U.S. Blowback to Steel Merger Vexes Japan

The prospect that President Biden is ready to block a merger between Nippon Steel and U.S. Steel on national security grounds is stirring discontent in Tokyo, where some officials view the action as casting Japan, a key U.S. ally, as a threat.

Japanese officials have, in public, largely kept their distance from the deal since it was proposed last year. But now behind closed doors, some are bristling at reports that Mr. Biden intends to sink Japan’s $15 billion acquisition of U.S. Steel.

Japan’s economy ministry has sought meetings with and conveyed concerns to U.S. officials after news emerged of Mr. Biden’s intention to take executive action to stop the merger, said two people with knowledge of the outreach who spoke on condition of anonymity because they were not authorized to speak publicly.

The political storm risks straining relations at a time when Tokyo and Washington are working to deepen ties to counterbalance China’s growing economic and military influence in Asia. On the economic front, the United States has been pressuring Japan to impose additional restrictions on the ability of its firms to sell advanced chip-making tools to China.

“The U.S. has pushed Japan to not only follow but take more initiative in promoting rules-based order in the Pacific, and in recent years it has really stepped up,” said William Chou, the deputy director of the Hudson Institute’s Japan Chair.

If American politicians move to scuttle a close ally’s planned merger, “Japan may move to take more of a back seat, letting the U.S. take the lead and following only when it is clear on what the American temperature of the day is,” he said. “That will be a great loss.”