* Japan watching market moves with vigilance - finmin Aso
* Adds global economy remains on solid footing
* Tokyo will mull response if markets stay volatile - MOF official
* Told G20 some risks to global economy materializing - Aso (Adds quotes, detail)
NUSA DUA, Indonesia, Oct 11 (Reuters) - Japanese Finance Minister Taro Aso said on Thursday he was watching stock and currency moves with vigilance, issuing a warning over the yen's recent appreciation that could damage the country's export-reliant economic recovery.
He said the decline in stocks was relatively small by historical standards, which reflected the market's confidence over the global economy's solid fundamentals.
"Global stock prices have fallen sharply and we've seen some currency fluctuations. But there's no change to our view the global economy, including the U.S. economy, remains on a firm note," Aso told reporters after attending a Group of 20 finance ministers' dinner at the resort island of Bali.
"The government must watch with vigilance financial and currency market developments," Aso said.
Japan's Nikkei tumbled to a one-month low on Thursday to suffer its biggest daily decline since March, joining a sell-off in global stock markets driven by concern over escalating trade frictions and uncertainty over the global economic outlook.
The yen also strengthened to its highest level this month, posing a headache for Tokyo policy makers worried about the damage a strong yen could have on the country's exports.
A senior Japanese finance ministry official later told reporters that Tokyo was ready to "consider a response" if markets remain extremely volatile. He did not specify what steps Japan could take to contain the market rout.
Aso said he told his G20 counterparts at the dinner session that global policy makers must be vigilant to heightening capital outflows from emerging economies and escalating global tensions that could hurt global growth.
"Some risks to the global outlook are materializing and given the limited policy room left, we shouldn't be complacent," Aso said.
"Inward-looking, protectionist policies benefit no country. These problems should be dealt with through a multilateral framework, not a bilateral one," he said. Global imbalances also remain a key risk to the global outlook, he said.
Aso said he held a bilateral meeting with U.S. Treasury Secretary Steve Mnuchin on Thursday, though he added the two did not discuss trade or currency moves. (Reporting by Leika Kihara)