
RUCNDT/USMISSION USUN NEW YORK 6465
RHMCSUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS TOKYO 001741 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EMIN EAID PREL SENV JA
SUBJECT: METI RELEASES STRATEGY TO LEVERAGE ODA, RESOURCE DIPLOMACY 
FOR RARE METALS 
 
REF: TOKYO 241 
 
SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE ACCORDINGLY. 
 
¶1. (U) SUMMARY: Japan should augment its use of official development 
assistance (ODA) to secure supplies of strategically important rare 
metals, according to a strategy released July 28 by the Ministry of 
Economy, Trade and Industry (METI).  In particular, the plan 
highlights a need for greater cooperation with Vietnam, a source of 
several key materials for Japanese industry.  The METI strategy 
program tracks with ongoing Japanese concerns over access to natural 
resources and presents the most explicit link to date between 
development assistance and resource security.  END SUMMARY. 
 
A COMPREHENSIVE APPROACH 
------------------------ 
 
¶2. (U) A METI-led panel of experts from government, industry, and 
academia released a proposed comprehensive strategy June 3 to employ 
various GOJ development assistance organs to strengthen Japan's 
ability to secure rare metals in the face of rising global demand. 
After several months of deliberation, METI senior officials adopted 
the program July 28.  (Note: The term rare metals typically refers 
to thirty-one non-ferrous metal elements that are economically or 
technologically difficult to extract in pure form and are used in 
several high value-added industrial applications.  Liquid crystal 
displays, cellar phones, IT products, and several emerging 
technologies, including hybrid electric vehicle motors, storage 
batteries, solar panels, high efficiency lighting, and fuel cells 
are among the industrial applications for such elements.  End note.) 
 
 
¶3. (U) The strategy calls for the Japan International Cooperation 
Agency (JICA) and the Japan Oil, Gas and Metals Exploration 
Corporation (JOGMEC) to provide technical assistance and build human 
resource capacity, while project finance institutions such as the 
Japan Bank for International Cooperation (JBIC) and Nippon Export 
Insurance (NEXI) will finance infrastructure projects in 
resource-abundant developing countries.  In addition, METI's FY09 
budget includes JPY525 million for feasibility studies of 
infrastructure development projects surrounding mines and oil and 
gas fields.  METI solicited bids for projects throughout May 2009, 
and will soon announce the selection of six projects.   (Note: 
Reftel provides additional information on the JOGMEC's budget and 
strategic priorities.  End note). 
 
VIETNAM'S DONG PAO AS MODEL 
--------------------------- 
 
¶4.  (U) As an example of the effectiveness of such an approach, the 
METI panel cited the Dong Pao rare earth mining development project 
in Vietnam.  A JOGMEC and JICA-funded joint venture with the 
Vietnamese state-owned mining company VIMICO first confirmed rare 
earth deposits in northwest Vietnam in 2001.  As the project moved 
toward commercial extraction, Japanese trading companies Toyota 
Tsusho and Sojitsu, as well as several Chinese entities expressed 
interest in competing for the project. 
 
¶5. (U) METI announced funding for a feasibility study to improve 
infrastructure related to the project at a Japan-Vietnam Metal 
Policy Dialogue in January 2009.  The president of the Vietnam 
National Coal and Mineral Industries Group (VINACOMIN) reportedly 
agreed on the spot to jointly develop the project with the two 
Japanese companies.  The entities signed a memorandum of 
understanding in April 2009. 
 
EXPANDED RECYCLING, STOCKPILING, DEEP-WATER EXTRACTION 
--------------------------------------------- --------- 
 
¶6. (U) In addition to resource diplomacy, the strategy advocates 
obtaining rare metals from recycled components using nano- 
technology and other innovative technologies to develop alternative 
materials, and expanding Japan's stockpile of rare metals.  Notably, 
the strategy calls for adding indium and gallium to the seven metals 
JOGMEC currently stockpiles and increasing the amount of cobalt, 
tungsten, and vanadium.  Raising the stockpile target to 60 days of 
supply from the current 42 days is another major component of the 
July 28 strategy.  The program also incorporates a JOGMEC-led effort 
to develop sea-floor deposits in Japan's Exclusive Economic Zone to 
increase self-sufficiency.  METI's FY2009 budget earmarks around 500 
million yen to research extraction of deep-sea resources with an aim 
to start commercial mining in 2018. 
 
¶7. (SBU) While Japan has been developing a comprehensive rare metal 
acquisition plan since at least 2007, a METI official told emboff 
 
the latest strategy lays out the most concrete measures to date. 
Beyond making the link between targeted ODA and resource security 
more explicit, the panel recommendation also offers useful insight 
into METI's view of key strategic industries.  For example, 
according to METI statistics, Japan consumes 60% of the global 
production of indium, an element used to manufacture liquid crystal 
displays.  Japan also leads global consumption of cobalt, a key 
element in the manufacture of lithium-ion batteries.  Gallium is an 
input for lower-energy light emitting diodes.  The strategy suggests 
countries with large deposits of these and other strategic metals 
will continue to be large targets of Japan's ODA policy. 
 
EXPANDED DIALOGUE WITH CHINA 
---------------------------- 
 
¶8. (U) The strategy also highlights ongoing coordination with China 
on rare metal acquisition strategies.  Chinese and Japanese public 
and private sector officials have had regular exchanges on rare 
metals strategy since 1988, primarily to exchange information about 
the supply and demand situation.  However, the most recent meeting 
in April 2009 was more comprehensive, discussing trade, investment, 
environment and technology policies.  Japan and China agreed (1) to 
hold regular meetings to enhance public and private sector exchange, 
(2)METI and China's National Development and Reform Commission will 
meet annually to consult on rare metals strategy, and (3) the agenda 
should include not only rare earth development, but also trade, 
investment, environment and technology. 
 
ZUMWALT