By Steve Holland
NEW YORK (Reuters) - U.S. President Donald Trump said he had agreed with Japanese Prime Minister Shinzo Abe on Wednesday to start talks on a bilateral free trade agreement that Tokyo has been resisting.
"We've agreed today to start trade negotiations between the United States and Japan," Trump said at a summit with Abe in New York on the sidelines of the U.N. General Assembly.
"This was something that for various reasons over the years Japan was unwilling to do and now they are willing to do. So we're very happy about that, and I'm sure that we will come to a satisfactory conclusion, and if we don't, ohhhhhh," Trump said.
Trump has made clear he is unhappy with Japan's $69 billion (52.4 billion pounds)trade surplus with the United States - nearly two-thirds of it from auto exports - and wants a two-way agreement to address it.
Japanese officials have been worried that Trump will demand a reduction in Japanese auto imports, and fret that Trump could impose steep import tariffs on autos and auto parts, which would deal a big blow to the export-reliant economy.
"Actually I think we will probably come to a conclusion and I think it'll be something very exciting," Trump said.
"And Japan is very smart - great negotiators - and up until now they've done very well, and they'll continue to do very well. We're going to have a really great relationship, better than ever before on trade. I think it's going to be better for Japan and better for the United States.
"It can only be better for the United States because it couldn't get any worse because of what's happened over the years."
Japanese Economy Minister Toshimitsu Motegi was quoted as saying by Japanese media after meeting U.S. Trade Representative Robert Lighthizer in New York on Tuesday that the two sides had reached a broad understanding over how to promote bilateral trade and may announce specifics on Wednesday.
The two top trade representatives failed at a meeting in August to narrow their differences on whether to open up negotiations for a bilateral free trade agreement.
Tokyo is worried that as part of any bilateral deal Washington might put pressure to open up its politically sensitive farm market.
The sense of unease in Tokyo increased after Trump escalated his trade fight with China, and has reportedly pushed Mexico into agree to cap auto exports to the United States.
(Reporting by Steve Holland; Additional reporting by David Brunnstrom; Writing by David Brunnstrom; Editing by James Dalgleish)