Bt-10 corn, manufactured by Swiss agrochemicals group Syngenta AG, is engineered to resist the corn borer insect. It was accidentally mixed with US grain shipments between 2001 and 2004.

"Bt-10 is not approved in Japan and we cannot allow this corn to be imported into Japan," the official said.

Last month, the Japanese government began spot-testing some US cargoes for Bt-10 corn. Japan has a zero tolerance policy on imports of unapproved biotech foods.

"Because of this incident, we will test every US vessel importing corn into Japan," the official said. "Before that we were doing some sampling testing. But after this incident we will enhance the tests."

The corn is not approved for use in the United States or Europe, but the US Agriculture Department and the US Environmental Protection Agency have said the variety does not pose a danger to people, animals or plants.

Consumers in Japan, a major buyer of American commodities, have long been skittish about gene-altered food and its possible long-term impact on human health and the environment.

Despite the contamination, the official said Japan would not halt corn imports from the United States. "We will continue to import US corn but we have to test it," he told Reuters.

Japan buys about 16 million tonnes of corn annually, with 90 percent of it from the United States.

TRADERS SHRUG OFF NEWS

Corn futures on the Chicago Board of Trade were unfazed by the news. The July delivery contract rose 2-1/2 cents to end at $2.24-1/2 per bushel due to concerns that dry weather in parts of the Midwest could hurt the newly planted crop.

"For the market to react to this you'll need the Japanese government to come out and put a ban on US corn imports into Japan. But if they do, where else are they going to buy corn from?" said one exporter, who declined to be named.

However, industry experts warned that corn prices might be affected if more contractual requirements were to be placed on shipments to Japan, as the cost of providing those services would have to be accounted for somewhere along the line.

The United States is the world's top corn exporter, with smaller amounts shipped by China, Argentina and South Africa.

A US trade source said Japan would likely ship the tainted supplies back to the United States, with Syngenta picking up the tab.

It may not be possible to pinpoint the exact source of the contaminated corn, experts suggested. Under the US system of collecting it for export, corn is transported from across the country and funneled into vessels waiting to ship it. So the contaminated cargo may be traceable only back to the last vessel loading point.

"Japan is our largest export market. For 2004-2005 it imported 22 percent, or 661 million bushels, of our corn. So obviously we are interested in following this issue," said Rhonda Lee Dean-Royce, spokeswoman for the National Corn Growers Association.

The European Union already blocked imports of corn from the United States unless shipments carry proof they are free of Bt-10 corn.

The Syngenta contamination became public in March and the US Agriculture Department fined the company $375,000.

A spokesman for Syngenta in Zurich said the company knew it was "possible" that some Bt-10 could be found in Japan.

Last month, a US cargo of corn gluten feed was found tainted with Bt-10 corn and was impounded on arrival at an Irish port. An industry source said the cargo shipped to Ireland was one of the few that left US shores for export destinations before a testing program was introduced.