DAVOS-Japan PM says downside risks mounting on global economy

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.

"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."

He added: "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 Japanese banks have limited holdings of subprime loan-related products.

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(Reporting by Natsuko Waki; editing by David Stamp)