Japan will file a request with the World Trade Organization next month for the creation of a dispute-settlement panel to deal with its simmering dispute with Indonesia over the Southeast Asian country's "national car" policy, government sources said Feb. 18.

The sources said the European Union and the United States, which have also criticized the auto industry policy Indonesia announced just a year ago, are also expected to file the same requests at a monthly meeting of the WTO's Dispute-Settlement Body scheduled for March 20. Indonesia's national car policy grants 100 percent exemptions from tariff and luxury taxes for three years to Pt Timor Putra Nasional, an automaker controlled by President Suharto's youngest son, Hutomo Mandal Putra.

In partnership with Kia Motors Corp. of South Korea, the Indonesian automaker plans to begin assembly of the Timor cars at home later this year and start full manufacturing in 1998. The Timor cars are now being made in South Korea and imported back into Indonesia duty-free under a presidential decree issued last June that permitted such imports for up to one year as a temporary measure until the automaker becomes fully prepared for local production.

But to qualify for the luxury-tax exemption, the company -- and any other local or foreign automaker -- must achieve a 60 percent local content requirement. Japan, the EU and the U.S. have claimed that the national car policy violates WTO rules, including the provision of "most-favored-nation" status and "national treatment" to foreign countries as well as a ban on local content requirements agreed under the Uruguay Round of world trade liberalization talks, completed at the end of 1993.