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Sitting at a desk in his central Tokyo office, Shigeo Nakamura taps the book he wrote five years ago, Rare Metal Panic.

"I saw this coming," he says.

His company, Advanced Materials Japan, specialises in importing rare earth minerals.

China has a near monopoly on supply and for a long time Mr Nakamura has been worried about a squeeze on shipments.

It got worse after Japan's coastguard arrested a Chinese trawler captain near contested islands in the East China Sea in September, triggering a territorial dispute.

"Probably, my company is in first place for the turnover of rare earths," he says. "But at this moment, actually, we couldn't get the raw material for the last month."

And that is a big problem for Japan in sectors ranging from car manufacturing to electronics production.

Many high technology products cannot be made without rare earths, and Japan is relying on them to drive future economic growth.

"It will affect all of Japanese industry. Digital electronics material, TV sets, air conditioners. Even digital cameras use a lot of rare earths. So almost everything," Mr Nakamura says.

China denies any embargo is in place, but the race is on in Japan to reduce its dependence.

One option is diversifying supply. Rare earths are not actually that rare, it is just that extracting and processing them is messy, so the job has been left to China.

Japan has already held talks with Vietnam over mining rights, but establishing new facilities or reopening old ones will take time.

Science could provide quicker results. At the National Institute for Materials Science (NIMS) in Tsukuba they are using lasers to shave the surface of advanced magnets, vital for electric motors, atom by atom.

The aim is to develop new manufacturing methods that consume less rare earths.

"When we proposed this project we thought potentially it was important, but we never thought this problem would become so urgent," says Dr Kazuhiro Hono, bending over the machine, a tangle of stainless steel pressurised cylinders and wires.

"We have been working in the area for seven years and no one paid attention to our activity. But now so many people come to us asking how we can reduce the rare earth element. We feel the atmosphere has changed all of a sudden."

Japan may be poor in natural resources, but valuable metals and minerals are abundant in its cities - in old computers, mobile phones and electronics. Some have called extracting them urban mining.

Toshikazu Yako specialises in recycling cars. His scrap yard is little bigger than two tennis courts, but it is full of half-dismantled vehicles and piles of their guts - springs, engine blocks and tyres.

He sells components containing rare earths to specialist companies.

"Japan was one of the first countries to invest a lot in recycling, for example steel," he says, sipping coffee from a can, surrounded by shelves lined with old car headlights.

"We recycle 90% of the products into something else. So we do quite a bit. Rare earths are even scarcer as a metal. People might aim for 100% recycling, but I am sure there will be losses. Eighty to 90% is realistic, I think."

At his trading house, Shigeo Nakamura has confidence in Japanese ingenuity. Japan survived the oil crisis of the 1970s, he says. It can get through this.

"Because of this disaster new invention will come, or new substitution," he says. "In the short term I worry, of course. But in the coming year or two new inventions will be started, I believe."