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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

(Adds Blinken comment, detail of meeting in Tokyo)

By David Brunnstrom, Simon Lewis, Trevor Hunnicutt and Tim

Kelly

WASHINGTON/TOKYO, Jan 7 (Reuters) - U.S. President Joe

Biden's decision to block Nippon Steel's ( NISTF ) $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 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.

On Monday, Japanese Prime Minister Shigeru Ishiba

described Biden's decision to block the sale of U.S. Steel to

Nippon Steel ( NISTF ) as "perplexing".

Accompanied by White House National Security Adviser Jake

Sullivan, Blinken met Japan's Foreign Minister Takeshi Iwaya in

Tokyo and will hold talks later in the day with Ishiba and other

senior Japanese officials

Numerous 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 cooperation.

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 ties and advance military, economic and diplomatic

cooperation 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 ( 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

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 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 re-election.

Trump reiterated after his re-election 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."