Japan aims to restart buying U.S. western white wheat as early as August, industry sources said, after halting imports of the grain following the discovery of an unapproved genetically modified strain in Oregon.

Asia's top wheat importer is worried about stocks of the wheat grade it relies on to make cakes and confectionary, and its return to the market would boost prices for western white, hit hard in the wake of the scare over the rogue strand.

"(The government) is intending to resume imports as soon as possible, as long as safety can be assured," said an industry source who spoke on condition of anonymity.

"But next week or the week after that is too difficult scheduling-wise, so they're saying they'd like to resume in August."

Japan's farm ministry has said that imports could only begin when it receives details of a U.S. investigation into how a GMO strain of wheat developed by Monsanto Co, but never put into commercial production, entered the system.

It has also said that the U.S. should implement tests for future shipments before they head overseas.

It was unclear whether these conditions would be met by August, but the sources said the government believes this is possible.

"(When buying begins) depends on progress of talks with the U.S. There are some conditions," Toru Hisazome, a farm ministry official involved in wheat trading, said without giving further details when asked about the timetable for a resumption.

Stockpiles at Japanese millers have been dwindling from the 150,000 tonnes, or 2.3 months worth, held before the GMO discovery was announced in late May.

They will be boosted by a total 170,000 tonnes bought before the import ban was introduced and which the government is in the process of testing. After that, stockpiles will continue falling unless the ban is lifted.

INSURANCE?

The farm ministry has also asked individual sellers to look into taking out insurance to cover against future GMO discoveries, three sources with knowledge of the matter told Reuters.

This insurance, which could become mandatory later, would be similar to existing polices used to defray costs incurred from shipping back or destroying cargoes of wheat tainted with pesticides outlawed in Japan.

Last week, for the first time since at least 1960, Japan purchased alternative western white grades, taking a total of 750 tonnes of soft-red winter grain and club wheat from the U.S. during a special dealing period.

The grain is expected to be mixed with the current stock of western white to help it last longer.

The world's sixth-biggest wheat importer annually buys around 800,000 tonnes of western white, a combination of soft white and club white wheat developed particularly for Japan and sold mostly to Asia.

Japan, along with South Korea, stopped importing the grade in May after the U.S. announced the GMO discovery.

South Korea has since lifted its ban, with imports expected to begin as early as this week after Seoul found no GMO grain in tests of earlier shipments.