But food makers are caught between US farmers demanding a higher premium for GMO-free corn and Japanese grocers and consumers, the last in Asia still resisting modified crops after South Korean processors last month bought GMO corn.

The rising costs and difficulty of dealing with modified corn separately from unmodified could also see more tie-ups in the industry, after No. 4 Oji Cornstarch Co last year formed an alliance with two smaller rivals.

"We've started to ask each of our customers in an interview whether and how much they can take," said Yoshihiko Shikakura, senior managing director at the sales department of Oji Cornstarch, a joint venture between Oji Paper Co and trading firm Mitsui & Co.

Until recently, most corn processors have used only non-GMO crops to produce corn starch and corn syrup, a widely used sweetener, as some customers, mainly beer and drug makers, refuse to use GMOs.

But smaller corn processors have already used unseparated cargoes, taking advantage of lax labelling laws for small quantities of raw materials in foods in Japan.

Shrinking supplies mean the price premium on non-GMO corn that processors pay to importers is set to double to 10,000 yen ($97) per tonne next year, industry sources said.

Currently, US GMO corn is imported at around 40,000 yen per tonne, doubling over the past two years on a similar rally in Chicago corn prices during the same period.

"They cannot help but give up 'non-GMO only' this year as it is now a question of 'to survive or not'," said a corn trading manager at a major trading house, who declined to be named.

The manager said one of the top corn processors had started test shipments of GMO corn for food use and another would follow suit, possibly from October.

Pro-GMO pundits argue that soft drink makers are the most likely to make the switch as the process to turn corn starch into syrup makes protein content in the product negligible.

Beer makers so far are resisting price hikes in corn starch, a key ingredient for beer, or a shift to GMO.

"Lack of public acceptance means we don't consider it," said a spokesman at Kirin Holdings Co which seven years ago led its peers to use only non-GMO corn starch for Japanese beer.

A survey last July by Japan's Food Safety Commission showed that only 4.1 percent of consumers think GMO food is free from risk.

PROTESTS LIKELY

Use of GMO products would trigger negative campaigning by anti-GMO groups such as Greenpeace, which led a successful attack on GMO foods in Europe.

"It is not something we can overlook due to a lack of strict labelling rules here," said Sachiyo Tanahashi, GMO campaigner at Greenpeace Japan.

"We've been proposing top food makers produce organic products at a premium price to gauge the appetite of consumers, but so far in vain," Tanahashi said.

Japan grows hardly any corn and imports 12 million tonnes a year for animal feed -- mostly GMO crops except for some 700,000 tonnes of non-GMO for organic eggs and other quality products.

It also imports about 3 million tonnes a year of corn for use in foodstuffs, almost all of which is non-GMO from the United States, the world's biggest corn exporter.

In 2007, GMO crops were found on 73 percent of US corn acres and were expected to rise further, increasing the costs to separate out non-GMO crops in planting, storing and transporting.

Use of GMO could be costly for corn processors. If an unapproved GMO trait is found, importers, not exporters, are responsible to pay the extra cost to dispose of the unwanted material.