BOJ's Shirakawa Says G7 Must Help World Economy

Bank of Japan Governor Masaaki Shirakawa joined on Friday a growing call for G7 finance heads to take steps this weekend to rescue the worsening global economy.

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"The world economy is in a very severe situation at the moment, so I want (the G7) to frankly exchange views on such economic conditions and the outlook, and discuss policy steps to help stabilize the world economy," Shirakawa told a media conference before leaving for a meeting of G7 finance heads in Rome.

"The Japanese economy is now undergoing severe adjustments in reaction to the severity of the world economy. I will explain the background behind the extraordinary policy steps the BOJ has been taking including CP (commercial paper) purchases and stock buying."

U.S. Treasury Secretary Timothy Geithner called this week for bold action at the meeting of finance leaders from the Group of Seven major industrialized nations to pull the world economy out of recession, prop up financial institutions and strengthen regulation.

Canadian finance minister Jim Flaherty has called for action to clean toxic assets to be cleared out of the financial system.

The shape of financial market regulation in the wake of the global financial crisis will be up for discussion by the G7, ahead of a broader G20 meeting in London in early April.

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Rumbles over protectionism -- as some countries seek to steer rescue packages towards local jobs and businesses -- may also come up, but Shirakawa played down the risk of a return to trade restrictions that many economists say deepened the 1930s Great Depression.

"I think policy makers from each country are strongly aware how important it is to avert protectionism. I don't know what discussions will be held at the moment, but I understand that each country recognizes that it is a very important issue."

Finance ministers and central bank governors from Britain, Canada, France, Germany, Italy, Japan and the United States meet in Rome on Friday and Saturday as they try to find a solution to the deepening credit crunch.

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