Toyota Tsusho, a trading house procuring for auto giant Toyota Motor, said Wednesday the company and its local subsidiary will "construct a manufacturing plant for processing rare earth oxides in the State of Orissa in India."

The plant, pursued by the trading house "in order to secure supply sources outside of China", is expected to secure Japan up to 4,000 tons a year of the precious minerals starting 2012.

The deal came after Japanese Prime Minister Naoto Kan and his Indian counterpart Manmohan Singh agreed in October to cooperate on nuclear energy technology and in the development and reuse of rare earth materials.

Rare earth minerals are used in everything from guided missiles to flat screen televisions and cars, and Japan's high-tech industries are the world's largest user.

Japan has depended on China for more than 90 percent of its rare earths supply, making its high-tech industry vulnerable to Beijing's efforts to cut export quotas.

Since 2006, China has cut export quotas on rare earths by five to 10 percent a year. Production has also been slashed amid concerns that Chinese supplies could run out in 15 years.

Tokyo also said China suspended shipments of the materials to the island nation over a territorial row earlier this year.

Ties between Tokyo and Beijing sharply deteriorated following Japan's September arrest of a Chinese fishing boat captain near a disputed island chain in the East China Sea.

The Toyota Tsusho move follows hot on the heels of a strategic alliance formed between Japanese trading house Sojitz and Australian mining firm Lynas, aiming at a 10-year deal that would supply Japan more than 9,000 tons of rare earths per year.

Officials say this would satisfy more than 30 percent of Japanese demand if the deal went ahead.

Japan has also reached a deal with Vietnam to share its nuclear energy and infrastructure-building technologies while jointly developing rare earth minerals in the Southeast Asian country.

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