Japan opposition repeats caution on USD bonds -BBC

TOKYO, May 13 (Reuters) - Japan's opposition finance spokesman repeated that Japan should avoid buying U.S. government bonds denominated in dollars because of currency risk, in comments to the BBC that fuelled selling pressure on the dollar on Wednesday as an election looms.

Masaharu Nakagawa, chief finance spokesman of the Democratic Party, told the BBC he was worried about the future value of the dollar and a Democratic Party government would continue to buy U.S. government bonds only if they were dominated in yen.

"If it's [in] yen, it's going to be all right," Mr Nakagawa said in an interview with the BBC World Service. ( here)

Traders said the report fed into selling on the dollar which sent it to a four-month low against a basket of six currencies .DXY and saw it slide 0.2 percent to 96.20 yen JPY=.

The dollar was also sold on breaks of technical levels and a commentary in the Financial Times warning of the risk of the United States losing its top-grade sovereign credit rating.

Nakagawa is the finance spokesman for the Democratic Party but it has not said if he will hold the portfolio if it wins a general election due by October.

He made similar comments about the currency risk of holding U.S. dollar assets in an interview with Reuters in January. [ID:nT16092].

The Democrats, who are picking a new leader after a fundraising scandal toppled their leader, are polling just ahead of the government in voter surveys. [ID:nPOLJP]

Japan's foreign exchange reserves totalled $1 trillion at the end of April.

Japan does not disclose the currency breakdown but historical data on its currency intervention suggests most of the reserves are in dollars. (Reporting by Charlotte Cooper; Editing by Rodney Joyce)