UPDATE 1-Resona to ask Japanese government to sell shares

(Adds details, background)

TOKYO, June 11 (Reuters) - Japan's Resona Holdings (8308.T: Quote, Profile, Research, Stock Buzz) said it would again ask the Japanese government, its top shareholder, to sell some of its shares, as the bank looks to repay 2.3 trillion yen ($21.billion) in public money.

Resona, which is about half owned by the Japanese government following a public bailout, asked the government in March 2007 to begin preparations for a share sale.

According to market participants, that sale was put on hold just a few weeks later, after Resona said it would issue 350 billion yen ($3.3 billion) of convertible preferred shares to Merrill Lynch & Co. (MER.N: Quote, Profile, Research, Stock Buzz), raising concern about the dilution of its stock price.

Resona said in a statement on Wednesday it has now withdrawn the request for a sale in the open market, as it is considering other share sale options.

"Resona (Holdings) has started considering a repayment method ... other than through the secondary offering," the bank said in a statement.

French bank Credit Agricole SA (CAGR.PA: Quote, Profile, Research, Stock Buzz), which currently holds just under 1 percent of Resona, has previously said it will consider raising its stake in the Japanese bank.

The two banks, which have been cooperating since 2002 in asset management and the sale of investment products, said in April they will expand their alliance to include insurance products and investment banking.

The bank also has ties to insurer Dia-Ichi Mutual Life Insurance Co. (Reporting by David Dolan and Taro Fuse)