U.S. - sources@
* Economic dialogue a test of U.S.-Japan ties
* Trump gov't looking for ways to lower trade deficit
* Japan hopes to avoid friction with important trading partner (Adds details on proposal, direct quote)
TOKYO, Oct 12 (Reuters) - Japan will propose changes to its safeguard mechanism on frozen U.S. beef imports that will shorten review periods and allow importers to voluntarily lower import volumes to prevent tariffs from automatically kicking in, two government sources said on Thursday.
The proposal will be made at the second round of the U.S.-Japan economic dialogue in Washington on Oct. 16, but it is uncertain if the U.S. side will go along, said the two sources, who have direct knowledge of the matter.
If successful, the proposal could help ward off trade friction with the United States, which is renegotiating free trade agreements with other countries to protect jobs and lower its trade deficit.
Under current measures, Japan automatically imposes higher tariffs if quarterly imports of specific beef products from any country rise more than 17 percent from the previous year.
Japan hiked tariffs from Aug. 1 on imports of frozen beef, popular in beef bowl dishes, from countries including the United States to 50 percent from 38.5 percent.
The move followed U.S. President Donald Trump's withdraw from the long-planned Trans-Pacific Partnership trade deal earlier this year.
Japan says the tariff hike, set to be in place until next March, is a "safeguard" mechanism to protect domestic farmers, but it has prompted some concern in Washington.
Instead of reviewing import data on a quarterly basis, Japan will propose shortening this period to every 10 days, the sources said. This will make it easier for companies that import beef to adjust volumes and avoid triggering tariffs, the sources said.
However, the plan is far from certain to work because frozen U.S. beef imports could surge next year in April after the current tariff increase expires, one source said.
"Once the safeguard is triggered, there is a concern that it will repeatedly be triggered in the future," the source said.
The first round of the U.S.-Japan economic dialogue, which was held in Tokyo in April, ended largely without incident. However, there is some concern among Japanese officials that the U.S. side could strongly push for trade concession during the second dialogue meeting.
Japan had a $69-billion trade surplus with the United States last year, according to the U.S. Treasury Department, which has expressed concern over what it called the "persistence" of the imbalance.
Japanese officials counter that Tokyo accounts for a much smaller slice of the U.S. deficit than in the past, while China's imbalance is much bigger. (Wrting by Stanley White; Reporting by Takashi Umekawa; Editing by Kim Coghill)