BOJ's Kuroda calls for 'rational' G7 debate on trade

By Leika Kihara

WHISTLER, British Columbia (Reuters) - Bank of Japan Governor Haruhiko Kuroda on Thursday called for "rational" debate among G7 nations to prevent protectionist trade measures from disrupting the global economy.

Countries that adopt protectionist measures will only see their economies suffer from disruptions in imports, as other countries will likely take counter-measures, he said.

"I don't think the tide of free trade will shift. But it's important to carry on discussion so that things don't escalate," Kuroda told reporters upon arrival for a meeting of finance ministers and central bank governors of the Group of Seven advanced economies.

"I can only say that we need rational discussions."

Fears of a global trade war are overshadowing G7 talks at the Canadian resort town, as Washington's allies vowed to push back against a U.S. decision to impose tariffs on their steel and aluminum exports.

Unlike some other U.S. allies, Japan had not been granted even temporary tariff exemptions. But Tokyo policymakers remain wary of pushing back too much, given its close defense ties with the United States, analysts say.

Japanese Finance Minister Taro Aso, who was also in Whistler for the G7, repeated Tokyo's request for a permanent exemption in talks with his U.S. counterpart Steven Mnuchin on Thursday, a senior Japanese finance ministry official told reporters.

Aso also called on the United States to join forces in stopping China from taking market-distorting trade practices, the official said, a sign Tokyo wants a united front with Washington against China despite disagreement over U.S. tariffs.

"China still takes various market-distorting trade and investment practices. There were discussions on how to bring China into the global, rule-based economic system," the official said. He added that Aso and Mnuchin did not discuss currency moves, or whether Japan and the United States should enter into talks for a bilateral free trade agreement (FTA).

The G7 finance leaders meet against a backdrop of solid global economic growth, though rising U.S. interest rates has caused capital outflows from some emerging economies such as Argentina and Turkey.

Kuroda said he did not see problems in the two countries spilling over into other emerging economies with sound fundamentals, particularly those in Asia.

"U.S. monetary policy normalisation is proceeding very cautiously," Kuroda said. "The fact U.S. monetary policy is normalising is because the U.S. economy is in good shape and inflation is converging toward the central bank's target. If so, that's beneficial for the global economy."

(Reporting by Leika Kihara; Editing by Chris Gallagher and Jacqueline Wong)