ABSTRACT
This chapter discusses the economic coercion through analysis of the rare earth embargo imposed by China in 2010. Economic sanctions are an example of economic coercion, and there is an enormous amount of both literatures on the theoretical basis and empirical evidence. Prior to the September 2010 crisis, Japan had rarely been the target of economic coercion, except in the prewar period. The most direct case of economic coercion faced by Japan in the postwar era was US retaliation for the alleged Japanese violation of the 1986 semiconductor agreement. The first instance of Chinese export restrictions on rare earth occurred in 1987, when the Chinese suddenly announced to Japanese trading companies that they would stop negotiations for new export contracts. The Japanese government had taken some measures to cope with possible supply shocks, one of which was to hold a regular dialogue with the Chinese government. High prices during 2011 deterred Japanese users from importing from China.
