TOKYO, JAN. 29 -- Japan will limit its passenger car exports to the United States for an eighth consecutive year to avoid fanning protectionist sentiment in Washington, the government said today.

The decision to retain the limit of 2.3 million cars in the fiscal year beginning April 1 was made in spite of a debate within the Ministry of International Trade and Industry.

Some MITI officials argued that 1988 was a good time to scrap restraints because the strong Japanese yen has raised export prices so much that auto makers will not even fill their allotment in the current fiscal year. The Japan Automobile Manufacturers Association announced today that Japan's exports declined 6.1 percent in calendar year 1987 to 2.2 million autos.

But the head of MITI, Hajime Tamura, said the government decided to continue the restrictions in light of rising protectionist sentiments in the U.S. Congress.

"No restrictions and self-restraint may give {two} different impressions," he said. "If and when it is confirmed that such restraints are no longer necessary, even during fiscal 1988, the restrictions will be removed."

In Washington, the Reagan administration reacted coolly to the continued restraints. "We haven't asked them to do it," said White House spokesman B.J. Cooper. "In fact, since 1985, we have been urging them not to put on automobile export restraints. That policy hasn't changed. We favor free and fair trade."

The administration has contended that the Japanese quotas, while they may benefit U.S. auto makers, still represent the kind of market restraints it is seeking to eliminate.

Japanese auto makers have long argued that the limits should be removed, saying the quotas originally were set to allow U.S. auto makers to recover from an industry slump that has since ended.

Some of Tamura's aides, however, argued that ending the curbs might result in an uncontrolled acceleration of exports and renewed trade disputes with the U.S. auto industry.

Japan began limiting its auto exports to the United States in fiscal 1981 under strong pressure from Washington and the slumping U.S. auto industry.