Japan’s rare earth recycling programme — known domestically as urban mining (toshi kozan) — is the most advanced national-scale effort to recover critical minerals from end-of-life electronics and industrial equipment anywhere in the world. Japan’s Environment Ministry has allocated ¥37.9 billion ($238 million) in its fiscal 2026 budget to fund collection, processing, and extraction infrastructure for rare earths and rare metals, according to ministry officials. The programme sits at the centre of Tokyo’s response to China’s rare earth export controls, which have disrupted supply to Japanese manufacturers since 2010.
Japan Rare Earth Recycling: Policy Framework and Government Funding
Japan’s approach to japan rare earth recycling is coordinated through JOGMEC (Japan Organization for Metals and Energy Security), which administers urban mining policy and manages strategic stockpiles. The ¥37.9 billion allocation for fiscal 2026 funds demonstration projects across the full recovery chain: collection from retired EV motors and air conditioning compressors, transport, quality testing, and element-specific extraction. Infrastructure grants are directed at developing automated disassembly lines capable of handling large volumes at commercially viable cost.
Japan has also extended its recycling supply chain internationally. The government is developing an e-waste import programme with ASEAN member states, targeting the collection of used electronic circuit boards for domestic rare earth refinement by 2029. The scheme would allow Japan to access a wider pool of secondary feedstock beyond its domestic appliance and EV base.
Japan holds no significant primary rare earth mining capacity. Its dependence on Chinese-sourced rare earths — which account for more than 60% of Japanese imports — makes Japan’s rare earth supply strategy heavily reliant on diversification through stockpiling, long-term offtake agreements with Western producers, and the urban mining programme itself.
Daikin-Hitachi-Shin-Etsu: Japan’s First Commercial Magnet Recycling Loop
The most significant near-term development in Japan rare earth recycling is a four-company consortium announced on 14 April 2026. Daikin Industries, Shin-Etsu Chemical, Hitachi, and Tokyo Eco Recycle will develop an automated recovery line for neodymium magnets contained in commercial air conditioning compressors, with full-scale operations targeted for 2027.
Under the scheme, Daikin collects compressors from end-of-life commercial units — targeting around 10,000 units per year. Tokyo Eco Recycle, working with Hitachi, extracts the rare earth magnets using AI-driven image recognition and robotic disassembly equipment designed to handle variation across compressor models. Shin-Etsu Chemical then processes the recovered magnet material into new rare earth magnets as raw material input. The entire loop, from collection to remanufacture, runs through a centralised data management system. Daikin has indicated the consortium aims to recover several tonnes of rare earth magnets annually at scale.
This is the first fully integrated commercial recycling loop for rare earth magnets in Japan’s air conditioning sector. Prior to this initiative, no established recycling framework existed in Japan for rare earth content in commercial air conditioning compressors. Compressor motors use neodymium magnets as core components; current neodymium prices of $124.87/kg (SMM industrial benchmark, April 2026) give the recovered material measurable commercial value alongside the strategic rationale.
Recovery Technology: SEEE Process and Green Demagnetisation
Two process innovations underpin Japan’s push to make rare earth recycling commercially viable. Researchers at Kyoto University have developed the Selective Extraction–Evaporation–Electrolysis (SEEE) process, a chemical separation method that achieves 96% recovery of neodymium and 91% recovery of dysprosium at above 90% purity from consumer-grade magnets. Recovery rates of this level are material: dysprosium trades at $220.93/kg (SMM, April 2026) and is predominantly sourced from China’s ionic clay deposits in Jiangxi province.
A complementary technology — resonance damping demagnetisation — uses an alternating magnetic field to demagnetise EV motor and air conditioning components without the carbon emissions associated with conventional electric furnace methods. This reduces the environmental cost of the pre-processing stage, supporting Japan’s broader ESG commitments under its green transformation (GX) strategy.
JOGMEC and Overseas Recycling Investment
Japan’s rare earth recycling ambitions extend beyond domestic borders. JOGMEC, Iwatani Corporation, and French firm Caremag SAS have partnered to invest in a heavy rare earth recycling facility in France, targeting dysprosium and terbium recovery from magnet scrap. The facility is designed to supply approximately 20% of Japan’s projected future demand for heavy rare earths starting from late 2026 — directly addressing the supply concentration risk on elements where China’s dominance is most acute.
