DAVOS-UPDATE 1-Downside econ risks mounting-Japan PM

(Adds climate change details, background)

By Natsuko Waki

DAVOS, Switzerland, Jan 26 (Reuters) - Japanese Prime Minister Yasuo Fukuda said on Saturday the world's economy faced growing downside risks and Group of Seven finance chiefs will discuss the credit turmoil when they meet in Tokyo next month.

Fukuda, who hosts the Group of Eight leaders' summit in July in northern Japan, urged countries to improve energy efficiency by 2020 and unveiled a $10 billion package to help developing countries to tackle climate change.

Fukuda joined a chorus of policymakers who warned in the World Economic Forum this week that countries must coordinate policies to limit the effect of a global economic slowdown from the fallout in U.S. subprime mortgages.

"Downside risks on the world economy are on the rise against a backdrop of U.S. subprime issues and a record rise of oil prices," he told business and corporate leaders at the annual meeting of the World Economic Forum in Davos.

"There is no need for excessive pessimism. At the same time however, we should respond quickly and should implement necessary measures."

Finance ministers and central bank governors meeting in Tokyo early in February will discuss the credit turmoil.

"I welcome efforts made by financial and monetary authorities around the world. Authorities in major countries will analyse factors behind the recent turmoil in financial markets and rapidly seek medium to long term responses. This will be discussed in the G7 in February," Fukuda said.