Japan, U.S. likely to engage in trade talks in near future - Reuters poll

By Kaori Kaneko TOKYO (Reuters) - A firm majority of economists expect Japan will engage in bilateral trade talks with the United States in the near future, a Reuters poll showed ahead of next week's high-level economic talks between the two nations. Japan and the United States kick off an economic dialogue on April 18 that will be led by U.S. Vice President Mike Pence and Deputy Prime Minister Taro Aso. The talks will cover issues such as macroeconomic policy, infrastructure investment and trade. Sixteen of 37 economists said they were somewhat concerned the talks would hurt Japan, the poll showed. Fifteen said they don't expect much from the dialogue; few saw a positive impact. And some predicted the meeting would sow the seeds for future bilateral trade talks. "It is reasonable to forecast that the dialogue will develop to trade negotiations as Washington sees Japan's trade surplus with the U.S. is a result of unfair commercial practice," said Takeshi Minami, chief economist at Norinchukin Research Institute. Twenty-nine of 37 analysts said bilateral trade negotiations would happen in the near future, while eight said it was unlikely, according to the poll taken April 4-12. After his inauguration in January, President Donald Trump pulled the U.S. out of the Trans-Pacific Partnership trade pact and declared Washington would instead seek one-on-one trade deals. His protectionist trade policies could undermine Japan's export-reliant economy. "There is a chance that Washington could demand Japan to make concessions to what have been agreed at the Trans-Pacific Partnership and the two nations could move on to negotiations on an individual sector such as autos to reduce the U.S. trade deficit," said Harumi Taguchi, principal economist at IHS Economics. Washington is pushing for trade to be a key issue in top-level economic talks with Japan, a person directly involved in preparations for the talks told Reuters on Thursday, an unwelcome development for Tokyo, which has sought to keep the talks from turning into a forum for U.S. pressure to reduce the bilateral trade imbalance. BOJ OUTLOOK Most analysts, meanwhile, maintained their view that the Bank of Japan's next action will be scaling back its ultra-easy monetary policy. Thirty of 38 analysts projected the central bank would phase out its stimulus while the rest said it is likely to ease further if it decides to change policy. That was largely in line with the previous survey. "The BOJ emphasizes the importance of maintaining inflation momentum more than that of attaining 2 percent at the earliest possible time," said Hiroshi Ugai, chief economist at JP Morgan Securities. "Therefore, we expect the BOJ's next policy move will be unwinding even though the BOJ cannot attain 2 percent target in fiscal 2018." Some analysts pushed back the timing of the central bank's projected next move. Five analysts said the move would start in the latter half of this year, down from ten in last's month survey, and seven projected it would happen in the first half of next year. Eight believe it will happen in the latter half of 2018. Eleven analysts see the BOJ taking steps in 2019 or later, up from eight in the previous survey. A few declined to predict the timing. Asked about what steps the BOJ would take if it decides to unwind its stimulus policy, the majority expect it to raise the 10-year Japanese government bond yield target from around zero percent now. Others said the central bank would raise the negative 0.1 percent interest rate applied on a small portion of commercial banks' excess reserves. Economists forecast the world's third-largest economy will expand 1.3 percent this fiscal year, started April, and grow 1.1 percent the next. That's up a tick from last month's 1.2 percent and 1.0 percent, respectively. The nation's core consumer prices, which include oil products but exclude fresh food prices, will probably rise 0.8 percent this fiscal year and 1.0 percent next, unchanged from a March survey. (Reporting by Kaori Kaneko, Editing by Malcolm Foster and Sam Holmes)