TOKYO - JAPAN and Vietnam are set to agree on joint development of rare earth minerals this month as countries scramble to secure supplies after a squeeze by China, a report said on Friday.

Japanese Prime Minister Naoto Kan and his Vietnamese counterpart Nguyen Tan Dung are expected to agree on the joint development plan in their meeting on Oct 31, with Japan providing exploration and smelting technologies for mining in Vietnam, the business daily Nikkei reported, without citing sources.

The report comes after China stopped shipments of rare earth minerals to Japan last month amid a simmering diplomatic row that began when Tokyo arrested a Chinese trawlerman in disputed waters.

Japan's stockpile of rare earth minerals, used in the manufacture of high-tech goods, could dry up by March or April without fresh imports from China, a senior Japanese government official warned on Thursday.

China, which controls more than 95 per cent of the global market, has not officially declared an export ban, but all 31 Japanese companies handling rare earth minerals have reported disruption to shipments.

Japanese trading houses Toyota Tsusho and Sojitz are working with the Vietnam National Coal, Mineral Industries Holding Corp, or Vinacomin, to prepare for the development of a rare-earth mine in Vietnam, the report said. The project will likely start moving once the leaders of the two countries sign the cooperation agreement in Hanoi, it said.

Japan, Vietnam to team up