REFILE-UPDATE 1-Govt stake in Japan Tobacco could be cut to a third -DPJ official

(Refiles to add UPDATE tag and add bullet points)

* Govt mulls stake sales in Japan Tobacco, NTT

* IPO of Tokyo Metro has also been floated

* Stake sales in JT, NTT would require law revision

By Kiyoshi Takenaka

TOKYO, Aug 3 (Reuters) - Japan's government could cut its stake in Japan Tobacco to one-third from one-half to help finance post-quake reconstruction efforts, a senior ruling party official said on Wednesday.

The government has been considering the sale of shares in Japan Tobacco as well as telecoms giant Nippon Telegraph and Telephone (NTT) , which is 33.3 percent owned by the state, although a government reconstruction plan did not mention the companies by name.

Lawmakers have also floated the idea of selling the government's 53 percent stake in Tokyo Metro, which operates a vast subway network stretching across Japan's capital, through an initial public offering.

"The government is taking a look at a sale of Tokyo Metro shares. But it would not be enough. I believe the sale of some shares in NTT and JT should also be considered," Katsuya Okada, the No. 2 official of the ruling Democratic Party, told a media luncheon.

Unlike Tokyo Metro, where there are no legal hurdles, the running down of the government's stakes in Japan Tobacco and NTT would mean changes in the law as current law requires the government to hold at least half of JT and one-third of NTT.

The government owns about 2.1 trillion yen ($27.2 billion)worth of NTT shares and 1.7 trillion yen of Japan Tobacco shares.

Based on the assumption it would sell 60 percent of its stake in Tokyo Metro, it has also earmarked 115 billion yen in possible proceeds into its budget for this year.

Okada also said the government would be facing a cash crunch in the autumn if a bill for deficit-financing bonds did not pass parliament, and that the nation's financial situation is even more severe than that of the United States.

"Failure to pass this bill could lead to downgrades on government bonds and higher interest rates. Damage from higher interest rates would be extremely serious for Japan, which is saddled with a debt of nearly 1,000 trillion yen," Okada said.

"The government is in a situation where it cannot issue new bonds. After autumn, when we have exhausted our tax revenues, we won't be able to make payments. The situation we are in is as dire as the one the United States was recently in." ($1 = 77.145 Japanese Yen) (Editing by Edwina Gibbs)