Japan braces for talks on yen, BOJ in trade negotiatons with US

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PM Ishiba appoints close aide Akazawa as Japan's negotiator

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Japan, US to begin trade talks on April 17, NHK reports

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Japan can discuss non-tariff barriers, FX

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Ruling coalition calls for sales tax cut, Yomiuri reports

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Ishiba may order compilation of extra budget next week, Kyodo says

By Leika Kihara and Makiko Yamazaki

TOKYO, April 11 (Reuters) - Japan is gearing up for trade negotiations with the United States that will likely touch on the thorny topic of currency policy, with some officials privately bracing for Washington to call on Tokyo to prop up the yen.

Prime Minister Shigeru Ishiba on Friday set up a task force to oversee trade negotiations with the United States, headed by his close aide and Economy Minister Ryosei Akazawa, who domestic media said will visit Washington next week.

U.S. President Donald Trump's focus on addressing a huge trade deficit, and his past remarks criticising Japan for intentionally maintaining a weak yen, mean markets are expecting Tokyo to come under pressure to strengthen the yen versus the dollar and give U.S. manufacturers a competitive advantage.

The slow pace at which the Bank of Japan is raising borrowing costs from ultra-low levels could also come under fire in bilateral trade talks, three sources familiar with the negotiations said.

"It's clear the U.S. side is interested in talking about the yen and monetary policy," said one of the sources, who spoke on condition of anonymity. Another source said Washington wants a reversal of the weak yen, but has not offered Tokyo clarity on its preferred steps.

Public broadcaster NHK reported on Friday that Akazawa will on April 17 meet U.S. Trade Representative Jamieson Greer and U.S. Treasury Secretary Scott Bessent, a former billionaire hedge fund manager known for his strong interest in the yen and BOJ policy.

"I understand Mr. Bessent is very fond of Japan and undoubtedly has a good impression of our country. He also has a deep financial background, so could be a tough counterpart to negotiate," Akazawa told a news conference.

"He seems to mention non-tariff barriers and currency policy as among topics he'd like to discuss. If so, we will obviously respond during the discussions," he said, adding that Japan will not take any topic off the table.

Trump expressed a strong interest in Japan's currency policy in phone call with Ishiba on April 7, Kyodo news agency reported on Friday, citing a Japanese government source.

Finance Minister Katsunobu Kato is likely to travel to Washington later this month for a meeting with his G20 counterparts on the sidelines of the spring IMF gathering, that could also offer the opportunity for a first face-to-face meeting with Bessent.

The BOJ is expected to hold interest rates at 0.5% at its two-day policy meeting concluding on May 1 while it scrutinises the impact of Trump's tariffs, but some analysts say it may feel the need to signal that further rate hikes are on the way to avoid causing further declines in the yen.

EXTRA BUDGET EYED In a stunning reversal, Trump said on Wednesday he would temporarily lower the hefty duties newly imposed on dozens of countries while further ramping up pressure on China.

The "reciprocal" tariff imposed on Japan has been cut to the universal 10% rate, from 24%, during the 90-day pause. A 25% duty still applies for automobile imports.

Akazawa and Chief Cabinet Secretary Yoshimasa Hayashi will lead the 37-member task force consisting of staff from various ministries to seek concessions from the United States.

A former transport ministry bureaucrat, Akazawa is among Ishiba's closest aides and has deep ties with the domestic agriculture sector. His current role as economy minister is his first ministerial post.

While government officials have revealed little about Tokyo's negotiating strategy with Washington, lawmakers have begun pressuring the government to take steps to cushion the potential economic blow from the tariffs.

The ruling coalition of Ishiba's Liberal Democratic Party (LDP) and its partner Komeito is considering requesting a temporary cut to Japan's sales tax rate for food, the Yomiuri newspaper reported on Friday. Ishiba may also instruct his cabinet as early as next week to compile a supplementary budget to fund cash payouts and fuel subsidies, Kyodo news agency reported.

The calls for expansionary fiscal policy come ahead of an upper house election expected in mid-July, in which the LDP is likely to struggle given Ishiba's low approval ratings.

(Reporting by Leika Kihara and Makiko Yamazaki; additional reporting by Kentaro Sugiyama and Yoshifumi Takemoto; Editing by Jacqueline Wong and Lincoln Feast, Kirsten Donovan)