REFILE-UPDATE 1-Canada says more subprime turbulence to come

(Adds dropped name in paragraph 2) (For more stories from the Tokyo G7 meeting click [G7/G8])

By Louise Egan

TOKYO, Feb 9 (Reuters) - More turbulence in global financial markets is inevitable as big banks continue to write down subprime-related debt but the world's top policy makers are finally coming to terms with how to solve the problem, Canada said on Saturday.

"Certainly there is still concern with some of the U.S. financial institutions, there is no question about that," Finance Minister Jim Flaherty told Reuters in an interview prior to the G7 meeting of finance ministers and central bankers in Tokyo.

"It's clear that we're not out of the woods yet on these issues ... and not just in the United States. This is global turbulence and there's more to come. I think everyone realises that," he said.

Canada saw no need for governments to rush to tighten regulations to prevent future debacles like the one stemming from the collapse of the U.S. subprime mortgage sector, he said.

The changes should come from market players themselves, he will tell his Group of Seven colleagues in Tokyo in a Saturday meeting.

"Who is primary here in terms of reform; is it the financial institutions themselves that should be leading the reform? In our view, yes it should be," he said.

"We are more in favour of self-regulation than imposed government regulation for the simple reason that self-regulation works better."