WASHINGTON - Japan has changed its auto replacement incentive program to give U.S. cars more chance to qualify after the United States complained its automakers were shut out, the Japanese government said on Tuesday.

President Barack Obama's administration welcomed the move, which also prompted a senior U.S. lawmaker from the hard-hit auto state of Michigan to postpone a hearing on barriers U.S. automakers face in Japan and South Korea.

I welcome the news ... that Japan is going to drop the complete exclusion of U.S. automobiles from their Cash for Clunkers program, said Sander Levin, chairman of the House of Representatives Ways and Means trade subcommittee.

But the problem of their closed market requires our vigorous and renewed focus, as increased exports must be part of our economic recovery and job creation efforts, Levin said, adding the hearing originally set for Thursday would be rescheduled to give lawmakers more time to prepare.

U.S. Trade Representative Ron Kirk said Japan agreed to open its program, but U.S. officials were still evaluating details of the announcement to ensure it meets the concerns my office has been raising with Japan since last fall.

Japan, in a statement from its embassy in Washington, said cars imported under a preferential handling procedure (PHP) established in 1986 for U.S. automakers would be able to participate in a Japanese program to subsidize purchases of more fuel-efficient vehicles.

U.S. automakers had complained their cars would not qualify for the subsidy, even though the cash for clunkers program created by Congress last year was open to all imported cars.

Japanese autos accounted for almost half of the 677,842 vehicles sold under the $3 billion U.S. auto purchase incentive program, which ran late July to late August. Many of the Japanese cars were made at U.S. plants.

COMPLAINTS

Representative Betty Sutton and many other Midwestern lawmakers complained that Japan's program was tilted against U.S. cars and urged Kirk's office to file a World Trade Organization complaint unless Tokyo opened it up.

U.S. automakers General Motors GM.UL, Ford Motor Co (F.N) and Chrysler also wrote to Kirk in December to complain about Japan's program.

The problem arose because cars imported under the PHP program face less testing in Japan than other cars, a Japanese embassy official said.

Now, U.S. automakers will be able to submit their own fuel economy data to see if their cars are eligible for the Japanese government subsidy.

We're saying, 'Bring your numbers and we're going to take a look at them', the embassy official said.

The huge imbalance in U.S. auto trade with Japan is a longtime irritant that has received more attention recently as the U.S. industry struggles to get back on its feet after severe sales downturn that helped force bankruptcies at GM and Chrysler last year.

The U.S. government owns 60 percent of GM and nearly 10 percent of Chrysler after providing billions in bailout and bankruptcy financing for both.

The United States imported $21.2 billion worth of passenger cars from Japan during the first 11 months of 2009, but exported just $257 million to Japan in the same period.

(Editing by Cynthia Osterman)

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