UPDATE 1-Japan FX reserves hit record high, nearing $1 trln

(Adds details)

TOKYO, Feb 7 (Reuters) - Japan's foreign reserves, the
world's second largest after China, hit a record high of $996
billion at the end of January as falling interest rates boosted
the value of foreign bonds in the stockpile.

Rising gold prices and the appreciation in the euro also
pushed up the value of euro-denominated assets in dollar terms, a
ministry official said, with the reserves now 11 percent higher
than a year ago.

The yield on the benchmark 10-year U.S. Treasury note
<US10YT=RR> fell to 3.597 percent at the end of January, down
from 4.027 percent at the end of December, ministry said.

The euro traded at around $1.4861 at the end of January,
against around $1.4591 at the end of December.

Japan's reserves ballooned after 20 trillion yen ($188
billion) in yen-selling intervention in 2003 and a further 15
trillion yen in the first three months of 2004, as Tokyo tried to
keep a rapid rise in its currency from derailing a fragile
economic recovery and accelerating deflation.

Tokyo has kept out of the market since then, but income on
the reserves has kept them edging up.

January's reserves figure included $844.5 billion in
securities and $124.0 billion in deposits. The rest includes IMF
reserve positions, special drawing rights and gold stocks.

Asked about a moderate decline in reserves held in deposits
at foreign banks over the past several months, the official said
it was due to the ministry's daily reserve management operations,
in which it seeks to ensure safely and liquidity before trying to
make profits.

Japan does not divulge the currency breakdown of its external
reserves but past Japanese currency intervention, which has
mostly taken the form of dollar buying, suggests most of Tokyo's
foreign cash pile are in the U.S. currency.
JAPAN OFFICIAL RESERVE ASSETS (in billion dollars)

END-JAN END-DEC YEAR AGO
TOTAL 996.044 973.365 895.383
To view the full tables, go to the Web site of the Ministry of
Finance here
For stories on Japan's foreign reserves, click on [JPRES=ECI]
(Reporting by Yoko Nishikawa)