Japanese industrial policy seeks pretty much three things: competitiveness of the Japanese export industry, assured supply for the Japanese domestic markets, and preventing China from screwing us. They have a curious frenemy thing going on: increasing economic cooperation with the aim of effectively establishing economic mutually assured destruction if either restarts the more traditional Japan/China relationship. (Japanese industry essentially can't survive without Chinese raw materials at present -- rare earth being only one example of hundreds. Similarly, Japanese investment is fueling much of China's economic boom.)
Sidenote: Notice the California NIMBYism versus global warming angle? I suppose our coming global apocalypse is worth any effort to stop... as long as it doesn't require radiation in California.
About the NIMBYism: that was just one more part of the article that sounded like a press release from the US rare earth producers.
Basically, they want protectionist policies to avoid foreign competition and they want exemptions from environmental legislation. So just the same as every other business in existence.
Every business has its pet bogeyman to scare legislators (or to give legislators plausible cover for their actions). I'm sure China will play this role well for various groups.
Sidenote: Notice the California NIMBYism versus global warming angle? I suppose our coming global apocalypse is worth any effort to stop... as long as it doesn't require radiation in California.