TOKYO (Reuters) - Japan's Kokusai Asset Management, the manager of Asia's biggest mutual fund, has not sold United States Treasuries from its flagship $14 billion bond fund as the United States is not expected to default on its sovereign debt, the fund's chief manager said.

Masataka Horii, the chief fund manager of Kokusai's Global Sovereign Open fund, said financial turmoil was not likely to occur even in the event of a technical default by the country.

"Our main scenario is that we'll not see a default in the United States. We have not positioned our portfolio, preparing to factor-in a possible default," Horii told Reuters in an interview.

Still, Kokusai will closely monitor the market situation and act appropriately if the US dollar falls sharply in the unlikely event of a default, Horii said.

The US government has been partially shut down since October 1 as Democrats and Republicans failed to agree on a budget and spending measures. The world's largest economy is also facing a looming deadline of October 17 to raise the debt ceiling to stave off a possible debt default.

The fund has raised exposure to US Treasuries and US agency bonds to 30 percent as of October 3 from 22.4 percent in late March due to the bullish outlook in the US economy.

"We think that the economies of the core developed countries - the United States, the euro zone, England and Japan - are healthy and leading to push up the entire global economy. That is the key reason why we have raised exposure to these places,"Horii said.

The fund increased allocations in the countries due to fading concerns over sovereign risks in developed countries, while it lowered exposure to countries such as Canada, Australia and New Zealand, the chief fund manager said.

The Global Sovereign fund raised the allocations to euro-denominated debt to 24.4 percent as of October 3 from 17.7 percent six months ago.

The fund's portfolio in euro-denominated bonds rose mainly due to increases in Belgian and French bonds.

The actively managed bond fund, which invests in sovereign and agency debt with credit ratings of higher than a single A category, has reigned as the top mutual fund in Japan for more than 11 years. The fund is also one of the largest bond funds in the world.