UPDATE 1-BOJ Shirakawa: Periods of fast growth can cause imbalances

* No economy can maintain high growth indefinitely-Shirakawa

* Warns on paradox of price stability, financial stability

* Policy-makers must aim for smooth growth transition

(Adds quote, details) By Leika Kihara

TOKYO, Oct 9 (Reuters) - Attempts to maintain high growthbeyond a country's potential could cause imbalances, Bank ofJapan Governor Masaaki Shirakawa said, warning that no economycan maintain high growth indefinitely.

Excessive optimism about Japan's potential growth andprolonged easy monetary policy created an asset price bubble inthe latter half of the 1980s, he told delegates visiting Tokyofor the International Monetary Fund meetings on Tuesday.

"The most important task for policy-makers is to achieve asmooth transition from high growth to stable growth," Shirakawasaid in a speech at the central bank.

Shirakawa has long warned of the drawbacks of maintainingunorthodox, ultra-loose monetary policy for too long, pointingto the case of Japan's asset price bubble in the 1980s and theexcessive risk-taking by global investors that led to the globalfinancial crisis.

"When price stability is achieved, many economic entitiesgain the confidence to take more risk. And, as a result, thestability of the financial system is compromised," he said.

The remarks came as major central banks, including the BOJ,continue to pump vast amounts of cash into the banking system,hoping to revive economies still suffering from the aftermath ofthe global financial crisis.

The IMF cut its global growth forecast for the second timesince April and warned U.S. and European policymakers thatfailure to fix their economic ills would prolong the slump.

The institution also warned that while the BOJ's monetaryeasing last month should support economic growth and help enddeflation, more stimulus may be needed for the country toachieve the central bank's 1 percent inflation target.

The BOJ eased monetary policy for the third time this yearin September. It kept policy steady last week, but left the dooropen to more action later this month, warning of looming risksto the outlook.

(Reporting by Leika Kihara; Editing by Michael Watson an EricMeijer)


Messaging: leika.kihara.reuters.com@reuters.net))


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