Japan launches Japan Tobacco insider trading probe -reports

TOKYO, Feb 2 (Reuters) - Japan's securities watchdog has launched a probe into possible insider trading in Japan Tobacco shares ahead of an announcement to recall Chinese-made dumplings contaminated with pesticide, local media reported on Saturday.

The Securities and Exchange Surveillance Commission (SESC) started the investigation after Japan Tobacco's stock tumbled 8 percent on Jan 28, two days before the company and other food firms made the recall, the Yomiuri Shimbun and Kyodo News said.

The drop was Japan Tobacco's worst one-day percentage fall in 7 years and volume on that day was unusually high.

No one at the SESC could be reached for comment.

A spokesman at Japan Tobacco, the world's third-largest cigarette maker, said he did not know if there had been insider trading.

"We don't know if it did or did not occur," said Tsuyoshi Miyashita, adding that the company did plan to launch its own investigation.

Japan Tobacco (2914.T: Quote, Profile, Research, Stock Buzz) said on Wednesday that its subsidiary, JT Foods Co, would recall frozen dumplings and other food made at a Chinese factory after several people fell ill after eating the products.

The affair has prompted big coverage by Japanese media and a nationwide food scare, with hundreds of people complaining they had fallen ill after eating similar products.

The insider trading story was on the front page of the Saturday edition of the Yomiuri, Japan's largest daily newspaper.

Japan Tobacco's stock continued to fall in the two trading days after the recall was announced, ending Friday down 1.8 percent at a 10-month closing low of 548,000 yen. (Editing by Jan Dahinten)