China has sharply reduced exports of several critical industrial minerals to Japan following deterioration in bilateral relations, with exports of some intermediate forms of tungsten to Japan effectively falling to zero this year, while shipments of rare earth elements essential for high-performance magnets used in electric vehicles, electronics, and military equipment have also stopped.

Mitsubishi Materials now sources around 70% of its tungsten feed stock from recycled materials and aims to reach complete recycling by 2030 in response to China's supply restrictions, while Sumitomo Electric has also invested heavily in recovering valuable metals from scrap.

Deep Seek's job listings include AI product managers, operations specialists, and industry experts in fields such as law, medicine, and language, suggesting the company is preparing more specialized AI applications beyond frontier research.

Liu Ting, an economics professor at Renmin University of China and former advisor to the Ministry of Industry and Information Technology, argued that China should begin discussing how the gains from AI-driven growth can be shared more broadly across society to prevent the excessive concentration of technological dividends.

Former central bank advisor Liu Shijin called for stimulus to focus more on boosting household incomes and renewed his proposal to increase China's basic pension for rural residents and unemployed urban citizens from just over 200 yuan per month to 1,000 yuan, arguing stronger social support would help revive domestic consumption and rebalance the economy.

Authorities have investigated allegations of Chinese-linked efforts to obtain Japanese industrial secrets, prosecutors in Taiwan have alleged that Nvidia artificial intelligence chips were smuggled to China through Japan, and officials have uncovered suspected links between Chinese organizations operating in Japan and illegal fentanyl exports.

Japan's Defense Minister Shinjiro Koizumi described the China-Russia joint air patrol flights as an expanding show of force around Japan.

Masayoshi Matsumoto, chairman and chief executive of Sumitomo Electric Industries, warned that prolonged restrictions on Chinese rare earth exports would create serious problems for Japanese manufacturing, particularly the automotive sector, which accounts for roughly 10% of Japan's GDP.

Deep Seek faces fierce competition from rivals including ByteDance, Xiaomi, Zhipu AI, and Moonshot AI, all battling to recruit China's top AI engineers.

Several advisors to the Chinese government are urging policy makers to address a widening imbalance in the economy, warning that booming artificial intelligence and high-tech industries are leaving much of the rest of the country behind.

Tony notes that the K-shaped economy pattern is not unique to China but is particularly acute in China (on steroids) compared to parts of the West.

Japan is launching a new investment screening body modeled on the Committee on Foreign Investment in the United States that will coordinate reviews across multiple government ministries to assess whether foreign investments pose national security risks, significantly expanding Japan's existing oversight systems.

Prime Minister Sanae Takaichi's 2024 book on economic security argued that Japan cannot ignore China's dominant position in global supply chains or Chinese intelligence laws that require citizens to cooperate with state intelligence work when required.

China and Russia conducted their 11th joint long-range strategic air patrol over the Sea of Japan, East China Sea, and Western Pacific on Saturday, with aircraft including four Chinese H-6 bombers, two Russian Tu-95 bombers, two Russian Tu-142 patrol aircraft, two Chinese J-16 fighter jets, and a Russian Su-30 fighter, prompting Japan and South Korea to scramble jets in response.

Japan first accelerated rare earth diversification after China's 2010 embargo during another diplomatic dispute, but the latest restrictions demonstrate that significant dependence on Chinese supply chains remain.

Japan lowered the foreign investment ownership threshold requiring government notification from 10% to just 1% in 2019, bringing thousands more transactions under official scrutiny, and foreign investment reviews have already increased sharply since that change.

China dominates global rare earth production and processing, controlling around 60% of global mined output and more than 90% of refining capacity, giving Beijing substantial leverage over industries ranging from consumer electronics to advanced defense manufacturing.

Deep Seek is embarking on a major recruitment drive to double the size of many of its core teams while also working with Huawei to optimize its models for Huawei's Ascend AI chips as China seeks alternatives to Nvidia hardware.

Huang Haizhou contrasted Japan, which struggled with decades of deflation and failed to produce globally dependent AI firms, with South Korea, whose stronger corporate profitability helped create technology champions such as memory chip maker SK Hynix.

China's economy is increasingly K-shaped this year with industries tied to artificial intelligence, semiconductors, and exports benefiting from the global AI investment boom and massive Chinese government subsidies, while households remain cautious and consumer confidence stays very weak.