UPDATE 1-Japan forex reserves $1.002 trln at end-June

TOKYO, July 7 (Reuters) - Japan's foreign reserves hit $1.002
trillion at the end of June, logging the first rise in three
months thanks in part to investment returns and the euro's rise
versus the dollar that inflated the value of euro-denominated
bonds in the stockpile, the Ministry of Finance said. [JPRES=ECI]

 Higher gold prices also helped lift Japan's reserves -- the
world's second largest after China's -- back above $1 trillion,
but still shy of the record high of $1.016 trillion at the end of
March, a ministry official said on Monday.

 The euro  edged up to $1.5754 at the end of June from
$1.5559 at the end of May, while the benchmark gold price rose to
$930.25 an ounce at the end of June from $885.75 the month
before.

 The ministry, which is in charge of Japan's currency policy,
does not disclose the currency breakdown of Japan's reserves, but
most is in U.S. dollars as past intervention has taken the form
of dollar buying.

 Japan's foreign reserves ballooned after massive yen-selling
interventions in 2003 and early 2004 as Tokyo tried to stem a
rapid rise in the yen from derailing a fragile economic recovery.

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

 The massive reserves have stirred a debate among Japanese
lawmakers about whether Japan should follow countries like China
into launching a sovereign wealth fund to invest some of the cash
pile. But the finance ministry remains cautious about the idea.

 The ministry started operating a new section within its
foreign exchange markets division on Friday that will focus on
managing Japan's massive foreign exchange reserves. [ID:nT343958]

 But ministry officials have said the launch of the new
section does not mean Japan will start investing the stockpile
more actively into risky assets to seek higher returns.