Highlights 2-BOJ Governor Shirakawa's speech

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TOKYO, May 12 (Reuters) - Bank of Japan Governor Masaaki Shirakawa said on Monday the central bank must pay close attention to the risks facing the economy.

He also said in a speech in Tokyo that while the BOJ would raise interest rates if uncertainties over the economy cleared, it would be appropriate to keep rates on hold -- or even cut them -- if the economy were hurt by rising energy prices.

Following are excerpts from his speech:

JAPAN ECONOMY "At the moment, there are many uncertainties, such as the situation in overseas economies, international financial markets, and rises in prices of energy and raw materials, and we are in a phase where we need utmost caution on downside risks to the economy.

"But we also need to be aware that upside risks could gain importance if the fog that is shrouding the Japanese and the world economy fades."

MONETARY POLICY

"We need to bear in mind that real short-term interest rates are around zero, a very low level. So if we are certain that the Japanese economy will follow a growth path under stable prices, we will be adjusting interest rates.

"But we are now at the stage where we need to pay utmost attention to the downside risks to the economy.