TOKYO (AP) _ Japan's Finance Ministry has decided to allow futures trading in 20-year government bonds when the volume of spot dealings is ''large enough,'' a ministry official said Monday.

He declined to specify the level of spot trading that could lead to the start of futures dealings.

But, he said, it ''will start when we consider the volume of spot trading to be large enough so that there is a minimal chance for a buy-out of the bonds by certain market players.''

The creation of a solid circulation market for the bonds is also a key to an early start of futures trading, he added.

According to the ministry, futures trading in 20-year bonds represents a continuation of its recent efforts to further liberalize and internationalize japan's financial markets, in part to allow increased participation of foreign securities companies and certain other financial institutions.

The ministry announced last week that it will adopt an auction system, replacing the present method of an underwriting syndicate, for selling 20-year government bonds this autumn.

''Our policy is to maintain a continuous and high-pitched pace of 20-year government bond issuance in order to foster the maturity of the market quickly,'' another ministry official said.

Increased trading in 20-year bonds is also considered by the ministry to be ''beneficial,'' as it could lower interest payments for the government and thus minimize costs, he said.