The US and Japan will boost cooperation on critical mineral supply chains as President Joe Biden aims to counter China’s dominance in the electric vehicle battery industry.

Following the pact, electric vehicles that use materials that have been collected or processed in Japan will be eligible for EV tax breaks under the US Inflation Reduction Act, Japanese trade minister Yasutoshi Nishimura said Tuesday in Tokyo.

“Securing critical minerals, which are necessary for electric vehicles, is an important issue to tackle as demand for these cars are expected to exponentially increase,” Nishimura told reporters. US Trade Representative Katherine Tai and Japanese ambassador to the US Koji Tomita are scheduled to sign an agreement later Tuesday, he said.

The deal outlined by Nishimura is similar to an agreement Washington has been negotiating with the European Union which would extend access to some of the as much as $369-billion in handouts and tax credits available over the next decade under the IRA, in areas including wind, solar and electric vehicles.

Japan-based suppliers to the EV sector advanced in Tuesday trading. Sumitomo Metal Mining, a producer of battery cathode materials, rose as much as 2.1%, while separator manufacturer Asahi Kasei also gained.

The US remains highly dependent on China and demand for critical minerals will be enormous in the years ahead, Treasury Secretary Janet Yellen said Friday during testimony in the House Ways and Means Committee. “One of the goals of the IRA is to broadly strengthen supply chains for these critical minerals and their processing,” she said.

The Treasury Department is scheduled to put in place new requirements that will mandate battery components and critical minerals be sourced from free-trade agreement nations in order to get the full $7 500 per vehicle consumer tax credit. Though the EU and Japan are not part of any FTAs with the US, the new pacts would give the allies the same status for critical minerals trade.