By Linda Sieg

Tokyo - An Islamic militant group said it was holding a badly wounded Japanese man after an ambush near a United States base in Iraq, but Japan's government said on Tuesday the incident would not affect its troop deployment in the country.

The Army of Ansar al-Sunna group posted on its website a picture of a Japanese passport bearing the name Akihiko Saito and an identification card saying he was a security manager.

Japan's foreign ministry said a British security company that employs the 44-year-old Saito as a consultant had reported him missing after a vehicle convoy was ambushed in western Iraq.

Several people appeared to have been killed in the attack, the ministry said.

Japanese media said Saito was a 20-year veteran of the French Foreign Legion and had also spent two years in Japan's army.

"We have been told by Hart Security that Akihiko Saito, who worked for them as a consultant, is missing in Iraq," chief Cabinet Secretary Hiroyuki Hosoda told a news conference.

"We are responding based on the premise that this is true," he said, but added the government had not confirmed other information on the website, including whether Saito was alive.

Foreign Minister Nobutaka Machimura said no demands had been received while Defence minister Yoshinori Ohno said the incident would not affect the work of Japan's 550 troops in southern Iraq.

"Under present circumstances, it does not affect activities of the Self-Defence Forces in Samawa. The security there is not particularly worsening," a spokesperson quoted Ohno as saying.

Prime Minister Junichiro Koizumi, a staunch ally of US President George Bush, has previously resisted militant demands that Tokyo withdraw its non-combat troops from Iraq.

Koizumi was on his way back from Russia where he attended ceremonies marking Russia's victory over Nazi Germany in World War 2.

The deployment - Japan's biggest overseas military operation since World War 2 - was unpopular. But previous hostage incidents involving Japanese, including the beheading of a young backpacker, had little impact on Koizumi's support rates.

The Islamic militant group said it had seized the man identified as Saito after an ambush on vehicles coming from a US base near Baghdad as the convoy approached the town of Hit in Iraq's Sunni Muslim western region.

"He has serious injuries and we will soon issue a video showing him," the group said.

The group claimed on the website to have captured 12 Iraqis and five foreigners in the ambush, and to have killed all of them except Saito.

US State Department acting spokesperson Tom Casey said in Washington he was unable to confirm the reports.

Hosoda said Saito's family had been contacted and that they appeared not to have known he was in Iraq.

Six Japanese civilian hostages have been taken since the war began. Five were freed unharmed and one was beheaded.

Two Japanese diplomats and two Japanese freelance journalists have been killed.

Kyodo news agency reported last week that the government was considering withdrawing its troops from Iraq in December, when the current mandate for their deployment expires.

Tokyo's stock market was little affected by the hostage reports, and some market participants said the incident was unlikely to affect the political scene.

"I don't think the news of a Japanese being kidnapped in Iraq will immediately affect Japanese politics. That means its impact on the stock market today will be negligible," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC's equity planning and administration department.

Some foreign exchange traders in Tokyo said the yen dipped in early trade on the news while others said the impact was nominal.

Australia also faces a hostage crisis in Iraq. Insurgents have seized Douglas Wood, a 63-year-old engineer, and have demanded that Australian troops leave Iraq by Tuesday.

Additional reporting by Risa Maeda, Brent Kininmont and Isabel Reynolds