* Japan undecided on if to file challenge to WTO
* Inward-looking policies benefit no country - Aso
* Aso voices discontent over U.S. demand on trade balance
* Aso calls for G7 to signal it is watching markets carefully (Adds quotes, detail)
By Leika Kihara
WHISTLER, British Columbia, June 1 (Reuters) - Japanese Finance Minister Taro Aso said U.S. metal tariffs were “deeply deplorable,” using unusually harsh language in a sign one of the United States’ closest allies was joining other G7 nations in attacking the Trump administration’s decision.
Aso said while Japan was undecided on whether to file a challenge to the U.S. tariffs on steel and aluminum with the World Trade Organization, it was making “various preparations.”
“Inward-looking policies involving one-sided, protectionist measures benefit no country. It’s important to achieve high global growth through free and fair trade,” Aso said on Friday after attending the G7 finance leaders’ gathering.
Fears of a global trade war have overshadowed the G7 talks in the Canadian mountain resort, where U.S. Treasury Secretary Steven Mnuchin was the prime target of criticism by other countries subject to the U.S. metals tariffs.
“Mnuchin was struggling to justify (the U.S. tariff decision). He was saying ‘Don’t tell me. Go directly to president Trump.’ ... He was in a very tough spot. Frankly I felt sorry for him,” Aso said.
Aso also signalled discontent over U.S. demands to shrink the country’s trade deficit with Japan.
Interest rate hikes by the U.S. Federal Reserve would push up U.S. yields and the dollar, which would make U.S. exports less competitive and help expand its trade deficit, he said.
“If the dollar rises, the U.S. deficit widens.”
While trade dominated talks, Aso said he urged his G7 counterparts to send a message at next week’s summit that the group will keep monitoring market moves carefully - underscoring Tokyo’s focus on preventing abrupt yen spikes that could hurt its export-reliant economy.
Japan has frequently issued verbal warnings against sharp yen gains, and justified them as being in line with G7 and G20 agreements that markets should move stably in a way that reflect economic fundamentals. (Reporting by Leika Kihara Editing by Shri Navaratnam)