Japanese media reported on the 5th that there are complaints within the Japanese government that the decision is disadvantageous to both Japan and the United States.
In addition, the Japanese media also criticized in editorials that the U.S. president’s blocking of ally Japan’s acquisition of U.S. companies was an extremely unusual decision, saying it would “leave a root in U.S.-Japan relations.”
Earlier, in a statement on the 3rd (local time), President Biden ordered the two companies to take all steps necessary to completely and permanently abandon their acquisition plans within 30 days, saying that Japan Steel’s attempt to acquire US Steel poses “a risk to national security and to very important supply chains.”
So far, there have been eight cases in which the U.S. president ordered the suspension of the acquisition based on the review of the Foreign Investment Review Committee (CFIUS) under the Treasury Department, and seven of them were China-related companies and alliance companies were unprecedented, the Yomiuri Shimbun reported.
Japan’s Minister of Economy, Trade and Industry, Yoji Muto, announced his position that it was “difficult to understand and regrettable” after President Biden’s decision became public.
In this regard, the Asahi Shimbun reported, “Discontent is swirling in the Japanese government, which has supported the acquisition.”
A Japanese economic ministry official told the newspaper that “it was originally an acquisition without any problems.”
“The prevailing view is that the intention of labor unions, which is the basis for President Biden’s support, was prioritized over economic rationality,” Yomiuri said. “It is largely contradictory to the Biden administration’s ideology, which emphasized strengthening allies and supply chains to reduce dependence on China.”
The newspaper analyzed that President Biden and the Democratic Party made the decision with the next presidential election in mind, adding, “Even if President Biden allows the takeover, Donald Trump, who will take office this month, is expected to reverse it, so the consciousness that he will not lose his achievement seems to have worked.”
In a separate editorial, Yomiuri said that Japan has been the No. 1 country in total investment in the U.S. for five consecutive years until 2023, adding that “the decision that goes against the grain will also adversely affect investment in the U.S.” Japan Steel has recognized that in order to survive in the steel industry, it must secure overseas markets away from the domestic market, where demand for steel is expected to decrease due to a decrease in population.
In particular, the U.S. planned to start developing the market in earnest with the acquisition of U.S. Steel as its population continues to grow and there is a demand for high-quality steel.
Nippon Steel is expected to make all-out efforts to acquire the steelmaker for the time being, as it may have to pay a $565 million penalty to US Steel if it does not complete the acquisition by June this year.
Japan Steel plans to first file a lawsuit against the U.S. government to claim that there is a defect in the procedural justification of the order not to take over.
However, since President Biden ordered the purchase plan to be abandoned within 30 days, if CFIUS does not extend this deadline, it will have to submit a certificate of abandonment by the 2nd of next month, according to the Nihon Keizai Shimbun (Nikkei).
“If Nippon Steel is to file a complaint against the U.S. government, its top priority is to ask the court to temporarily suspend the purchase waiver order by Feb. 2,” Nikkei said.
He then introduced that although there were cases in which U.S. companies under Chinese companies won similar lawsuits in 2014, the main basis for the court’s judgment was that Chinese companies were not given sufficient opportunities to object.
In response, a Japanese lawyer told Nikkei, “Based on the reports, it seems that Japan Steel has secured an opportunity to claim,” adding, “It is unlikely that the court will admit that it violated procedural legitimacy.”
Instead of making US Steel a wholly owned subsidiary, Japan Steel may seek to form a capital alliance or acquire only some facilities, the newspaper said.
It also added that if the plan to acquire US Steel is completely thwarted, it could consider expanding its existing business in the United States.
Nikkei said, “There is also a scenario where we are looking for a reversal after Trump’s inauguration,” predicting that Japan Steel could persuade the Trump administration to revoke the order not to take over by proposing additional investments.
However, the feasibility of this scenario does not appear to be significant as Trump has repeatedly expressed his opposition to US Steel’s acquisition by Japan Steel in early last month.
JULIE KIM
US ASIA JOURNAL
