# US and Japan open Keen Sword drills near Taiwan as China's cutoff of heavy rare earths to Japan continues

Chinese shipments of dysprosium and terbium to Japan have largely stopped since December, and President Donald Trump says the United States will take nearly half of the world chip market.

- Published: 2026-10-21T05:06:44.357Z
- Canonical: https://polylog.news/2026-10-21/us-and-japan-open-keen-sword-drills-near-taiwan-as-china-s-c
- Publisher: Polylog (Global desk)
- Section: geopolitics
- Sources: [ZeroHedge (via Antiwar.com)](https://www.zerohedge.com/geopolitical/us-japan-begin-major-military-exercises-will-focus-islands-near-taiwan), [OilPrice](https://oilprice.com/Energy/Energy-General/How-Bad-Would-It-Get-If-China-Blocks-Rare-Earths-to-America.html), [BFM.ru](https://www.bfm.ru/news/621488), [The Japan Times (Business)](https://www.japantimes.co.jp/business/2026/10/21/economy/japan-exports-growth-september/)

The United States and Japan began their biennial Keen Sword exercise on Monday, one of the largest joint drills between the two countries. This year it focuses on islands near Taiwan, [Antiwar.com reported, as republished by ZeroHedge](https://www.zerohedge.com/geopolitical/us-japan-begin-major-military-exercises-will-focus-islands-near-taiwan).

Beijing has already shown what it can withhold. After Japan indicated it would not stay neutral in a conflict over Taiwan, China sharply restricted exports of several heavy rare earths, including dysprosium and terbium, [OilPrice reported](https://oilprice.com/Energy/Energy-General/How-Bad-Would-It-Get-If-China-Blocks-Rare-Earths-to-America.html). The outlet called Taiwan the next point where China will test the use of rare earths as leverage. Since December, Chinese exports of dysprosium, terbium and yttrium oxide to Japan have stopped apart from a few small shipments of yttrium, [StratNews Global reported](https://stratnewsglobal.com/world-news/china-squeeze-cuts-off-supply-of-heavy-rare-earths-to-japan/). Japanese magnet maker Shin-Etsu has stopped accepting new orders for dysprosium magnets, a customer said. In 2024 China exported about 14 tons a month of dysprosium and terbium to Japan. Lynas Rare Earths, the Australian producer Japan helped finance, made 8 tons of the two metals in the first quarter of 2026.

Washington is also pressing on chips. Trump said the United States will take nearly half of the world semiconductor market, [Russian business outlet BFM reported](https://www.bfm.ru/news/621488). BFM noted that Washington had earlier proposed moving half of Taiwan's chip production to the United States. Japan meanwhile continues to profit from the AI build-out: shipments of semiconductors and chipmaking equipment rose sharply and supported solid export growth in September, [The Japan Times reported](https://www.japantimes.co.jp/business/2026/10/21/economy/japan-exports-growth-september/).

## What this means

The two superpowers are each using a chokepoint they control. China holds heavy rare earth processing, and the United States is using tariffs and investment pressure to move chip manufacturing into the United States. Japan is exposed to both. Its export strength depends on chipmaking equipment sold into the AI build-out, while its magnet, electric-vehicle motor and defense supply chains depend on heavy rare earths that China has cut off. Lynas produces about a fifth of what China used to ship to Japan, so stockpiles must cover the gap for years. The precedent is China's 2010 restriction on rare earth shipments to Japan during the Senkaku dispute. That episode pushed Tokyo to fund alternative supply, but it did not end Japan's dependence. The desk's read is that Japanese manufacturers face rationing of dysprosium magnets within months, and that Tokyo increases subsidies for non-Chinese supply and recycling. The read would prove wrong if Beijing resumes export licenses to Japanese buyers. That would signal a political opening between Beijing and Tokyo.

## What to watch

- Chinese statements or coast guard activity in response to Keen Sword. A visible response would show Beijing linking the drills to new pressure.
- Japanese government funding announcements for rare earth stockpiles or new suppliers. They would show how long Tokyo expects the cutoff to last.
- Taiwan's response to US demands to move chip production. Any agreement would change where the most advanced chips are made, and where the risk sits.