China detains two Japanese nationals suspected of smuggling banned goods

China has detained two Japanese nationals suspected of smuggling banned items, Tokyo said on Wednesday after media reported an employee of a major Japanese electronics firm was among those arrested in a case involving rare earth-related exports.

The detentions could further strain relations between Asia's top two economies, which have plunged since comments by Japan's leader Sanae Takaichi on Taiwan sparked a major dispute with Beijing last year.

China told Tokyo that a Japanese national was detained in the port city of Dalian on May 18 on suspicion of violating a law against smuggling goods prohibited from trade, Japan's top government spokesperson said.

Another Japanese national was detained for the same reason on May 25, the spokesperson, Minoru Kihara, told a press briefing on Wednesday.

"The (Japanese government) will continue taking appropriate steps to protect Japanese citizens, while keeping contact with the detained individuals and relevant parties," Kihara said.

CHINA'S FOREIGN MINISTRY CONFIRMS DETENTIONS

China's foreign ministry confirmed the detentions on grounds of legal violations but did not elaborate. Authorities had informed Japan, ministry spokesperson Guo Jiakun said.

"We would like to stress that Japan should educate and remind its citizens and businesses in China to abide by Chinese laws and regulations," Guo told a regular news briefing.

One of the arrests relates to accusations of attempts to export products containing rare earths, restricted in China, Kyodo news agency and the Asahi newspaper said, citing sources familiar with the matter.

Kihara did not say what the goods were.

China dominates the global market for rare earths, vital in making items from electric cars to weapons. It has been tightening its grip on the once-unruly sector in recent years, turning it into a powerful source of diplomatic leverage.

Last year, China's spy agency said foreign agents were trying to steal rare earths and vowed to crack down on smuggling.

Since the feud with Japan erupted in November, China has choked off supplies of certain key minerals to Tokyo and curbed shipments of so-called dual-use items that can be used for military purposes, including rare earths.

It has also told citizens not to travel to Japan and cancelled a swathe of trade and cultural events.

Arrests of Japanese nationals in China have become a recurring issue since Beijing adopted sweeping anti-espionage laws in 2014, for example the case of an employee of drugmaker Astellas Pharma 4503.T jailed last year for 3-1/2 years.

Reuters

Updated 4.04pm

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