US, Japan leaders sign nuclear power deal ahead of Trump-Xi meeting

TOKYO: Japan and the United States agreed to a deal on new-generation nuclear power reactors and rare earths, as Tokyo seeks a way back to export markets for its nuclear technology and both look to reduce China's dominance over key electronic components. 

US President Donald Trump and Japanese Prime Minister Sanae Takaichi signed a framework agreement on Tuesday (Oct 28) for securing the supply of rare earths used in everything from cars to fighter jets. 

They signed the documents, which included critical minerals, at the neo-Baroque-style Akasaka Palace in Tokyo, beneath three chandeliers swathed in gold ornamentation, as aides applauded. 

They made no direct public mention of China, which processes more than 90 per cent of the world's rare earths, making it the source of each country's concern about its mineral supply chain. 

Beijing has recently expanded export curbs. Trump and Chinese President Xi Jinping are set to meet on Thursday on the sidelines of the Asia-Pacific Economic Cooperation in South Korea to discuss a deal that would pause steeper US tariffs and Chinese rare earths export controls.

Japan and the US would use economic policy tools and coordinated investment to speed "development of diversified, liquid, and fair markets for critical minerals and rare earths", the White House said in a statement.

They aim to provide financial support to selected projects within the next six months, it added.

Both countries would consider a mutually complementary stockpiling arrangement and cooperate with international partners to ensure supply chain security, it said.

While China dominates global rare earth extraction, the US and Myanmar control 12 per cent and 8 per cent respectively, says Eurasia Group, with Malaysia and Vietnam covering processing - where China is also the top player - of another 4 per cent and 1 per cent each.

NUCLEAR POWER, OTHER AREAS

In a factsheet for the talks, Japan mentioned mutual interest in cooperating in the construction of new generation AP1000 nuclear reactors and small modular reactors (SMRs). 

These could involve Japanese companies such as Mitsubishi Heavy Industries, Toshiba Group and others, along with other cooperation areas. 

Nuclear power, including next-generation reactors, as a matter of greater energy security, affordable power supply and export technology, is among the top priorities of Takaichi, who became Japan's first female prime minister last week.

Japan shut down all its reactors after the Fukushima Daiichi nuclear disaster, caused by a powerful 2011 earthquake and subsequent tsunami. 

China, France, South Korea and Russia currently dominate global exports of nuclear power technology. 

A separate White House statement also mentioned fusion energy as a potential area for cooperation favoured by Takaichi. 

About 20 companies from Japan and the US have shown interest in potential investment projects forming part of a promised US$550-billion investment package, the factsheet issued by both countries showed. 

But it did not mention further US liquefied natural gas offtake or upstream investments that Japanese companies have recently been expanding. 

Before Trump's Asia trip, the US urged buyers of Russian energy, including Japan, to cease imports and put sanctions on Moscow's two biggest oil exporters, Rosneft and Lukoil, to push the Kremlin into talks to end the Ukraine war.

Japan has stepped up US liquefied natural gas purchases in the last few years as it tries to diversify away from its key supplier Australia, and prepare for the expiry of supply contracts with Russia's Sakhalin-2 liquefied natural gas project, which Mitsui and Mitsubishi helped launch in 2009. 

In June, JERA, Japan's top liquefied natural gas buyer, agreed to buy up to 5.5 million metric tons a year of US liquefied natural gas under 20-year contracts, with deliveries starting around 2030. This is roughly the volume Japan imports annually from Sakhalin-2.

Most supply from Sakhalin-2, which meets 9 per cent of Japan's gas needs, ends in the period from 2028 to 2033.

Japan buys less than 1 per cent of its oil imports from Russia under a sanctions waiver due to expire in December, with the bulk of its oil supply covered by the Middle East. 

Last week alone, Japan's biggest city gas supplier, Tokyo Gas, signed a preliminary deal to buy 1 million metric tons per annum of liquefied natural gas from the Alaska LNG project, following a similar September announcement by JERA. 

JERA pledged US$1.5 billion for gas assets in Louisiana in its first foray into upstream production in the US, where Tokyo Gas and Mitsui are already present. 

To keep electricity prices in check, Japan wants to continue Sakhalin-2 LNG imports, a senior official has said, as it takes only a few days to deliver LNG to Japan compared to around a week from Alaska and roughly a month from the US Gulf Coast.

"The US said it wants Japan to stop importing Russian energy - but this is Japan's closest liquefied natural gas source and is also cheap," said Nobuo Tanaka, chief executive of advisory Tanaka Global, Inc.

"I think the question should be framed this way: can the US provide Japan with liquefied natural gas as cheap as what currently comes from Russia? Can gas from Alaska be that affordable?"