Japan, the world's third-biggest nuclear power generator, is also eyeing fast-growing markets to develop nuclear plants as electricity demand in the country is likely to stay flat or rise slightly due to its aging society and industries going abroad.

"Prime Minister (Nguyen Tan) Dung told me this (rare earths) decision was a political and strategic one," Kan told reporters after meeting Dung.

China gave repeated assurances at an Asia-Pacific summit in Hanoi that ended on Saturday that it would remain a "reliable supplier" of the high-tech ores used in lasers, superconductors, computers and other electronics.

Nevertheless, Japan and other countries, including the United States, say they want to diversify their sources of supplies.

Last week, Japan and India decided to seek cooperation in developing, recycling and finding substitutes for rare earths and rare metals.

Japan believes it has secured the mining rights for a mine in Lai Chau province of northwestern Vietnam, another Japanese government official said.

Japan's Sojitz Corp and Toyota Tsusho Corp and a Vietnamese firm are conducting a feasibility study at a deposit in Lai Chau, and the project could produce 3,000 metric tons of rare earth minerals a year or about 10 percent of annual demand in Japan, a Japanese trade ministry official said.

Tokyo is certain that Vietnam will choose out of the three Japanese nuclear plant makers to build two reactors at a nuclear power plant site in central Vietnam, a Japanese government official said.

The three are Hitachi Ltd, allied with General Electric, Toshiba Corp, which controls U.S. power firm Westinghouse, and Mitsubishi Heavy Industries, which has a joint venture with Areva, he said.

Vietnam plans to start building its first nuclear power plant in 2014 using Russian technology.

Kan also told Dung that Japan, Vietnam's biggest donor, would provide about 79 billion yen ($982.7 million) in yen loans to Vietnam for infrastructure projects, a joint statement between the two leaders showed.

(Additional reporting by Risa Maeda in Tokyo and John Ruwitch in Hanoi; Editing by Nick Macfie)