TOKYO -- As ministers from Japan and the European Union gather for late-stage talks on a bilateral trade pact, Tokyo's slate of tariffs on dairy products is proving one of the toughest issues to slice through.

Japanese Foreign Minister Fumio Kishida and EU Trade Commissioner Cecilia Malmstroem will meet here Friday and Saturday to continue negotiations on an economic partnership agreement, aiming to have broad deal ready for Prime Minister Shinzo Abe and top EU officials to finalize when they meet next week.

"These are going to be very difficult negotiations," Kishida told a news conference Thursday. "We will use the time we have as effectively as possible."

The EU, whose members include countries synonymous with cheese like France and Italy, wants Japan to cut or eliminate tariffs in this sector as early as possible. The brunt of this attack is directed at the the 29.8% duty on soft cheeses such as mozzarella and Camembert. But Japan "cannot give more ground" than it did under the 12-nation Trans-Pacific Partnership trade pact, according to a source in the trade sector.

In the TPP, Japan agreed to phase out its tariff on hard cheeses such as Gouda and cheddar, but held firm to its soft-cheese duty, despite sharp protests from New Zealand and other negotiating partners. If Tokyo were to offer Brussels sweeter terms, TPP members could push to revisit that agreement, potentially spoiling an effort to bring that pact into force without the U.S., which withdrew in January.

If Japan cannot hold the TPP line, the next-best approach could be to create more categories for taxing imported cheese -- based on ingredients, for example -- and repeal tariffs only on those products unlikely to compete with Japanese offerings, a trade source said. But this would have little benefit for the Europeans, and would lessen the savings domestic consumers receive from cheaper cheese imports.

Japanese dairy farmers are paying close attention to how the negotiations play out. "An influx of highly competitive European cheeses would upset the supply-demand balance for raw milk," worried the head of a farmers cooperative in Hokkaido, one of Japan's premier milk-producing regions. Such voices will be difficult to ignore in Tokyo.

(Nikkei)