NEWS ANALYSIS : U.S.-Japan Gap Yawns as Auto Trade Deadline Nears : Negotiations: Little progress is seen in Geneva. Dispute goes beyond cars to national economies, global commerce.

With their deadline measured now in hours, the top-level trade officials from the United States and Japan began a last-ditch effort Monday to settle their dispute over auto imports and avoid widening the breach in the troubled U.S.-Japanese relationship.

But they faced an enormous gap, one that separates the two economic giants of the world not only over the details of automotive trade but, more broadly, over the conduct of international commerce and the structure of their domestic economies.

U.S. Trade Representative Mickey Kantor and Japanese Trade Minister Ryutaro Hashimoto met for 3 1/2 hours--until midnight--Monday. But they reported no significant progress after the first of what could turn into on-again, off-again sessions reaching eventually marathon proportions by the deadline of midnight Wednesday, Washington time.

In a playfulness that belied the huge stakes of the negotiations, Kantor presented Hashimoto, on the Japanese official’s arrival at the building housing the U.S. trade representative’s office in Geneva, with a four-foot-long Japanese- made shinai --four bamboo sticks fashioned into a replica of a sword and used in the martial art of kendo , of which Hashimoto is a devotee.

The standards of Kendo are “courage, honesty, integrity and patience,” Kantor said to Hashimoto with the smile of a man whose flattery was about to find its mark, “and you represent all of them.”

“It’s going to cost me a lot,” the Japanese official said with jocular wariness.

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But while a spirit that Kantor described to an aide as “occasional levity” crept into the meeting, attended by only a small group of senior officials on each side, the aide said later: “Basically, there hasn’t been a lot of movement.”

“Wide gaps still remain in all the major issues,” a senior Clinton Administration official said early this morning.

Offering only a glimmer of optimism, officials said the two sides began drafting language for the text of some elements of an agreement--which one acknowledged “signals some movement.”

Kantor, who flew to Geneva from Washington on Sunday, and Hashimoto, who arrived from Tokyo on Monday, began their talks just as the sun was setting on the Alpine hills that overlook this lakeside Swiss city.

A spokeswoman for the American Automobile Manufacturers Assn., Laura Armstrong, who has been working closely with U.S. officials, said Monday that “there have been some baby steps taken. There’s an awful lot still to be resolved.”

The Clinton Administration is pushing the Japanese government to make it easier for auto dealers in Japan to sell U.S. cars; to lift regulations that the United States has said raise insurmountable obstacles to the sale of U.S.-made parts for auto repair work, and to increase purchases of U.S. parts for car manufacturing.

President Clinton has vowed to impose 100% tariffs on the import value of 13 top-of-the-line automobiles, worth $5.9 billion last year, if the U.S. demands for a more open market are not met by Wednesday.

Offering a cascade of numbers to support its case that U.S. auto and automotive parts companies encounter a never-changing red light when they try to sell in Japan, the Administration argues, among other points, that:

* Over the past 25 years, Japan has sent 40 million cars to the United States and has purchased 400,000 U.S.-made cars.

* Japanese autos make up 24% of the auto sales in the United States, while cars made by Chrysler, Ford and General Motors account for 1.5% of the Japanese market.

* Foreign auto parts make up 32.5% of the auto parts market in the United States, while the foreign share in Japan is 2.6%.

Japan disputes many of the specific numbers, but there has been little argument over the view that the gap is wide.

But for all the focus on market share, the dispute is about more than automobiles.

At its heart, it is about the structure of the Japanese economy and how the closely knit keiretsu system--in which a vertically integrated network of companies links suppliers, manufacturers and dealers--keeps out challengers, foreign and domestic.

The efforts by U.S. companies, for example, to sell their auto parts to Toyota, Honda and the other Japanese car makers, or to repair shops, are seen in the United States as an attempt to gain a fair share of a lucrative market.

In Japan’s view, however, those efforts are a threat to the longstanding tradition under which auto companies reach down the ladder to suppliers with whom they have been doing business for years to create a protected and stable economic food chain.

The dispute also represents a political contest of enormous dimensions, and one in which both sides could find at least temporary benefit in not backing down.

With Americans chafing under what is widely seen as a successful Japanese economic invasion of the United States, Clinton has drawn a line at the docks.

Failure to make a credible case that he has achieved his goal of opening Japan to the fruits of American factories--or make Japan pay a price for its refusal--would put the brakes on a Clinton reelection campaign.

But for Japan, the export of automobiles represents both jobs at home and worldwide recognition of its economic rebirth after World War II, as well as its redeemed role on the global stage.

With the Japanese economy now seemingly on the brink of a return to recession, the face-off with the United States could offer the image of Hashimoto as an economic warrior who can manage the U.S-Japanese relationship more aggressively than the previous generation of Japanese leaders.

While the arrival of Kantor and Hashimoto in this city of international negotiations would suggest a deal was in the offing, the unusual dynamic surrounding these talks suggests something else: that both sides must show they are working to the nth degree to find a solution.

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But in the end, Kantor, the manager of Clinton’s 1992 presidential campaign whose political instincts are never far from the surface, and ultimately the President himself, will be faced with a series of questions.

What constitutes a victory? Is it an agreement that simply boosts the sale of autos and auto parts, or one that also attacks the closed nature of Japanese commerce?

Finally, as in any protracted government-to-government negotiation, there is the persistent question: Is a partial deal better than none, and will sanctions so disrupt relations between the world’s two largest economies that a resolution would be delayed for months, at untold costs?