G7 ready to act to stabilize markets: Japan MOF

By Natsuko Waki and Toni Vorobyova

LONDON (Reuters) - The Group of Seven industrialized nations is closely monitoring the global financial market turmoil and stands ready to take action to enhance stability in the market, Japan's top financial diplomat said on Thursday.

Naoyuki Shinohara, vice finance minister for international affairs, also cast doubt on calls to establish a Japanese sovereign wealth fund, saying the country's foreign reserves are not a pure investable asset given its huge budget deficit.

G7 finance chiefs warned in Tokyo earlier this month that credit turmoil could still unhinge the global economy and pledged a plan of action for restoring markets to financial health.

But they steered clear of any joint plan to safeguard world growth from the ravages of the credit debacle.

"The world economy confronts a more challenging and uncertain environment than when we (the G7) met in October. But we also shared the view that economic fundamentals remain pretty solid with regards to the global economy," Shinohara said in the Euromoney Japan Debt Capital Markets Forum in London.

He said the G7 would continue to monitor developments in the world economy and financial markets closely and its member countries are ready to take action both individually and collectively.

"We have made it clear that we stand ready to take any action necessary to enhance stability in financial markets," Shinohara said.

He also said that the Japanese economy is expected to slow in the short term, but growth would be sustained in the medium term, with stable price conditions.