Nippon Oil Corp, Japan's biggest oil refiner, will switch payment for Iran crude purchases to yen from dollars in September or October.

The refiner is the first Japanese customer to accept Iran's formal request last week to switch to yen, in line with Tehran's move over the past year to limit dollar-denominated trade as the United States leads efforts to isolate the Islamic Republic over its nuclear programme, a source familiar with the transactions said.

'Nippon Oil has informed us they will switch from September or October,' the source said, adding that it was the first customer in Japan to inform the National Iranian Oil Company (NIOC) of its plan to change currencies.

A Nippon Oil spokesman declined to comment when contacted, but confirmed that the company had received the request from NIOC. Iran's written notice issued last week followed months of informal requests to its Japanese customers.

By May Iran had raised the amount of its oil earnings in currencies other than dollars to 70 percent. But customers in Japan, which imports over 300,000 barrels a day (bpd) from Opec's second-largest producer, had not made the change.

Iran is Japan's fourth-largest oil supplier, although buyers including Nippon Oil have curbed imports in recent years amid growing international pressure over Tehran's nuclear programme. The West fears Iran wants to build a bomb, a charge Tehran denies.

Japan still buys more than one-sixth of Iran's exported crude, which until last year had been paid for largely in US dollars, as is the standard industry practice worldwide. - Reuters