INTERVIEW-UPDATE 1-BNY Mellon Japan aims to grow organically

* Organic growth key after mandate from Japan govt pension fund * Would consider M&A if good investment chance arises * Retail demand picking up; pension, institutions still slow (Adds background, comments)

TOKYO, July 16 - BNY Mellon Asset Management Japan's priority is to grow organically after winning a mandate to manage funds for the top Japanese public pension fund, though it would also consider M&A moves, its head said on Thursday.

But BNY Mellon Japan President Shogo Yamaguchi declined to comment directly on a report that his firm was among the bidders for Citigroup's Japanese asset management unit Nikko Asset Management.

"We seek organic growth ... If there are good investment opportunities or if there is a chance to form a suitable alliance then we'll be positive about such moves, but again, organic growth is our priority," BNY Mellon Japan President Shogo Yamaguchi told Reuters in an interview.

The asset manager was picked in March as one of the firms to manage foreign stockholdings for Japan's Government Pension Investment Fund (GPIF), which holds about $1.2 trillion in assets, making it the biggest pension fund in the world.

BNY Mellon Japan is the Japanese fund management arm of Bank of New York Mellon, the world's largest custodian of financial assets, managing $881 billion in assets. BNY Mellon also has 17 asset management affiliates.

BNY Mellon was in the running to buy Barclays Global Investors but lost out to BlackRock, and it was reported by the Nikkei business daily to be one of the bidders for Citigroup's Nikko Asset Management -- Japan's third-biggest fund manager.

BNY Mellon also aims to expand in Russia, India and China, potentially through new acquisitions, a top executive of the bank said earlier in the month

Yamaguchi said investment appetite was increasing among retail investors, while demand from pensions and other institutions has still been slow.

But BNY Mellon Asset Japan, which supervised about 740.6 billion yen ($7.9 billion) in assets as of March, has been receiving more inquiries from pension funds about its foreign stock funds after it was selected in March as one of the firms to actively manage foreign stocks for the GPIF.

"I have to admit that recognition of our brand is still low among pensions, but pension funds are showing interest in our foreign stock funds after the GPIF selected our funds," Yamaguchi said.

The value of two BNY Mellon funds in the GPIF's portfolio totalled 142 billion yen as of the end of March, according to a GPIF document. ($1=94.18 Yen)