In essence, the projects have been caught in the trade diplomacy crossfire over Chinese restrictions on exports of rare-earth metals, which are vital for making powerful magnets. The longer the dispute rages, the greater the chance of trouble for production of hybrid cars and other items containing these magnets.

...A key ingredient is dysprosium, a rare-earth metal produced mostly in China. Hoping to get around Chinese export restrictions, Hitachi Metals and TDK had each been considering forming magnet-making joint ventures there. Hitachi Metals aimed to begin production next year; TDK and its partner Showa Denko KK, in 2014.

Japan’s decision to impose export restrictions has disrupted those plans, according to the Nikkei.

While magnet manufacturers see Chinese production as a way to keep output steady, Japan’s Ministry of Economy, Trade and Industry worries about vital technology falling into Chinese hands. METI will revise its export and trade controls on Aug. 1, widening the regulations’ scope to high-performance magnets, the equipment to make them, and related components. Companies that export this technology will need to show that it will not be used to make weapons of mass destruction.