Blinken visits Japan as Nippon Steel decision weighs on relations By Reuters

By David Brunnstrom, Simon Lewis (JO:), Trevor Hunnicutt and Tim Kelly

WASHINGTON/TOKYO (Reuters) -U.S. President Joe Biden’s decision to block Nippon Steel’s $14.9 billion bid for U.S. Steel cast a shadow over Secretary of State Antony Blinken’s visit to Japan on Tuesday for farewell meetings with Washington’s most important ally in Asia.

The rejection, announced on Friday, has jolted U.S. efforts to boost ties just as neighbouring South Korea’s political crisis potentially complicates a deepening trilateral relationship between Washington, Seoul and Tokyo formed to counter China’s growing military power.

On Monday, Japanese Prime Minister Shigeru Ishiba described Biden’s decision to block the sale of U.S. Steel to Nippon Steel as “perplexing”.

While Japanese investment into the U.S. could also be chilled, analysts say that given the two countries’ shared security concerns about China, any damage to their wider relationship will probably be limited amid political transition in the U.S. where Donald Trump becomes president on Jan. 20.

MEETINGS

Accompanied by White House National Security Adviser Jake Sullivan, Blinken met Japan’s Foreign Minister Takeshi Iwaya in Tokyo followed by meetings with other senior Japanese officials including Ishiba.

Seven trips to Japan over the last four years “is evidence not just of the importance, but of the centrality the United States attaches to our partnership. President Biden asked me to come on this last trip to underscore that,” Blinken told Iwaya.

“We have, between our two countries, a partnership that started out focusing on bilateral issues, that worked on regional issues and that now is genuinely global,” he added.

Ahead of his trip, the State Department said that Blinken wanted to build on the momentum of U.S.-Japan-South Korea trilateral co-operation.

In Seoul on Monday, Blinken reaffirmed confidence in South Korea’s handling of its political turmoil as investigators there sought to extend a warrant for the arrest of impeached President Yoon Suk Yeol.

Trump’s allies have also reassured Seoul and Tokyo that he will support continuing efforts to improve ties and advance military, economic and diplomatic co-operation to counter China and North Korea, Reuters reported ahead of Trump’s Nov. 5 re-election.

TENSION, LIMITED DAMAGE FROM NIPPON STEEL DECISION

Nippon Steel and U.S. Steel filed a lawsuit on Monday charging that Biden violated the U.S. Constitution by blocking their $14.9 billion merger through what they termed a sham national security review. They called for the U.S. federal court to overturn the decision.

Nicholas Szechenyi, a Japan expert at Washington’s Center for Strategic and International Studies, said Biden’s decision would make Blinken’s Tokyo visit “awkward.”

However, “Japan won’t let the Nippon Steel decision poison the U.S.-Japan relationship; it’s too important for Japan’s national security,” he said.

After meeting Ishiba at his residence on Tuesday, Blinken did not respond to questions shouted by reporters about the potential impact of Biden’s U.S. Steel decision on bilateral ties.

They discussed security and economic ties including the “importance” of Japanese investments in the United States, according to a Japanese government press release.

A Japanese diplomat told Reuters Biden’s decision could chill foreign direct investment, but hoped close U.S.-Japan relations would continue, with a strong emphasis on re-establishing the strong ties with Trump seen during his previous administration, and taking advantage of the increasingly hawkish mood in Washington on China.

Business lobbies in both Japan and the U.S. pushed hard for the merger, backing their arguments with warnings about the effect on the U.S.-Japan relationship.

But the merger faced opposition from both Biden and Trump, who was assiduously courted by Japan in the run up to his re-election.

Trump reiterated after his election win that he was “totally against” the merger and vowed to block it as president and support U.S. Steel with tax breaks and tariffs.

A former senior official in Trump’s first administration told Reuters he believed Trump would have taken the same approach as Biden.

Marc Busch, a fellow at Georgetown University’s McDonough School of Business, forecast “significant fallout” for U.S. efforts to work with allies to create resilient supply chains in the face of Chinese dominance or competition in key areas.

“Japan and other allies will have doubts about investing in or aligning with politically sensitive U.S. supply chains. China must be chuckling to itself that it could never have hoped for a better outcome.”