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China lifts rare earth export ban to Japan: trader

TOKYO (Reuters) - China has ended a de facto ban on exports to Japan of rare earth minerals, a Japanese trading firm source said on Wednesday, easing concerns about fallout from a bitter feud between Asia’s two biggest economies.

Tokyo and Beijing have been bickering over Japan’s detention of a Chinese fishing boat skipper whose trawler collided this month with two Japan Coast Guard ships near uninhabited islands in the East China Sea that both sides claim.

Japan released the skipper on Saturday but a war of words has continued as each side insists the other is to blame.

Japanese Prime Minister Naoto Kan is set to attend an October 4-5 Asia-Europe summit in Brussels but it is unclear whether he will meet Chinese Premier Wen Jiabao -- who snubbed the Japanese leader at the United Nations last week -- on the sidelines.

The islands, called the Diaoyu in China and Senkaku in Japan, are near rich fishing grounds and potentially large oil and natural gas reserves.


China has also detained four Japanese nationals on suspicion of violating a law protecting military facilities, although Tokyo said the incident was unrelated to the islands row.

China has denied imposing an export ban on the rare earth metals, essential for a raft of products from electronics to cars, in retaliation for the fishing boat captain’s arrest, but Japan’s government has been investigating the situation.

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The Japanese trading firm source said Chinese exports were still being delayed by preshipment checks. “There is a long line at the customs office,” the source told Reuters.

Japanese prosecutors’ decision to release the Chinese skipper followed mounting worries about worsening ties between the region’s two biggest economies and high-profile pressure from Beijing, including a halt to top level diplomatic contact. China became Japan’s biggest trade partner in 2009.

China accounts for about 97 percent of the world’s total production of rare earth elements, about half of which are exported to Japan.

Total export quotas for 2010 had already been cut by about 40 percent from last year’s level, raising concerns not just in Japan but Europe and the United States, since a ready supply is crucial to several key industries.

Japanese Trade Minister Akihiro Ohata said on Tuesday that the country should minimize the risk of supply shortages by diversifying rare earth mineral suppliers to other countries including Canada, Vietnam and the United States.

“I think we should diversify suppliers,” Ohata told reporters. “We haven’t put enough effort into risk management.”

Additional reporting by Kiyoshi Takenaka and Risa Maeda; Writing by Linda Sieg; Editing by Edmund Klamann