U.S.-Japan deal on autos trade would be backed by penalties -source

ATLANTA, Oct 2 (Reuters) - A U.S.-Japan agreement on autos trade as part of a sweeping Pacific Rim trade deal would have its own dispute settlement mechanism including penalties if Japan does not open its market enough to U.S. vehicles, a source close to the negotiations said on Friday.

Negotiators are working to finalize a trade deal which would stretch from Japan to Peru and autos trade is one of the few remaining sticking points.

The source said a broader deal on autos trade between Japan, the United States, Mexico and Canada was nearly complete, with remaining differences centered on local content thresholds for specific auto parts.

Mexico is keen to maintain high thresholds to protect its booming auto industry from increased competition from Asia, where Japan has already-established supply chains.

(Reporting by Kevin Krolicki and Krista Hughes; Editing by Meredith Mazzilli)