Japan industry ministry gets $423 million extra budget to strengthen resource policy

TOKYO (Reuters) - Japan’s industry ministry has secured 45.9 billion yen ($423 million) in the country’s supplementary budget for the current financial year as it looks to strengthen its resource policy and secure supplies of key commodities.

The move comes as resource-poor Japan faces an increasing risk of supply disruption. It buys 90% of its oil from the Middle East where geopolitical tensions are on the rise, while it is also competing with other countries to secure liquefied natural gas and critical metals used in batteries and other high-tech products amid rising global demand.

Japanese cabinet approved its supplementary budget last Friday, featuring additional fiscal spending worth about 4.5 trillion yen, for the fiscal year to March.

The Ministry of International Trade and Industry plans to use 20.9 billion yen of the extra budget to diversify sources for rare earths and cobalt, which are used in electric vehicles and lithium batteries, its budget document shows.

The country aims to lower its reliance for rare earth on any single country to 50% or less by 2025 while it wants to raise its self-sufficiency ratio through equity investments to 50% by 2025, the ministry said in the document.

China dominates the supply chain of rare earths from mining to processing to magnet production, accounting for more than 80 percent of global supply.

The ministry also set aside 25 billion yen to provide funds through state-run Japan Oil, Gas and Metals National Corp (JOGMEC) to help LNG projects in Russia and Arctic areas.

This year, Japanese trading house Mitsui & Co and JOGMEC agreed to buy a 10% stake in an upcoming LNG project, the Arctic LNG 2, owned by Russia’s Novatek.

Japan is targeting to boost self-sufficiency ratio for oil and gas to 40% in 2030 from 29.6% in 2018, according to an official at the ministry.

Reporting by Yuka Obayashi; Editing by Himani Sarkar