China and Japan, two of Asia’s largest economies, are once again at odds. On February 24, 2026, Beijing announced sweeping new export restrictions targeting 40 Japanese companies and organizations, accusing them of aiding Japan’s so-called “remilitarization.” The move marks a dramatic escalation in a diplomatic feud that’s been simmering for months, with far-reaching consequences for business, security, and the already fraught relationship between the two neighbors.
According to the Associated Press, China’s Commerce Ministry placed 20 Japanese entities on an export control list, effectively banning them from importing dual-use goods from China—materials and technologies that can serve both civilian and military purposes. Among the affected are some of Japan’s most prominent industrial giants: subsidiaries of Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and Fujitsu. Even Japan’s National Defense Academy and the Japan Aerospace Exploration Agency found themselves on the list.
But Beijing didn’t stop there. Another 20 Japanese companies, including Subaru Corporation, ENEOS Corporation, Mitsubishi Materials Corporation, and the Institute of Science Tokyo, were added to a separate watchlist. For these firms, any Chinese exporter must submit individual export license applications, complete with risk assessment reports and written pledges that the goods won’t be used by Japan’s military, as reported by AFP and Bloomberg.
In a statement, China’s Commerce Ministry insisted the measures are “entirely legitimate, reasonable, and legal,” and claimed they are designed to curb Japan’s military ambitions and nuclear aspirations. The ministry emphasized, “They will not affect normal economic and trade exchanges between China and Japan, and honest and law-abiding Japanese entities have absolutely nothing to worry about.” Still, the targeted companies—particularly those with defense links—face immediate and potentially severe disruptions to their supply chains. Bloomberg noted that shares of publicly traded companies on both lists fell sharply following the announcement, reflecting investor anxiety over the restrictions’ likely impact.
Japan’s government wasted no time in responding. Tokyo formally protested the move to China’s Deputy Chief of Mission, with Masaaki Kanai, head of the Foreign Ministry’s Asian and Oceanian Affairs Bureau, calling the restrictions “absolutely unacceptable.” Japanese Deputy Chief Cabinet Secretary Sato Kei echoed the sentiment in a news conference, describing China’s actions as “deplorable” and vowing, “The measures announced today will never be tolerated. This is deplorable indeed. We strongly protest to China and urge them to lift them (the controls).” Sato also noted that some aspects of the restrictions remain unclear, including whether rare earths trading is affected, and said, “We will take actions accordingly.”
For its part, China says the restrictions only target a small number of Japanese entities and only concern dual-use items. Foreign organizations or individuals are now also banned from providing Chinese-origin dual-use goods to the 20 entities on the control list. “All ongoing related activities must cease immediately,” the Commerce Ministry’s statement declared.
The diplomatic row didn’t materialize out of thin air. Tensions between the two countries spiked in November 2025 after Japanese Prime Minister Sanae Takaichi suggested that Japan could intervene militarily if China used force against Taiwan, an island democracy that Beijing claims as its own. Takaichi’s remarks, delivered in the Japanese legislature, were among the most explicit statements to date about Japan’s willingness to become involved in a Taiwan conflict. She stated that a Chinese attack on Taiwan would constitute a “survival-threatening situation” for Japan, which could legally trigger the activation of its Self-Defense Forces, despite Japan’s constitutionally enshrined pacifism.
China was quick to express its fury over these comments, with Beijing not only issuing stern diplomatic protests but also discouraging Chinese citizens from traveling to Japan—a move that led to a significant drop in tourism revenue for Japan. The relationship deteriorated further in January 2026, when China imposed restrictions on exports of rare earth elements such as gallium, germanium, graphite, and rare earth magnets to Japan. These materials, as noted by the Centre for Strategic and International Studies (CSIS), are vital for defense and high-tech industries. CSIS analysts argued that these “retaliatory measures underscore rising tensions between Beijing and Tokyo and serve as a pointed warning from China to countries that take explicit positions on cross-strait relations.”
Japan’s political climate has only heightened the stakes. Earlier this month, Prime Minister Takaichi’s party secured a landslide victory in parliamentary elections, a mandate widely seen as an endorsement of her conservative stance on security and defense. This victory gives her the political capital to double down on policy shifts, including a more assertive military posture and stricter immigration controls.
While the Chinese government insists that normal economic and trade activities should not be affected, the reality for Japanese companies is more complicated. Those on the export control list—such as Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and IHI Corp.—now face the loss of access to around 800 dual-use goods from China, ranging from rare earths and chemicals to electronics, sensors, and advanced technologies used in shipping and aerospace, according to Bloomberg. For businesses on the watchlist, the added bureaucracy of export license applications and risk assessments could slow down operations and increase costs, even if trade is not outright banned.
Some Japanese companies, like Yashima Denki Co. and chemical maker NOF Corp., downplayed the immediate impact, telling the Associated Press that their dealings with China are already limited. But for others, especially those deeply embedded in global supply chains, the consequences could be much more severe. The restrictions have already rattled investors, as evidenced by the drop in share prices of affected firms.
China has used similar tactics before, imposing export restrictions on the US and Taiwan in response to political disputes. The current measures against Japan, however, are particularly pointed, given the recent rhetoric and policy shifts in Tokyo. The situation is further complicated by geography: Japan’s outlying islands, including Okinawa, are closer to Taiwan than to the Japanese mainland, and public support for Taiwan remains strong among ordinary Japanese citizens.
As the two governments dig in, the risk of further escalation looms. The Chinese Commerce Ministry maintains that its actions are in line with international obligations like non-proliferation, and that they are necessary to “safeguard national security and interests.” Japanese officials, meanwhile, argue that the restrictions are discriminatory and diverge from international norms.
Whether this standoff will lead to broader economic fallout or even a rethinking of regional security alliances remains to be seen. For now, though, the export controls stand as a stark reminder of how quickly trade and diplomacy can become entangled in the crosshairs of geopolitics—and how businesses, workers, and ordinary citizens often find themselves caught in the middle.