UPDATE 1-Japan's Noda: may contact China over bond buying

(For more stories on the Japanese economy, click [ID:nECONJP])

* Japan Fin Min Says strange Japan can't buy China govt bonds

* Wants talks over ban on non-residents' yuan bond buying

* Japan FX reserves chiefly in dlrs as meant for intervention (Adds quotes, background)

TOKYO, Sept 9 (Reuters) - Japanese Finance Minister Yoshihiko Noda said the government may contact China about allowing Japanese purchases of Chinese bonds, which could help to curb the yen's surge, and is looking into a recent jump in Chinese buying of Japanese debt.

"I feel a bit unnatural about the fact that China is buying Japanese government bonds but Japan cannot buy Chinese government bonds," Noda told a parliamentary upper house committee on financial and monetary affairs.

"There is room for the two countries' authorities to talk to improve this situation," he said, when urged by a ruling party lawmaker to negotiate a deal with Beijing to buy each other's bonds to help stabilise the strengthening yen.

But Noda also said Japan's foreign reserves, totalling $1.07 trillion, are held chiefly in dollars because they are designed for use in currency market intervention, suggesting Tokyo sees little need to diversify away from the dollar.

He said it was not known why China was increasing its buying of short-term Japanese government securities but Tokyo was keeping in contact with Chinese authorities to confirm what was behind the move.

China bought a net 640.8 billion yen ($7.65 billion) in short-term Japanese bills in July, extending a record buying spree of Japanese debt seen since the start of the year, although Chinese were net sellers of medium- to long-term Japanese bonds. [ID:nTOE68700Y]

The recent surge in Japanese bond investment by Chinese investors has stirred talk that China may be diversifying its foreign reserves into the yen and away from the euro and the dollar.

The dollar slipped to around 83.66 yen JPY= on Thursday, moving back toward a 15-year low of 83.34 yen struck on the EBS platform the previous day. (Editing by Edmund Klamann)