rewrite this title Despite Nippon Steel, US and Japan say ties stronger than ever By Reuters

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

TOKYO/WASHINGTON (Reuters) -The foreign ministers of Japan and the United States said their countries’ ties were stronger than ever on Tuesday, even after Japan’s prime minister called U.S. President Joe Biden’s decision to block Nippon Steel’s $14.9 billion bid for U.S. Steel “perplexing.”

Biden’s move last Friday was a jolt to U.S. efforts to boost ties just as neighboring 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 expressed confusion over Biden’s decision, but after meeting in Tokyo on Tuesday, U.S. Secretary of State Antony Blinken and Japan’s Foreign Minister Takashi Iwaya hailed bilateral ties as stronger than ever.

In remarks to the media, at which no questions were taken, Blinken did not mention Nippon Steel, but a statement from Japan’s foreign ministry said he and Iwaya “exchanged views on the economy, including on the acquisition of United States Steel (NYSE:) Corporation by Nippon Steel Corporation.”

It said they “reaffirmed the importance of Japan-U.S. economic relations, including investments by Japanese companies in the U.S.”

Blinken said the two countries were “leading the way” in cooperation between like-minded countries and added: “I have great confidence that will continue for many, many years to come.”

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

Analysts say that while it could have a chilling effect on Japanese investment into the U.S., any damage to their wider relationship will probably be limited given the two countries’ shared security concerns about China.

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

But it still faced opposition from both Biden and President-elect Donald Trump, who takes office on Jan. 20 and was assiduously courted by Japan in the run up to his re-election.

Ahead of his trip, the State Department said 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 to extend a warrant for the arrest of impeached President Yoon Suk Yeol.

Trump’s allies have also reassured Seoul and Tokyo he will support continuing efforts to improve ties and advance military, economic and diplomatic cooperation to counter China and North Korea, Reuters reported ahead of the U.S. 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 merger through what they termed a sham national security review. They called for the U.S. federal court to overturn the decision.

A Japanese diplomat told Reuters Biden’s move 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.

Nicholas Szechenyi, a Japan expert at Washington’s Center for Strategic and International Studies, said Japan would not let the decision poison the U.S.-Japan relationship. “It’s too important for Japan’s national security,” he said.

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,” he said. “China must be chuckling to itself that it could never have hoped for a better outcome.”