A separate partnership between Mitsubishi Materials and ReElement Technologies (USA) is studying a joint rare earth recycling plant in Japan, applying ReElement’s advanced purification technology to EV battery and magnet scrap streams. Itochu Corporation and ERI (USA) are targeting Japan’s consumer electronics e-waste recovery rate, currently around 20%, through automated collection and processing infrastructure.
For a broader overview of global companies operating in this space, see our analysis of the top 10 rare earth recycling companies.
Constraints: Refining Dependency and Economic Competition
Japan’s urban mining programme faces two structural constraints. China controls more than 70% of global rare earth refining and separation capacity. Even where Japan can recover magnet scrap or mixed rare earth concentrate domestically, cost-competitive refining infrastructure within Japan remains limited. Shipping scrap to a French or US partner facility (as in the JOGMEC-Caremag arrangement) partially addresses this, but adds logistics cost and complexity.
The second constraint is price competition from primary Chinese supply. Recycled rare earths must compete against Chinese mined material produced at lower cost and with less stringent environmental compliance. When Chinese domestic rare earth prices soften — as happened with dysprosium before the April 2026 export control-driven spike — the economics of recycling narrow. The $238 million government subsidy directly targets this viability gap, treating recycling as strategic infrastructure rather than a purely commercial proposition.
Japan’s progress on japan rare earth recycling sits within the country’s wider rare earth supply strategy, covered in detail on our rare earth recycling and circular economy analysis.
Japan Rare Earth Recycling: Key Initiatives at a Glance
| Initiative | Partners | Target Elements | Timeline |
|---|---|---|---|
| Commercial AC compressor magnet loop | Daikin, Hitachi, Shin-Etsu, Tokyo Eco Recycle | Neodymium | Equipment 2026, full-scale 2027 |
| France HREE recycling plant | JOGMEC, Iwatani, Caremag SAS | Dysprosium, Terbium | Late 2026 (20% of Japan Dy/Tb demand) |
| Japan rare earth purification plant study | Mitsubishi Materials, ReElement Technologies | REE from EV batteries and magnets | Feasibility stage |
| Consumer e-waste automation | Itochu, ERI (USA) | Mixed REE from electronics | Ongoing — targeting 20%+ recovery rate |
| ASEAN e-waste import programme | Japan Environment Ministry | Mixed REE from circuit boards | Target 2029 |
Sources: Japan Ministry of Economy, Trade and Industry (METI); USGS Rare Earths Statistics and Information.
This article is for informational purposes only and does not constitute investment advice. Prices are subject to change without notice.
What is Japan’s rare earth recycling programme?
Japan’s rare earth recycling programme — known as urban mining (toshi kozan) — recovers neodymium, dysprosium, terbium, and other critical minerals from end-of-life electronics, EV motors, and industrial equipment. The Environment Ministry allocated ¥37.9 billion ($238 million) in fiscal 2026 to fund collection, processing, and extraction infrastructure across Japan.
Which companies are involved in Japan rare earth recycling?
Key participants include Daikin Industries, Shin-Etsu Chemical, Hitachi, and Tokyo Eco Recycle (commercial AC magnet loop); JOGMEC, Iwatani, and France’s Caremag SAS (HREE recycling facility in France); Mitsubishi Materials and ReElement Technologies (EV battery and magnet processing); and Itochu with ERI (consumer e-waste automation).
What technology does Japan use to recycle rare earth magnets?
Kyoto University’s SEEE (Selective Extraction–Evaporation–Electrolysis) process achieves 96% neodymium recovery and 91% dysprosium recovery at above 90% purity from consumer magnets. The Daikin-led consortium uses AI-driven image recognition and robotic disassembly to extract magnets from compressors at scale.
Why is rare earth recycling strategically important for Japan?
Japan holds no significant domestic primary rare earth deposits and sources more than 60% of its rare earth imports from China. Recycling reduces that dependence, stabilises supply chains for EV and clean energy manufacturing, and provides a domestic feedstock for magnet producers such as Shin-Etsu Chemical and TDK.
What are the main challenges facing Japan rare earth recycling?
The two principal constraints are refining dependency and price competition. China controls over 70% of global rare earth separation capacity, limiting Japan’s ability to process recovered scrap domestically at competitive cost. Recycled rare earths also face price competition from lower-cost Chinese primary supply, which narrows recycling economics when spot prices soften.
