Prime Minister Shinzo Abe was poised to announce on Friday that Tokyo wants to join talks on a U.S.-led free trade pact, media said, a move proponents say will help tap vibrant regional growth, open Japan to tougher competition and create momentum for reforms needed to revive the long-stagnant economy.
The decision to join talks on the Trans-Pacific Partnership (TPP) will launch the "third arrow" in Abe's policy triad following the fiscal pump priming and hyper-easy monetary measures he has pushed since returning to office in December after his Liberal Democratic Party's (LDP) big election win.
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Jiji news agency quoted Abe as telling an LDP official that he would announce his decision to seek entry to the TPP negotiations at a news conference at 6 p.m. (0900 GMT).
"Abenomics" has been playing to rave reviews in the Tokyo stock market and with voters, around 70 percent of whom support the prime minister.
Business executives and economists say the real test, though, will be whether Abe buckles down to more controversial reforms such as deregulation, which can hurt vested interests.
"TPP could be a trigger for Japan to implement deregulation in various sectors by using external pressure," said Hideo Kumamo, chief economist at Dai-ichi Life Research Institute.
"It is being seen as a way to stimulate the economy by making the nation more competitive."
The United States and 10 other countries are pushing for a deal by the end of the year and possibly as soon as an Asia-Pacific leaders summit in Bali in October.
Much of the attention has focused on political hot-button issues such as scrapping tariffs on farm products and textiles.
But negotiators are also grappling with thorny matters such as rules on disputes between companies and governments, state-owned enterprises, copyright protection, access to financial and other service sectors, cross-border transfer of electronic data and protection for workers from trade-related fallout.
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Hurdles remain to Japan's entry to the talks.
Tokyo must first hold bilateral meetings with existing members and be supported by a consensus to "keep up the good momentum" as the countries prepare for the next talks in Peru, Singapore negotiator Ng Bee Kim said after the 16th round of the three-year-old talks ended on Wednesday.
"It's a mistake to think that TPP is just aimed at stimulating free trade," Lawson Inc CEO Takeshi Niinami, a member of a government panel on competitiveness, told Reuters last week.
"This will create a huge opportunity for revitalizing Japan.
Japanese big business wants Tokyo to join the pact to keep from falling further behind rivals such as China and South Korea, while traditional LDP supporters such as farmers are generally opposed.
An LDP panel on Thursday gave Abe a resolution calling for protection of sensitive items such as agriculture products and Japan's universal healthcare system and demanding that the government withdraw from the trade talks if it cannot.
With strong approval ratings for now, Abe appears to be betting he can decide to join the TPP talks even at the risk of angering some voters ahead of a July upper house poll that his ruling bloc needs to win to cement its grip on power.
Economists said the immediate economic impact of joining TPP would likely be limited but that taking part would allow Japan to help set the rules.
Two of Abe's predecessors from the now-opposition Democratic Party of Japan promoted the idea of joining TPP but were unable to get full backing from their party. Abe could fare better.
"He is a unifying force and I think the environment is such that LDP lawmakers find it hard to disagree strongly," a government official said.
(Writing by Linda Sieg; Editing by Kim Coghill)