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Blinken in Japan to meet leaders on Tuesday

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South Korea turmoil potentially complicates trilateral

progress

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Incoming President Trump also opposed merger

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U.S., and Japan share concerns about China

By David Brunnstrom, Simon Lewis and Trevor Hunnicutt

WASHINGTON, Jan 6 (Reuters) - U.S. President Joe Biden's

decision to block Nippon Steel's ( NISTF ) $14.9 billion bid for U.S.

Steel casts 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 with Asian allies just as South Korea's political

crisis potentially complicates a revived relationship between

Washington, Seoul and Tokyo. The trilateral alliance is a key

plank in the countries' efforts to counter China's military

buildup.

Investment into the U.S. could also be chilled, but analysts

say any damage to the wider U.S.-Japan relationship will likely

be limited given shared security concerns about China.

The State Department said Blinken will meet with senior

Japanese government officials on Tuesday to review "the

tremendous progress the U.S.-Japan alliance has made over the

past few years."

He would "reaffirm the importance of the alliance in

addressing a range of bilateral, regional, and global issues and

continue to build on the momentum of U.S.-Japan-ROK trilateral

cooperation," it said, using the initial of South Korea's

official name, the Republic of Korea.

In Seoul on Monday, Blinken reaffirmed confidence in South

Korea's handling of its political turmoil as investigators there

sought an extension of a warrant to arrest impeached President

Yoon Suk Yeol.

Allies of U.S. President-elect Donald Trump have also

reassured Seoul and Tokyo that he will support continuing to

improve their once-icy ties and advance military, economic and

diplomatic cooperation to counter China and North Korea,

Reuters reported ahead of Trump's Nov. 5 reelection.

TENSION, LIMITED DAMAGE FROM NIPPON STEEL DECISION

Nippon Steel ( NISTF ) 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 ( NISTF ) decision

poison the U.S.-Japan relationship; it's too important for

Japan's national security," he said.

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

reestablishing 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 vital U.S.-Japan relationship.

But the merger faced opposition from both Biden and Trump,

who takes office on Jan. 20 and was assiduously courted by Japan

in the run up to his reelection.

Trump reiterated after his reelection 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."