Reply #6: Global market adjustments temporary-Japan ex-MOF

[Ghost Dog]

http://yahoo.reuters.com/investing/FinanceArticle.aspx?type=economicNews&storyID=urn:newsml:reuters.com:20060525:MTFH54473_2006-05-25_10-13-15_T17146&rpc=44
Thu May 25, 2006 6:13 AM ET

By Tamawa Kadoya

TOKYO, May 25 (Reuters) - Recent adjustments in global markets, such as stock price declines, are temporary and unlikely to have an adverse effect on the economy but fund flows are large and need watching, Japan's former top financial diplomat said on Thursday.

"It is unlikely that recent adjustments will have a large effect on real economic conditions" because the fundamental outlook for global expansion remains intact, Zembei Mizoguchi, former vice finance minister for international affairs, told a small group of reporters.

However, "fund flows are getting larger and an adjustment in one market affects others, so close watch is needed," he said.

The global expansion is continuing into its fourth year, but inflation concerns and uncertainty over the outlook of U.S. interest rates have prompted a sell-off in equities and commodities, with funds shifting to cash and bonds.

On possible capital outflows from emerging markets, Mizoguchi, now president of the Japan Center for International Finance, a think tank, said that emerging Asian markets were more resilient toward external shocks, moving to build up their external reserves and taking steps against inflation.

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