By Yuka Obayashi

TOKYO (Reuters) - Japan is threatening to take India to the WTO over restrictions that nearly halved its steel exports to the South Asian nation over the past year, a step that could trigger more trade spats as global tensions over steel and other commodities run high.

Such action is rare for Japan. The world's second-biggest steel producer typically tries to smooth disputes quietly through bilateral talks, but with global trade friction increasing, Japan's defence of an industry that sells nearly half of its products overseas is getting more vigorous.

Besides concern over India's protection of its domestic steel industry, Japan is also worried about the more rough and tumble climate for global trade being engendered by incoming U.S. President Donald Trump, and feels it must make a strong stand for open and fair international markets.

"We need to stop unfair trade actions from spreading," said a Japanese industry ministry official, explaining a Dec. 20 request for WTO dispute consultations with India over steel safeguard duties and a minimum import price for iron and steel products.

India imposed duties of up to 20 percent on some hot-rolled flat steel products in September 2015, and set a floor price in February 2016 for steel product imports to deter countries such as China, Japan and South Korea from undercutting local mills.

"If consultations fail to resolve the dispute, we may ask adjudication by a WTO panel," the industry ministry official said. Such action could come as soon as 60 days - in February - after its consultation request was filed in December.

Tokyo says India's actions are inconsistent with WTO rules and contributed to the plunge in its steel exports to India, which dropped to 10th-largest on Japan's buyer list in 2016 through November, down from sixth-largest in 2015.

"We are following the WTO guidelines," said a top official at India's steel ministry, though adding that New Delhi is ready to sit across the table for trade talks.

As of Friday, the date of a WTO-led consultation had not been set.

GROWING GLOBAL TRADE DISPUTES

There has been a series of trade disputes over the past few years amid massive exports of cheap steel products from China, the world's top producer, with Vietnam, Malaysia and South Africa taking or planning measures to block incoming shipments.

China's steel exports dropped by 3.5 percent in 2016 to 108 million tonnes, still about as much as Japan produces in a year.

Japan is also monitoring its small volume of imports for signs of dumping, fearing that steel products with nowhere to turn because of import restrictions may head to it own market.

"All trade need to be fair. If there are trades that violate the rules, we will take necessary actions while consulting with our government," Kosei Shindo, chairman of the Japan Iron and Steel Federation, told a news conference on Friday.

But in an environment where a new U.S. president is threatening to tear up trade treaties and impose import duties in the world's biggest economy, Tokyo may be at risk of helping to set off a trade war it is trying to avoid.

"We may see a battle of trade litigations especially after Trump takes the helm in the U.S.," said Kazuhito Yamashita, research director at Canon Institute for Global Studies.

(Reporting by Yuka Obayashi; Additional reporting by Neha Dasgupta in NEW DELHI; Editing by Tom Hogue)