TOKYO (AFP) -- The outlook for the global economy remains uncertain following recent financial market turmoil and signs of slowing U.S. economic growth, Bank of Japan governor Toshihiko Fukui said Monday.

Japan's Central Bank needs to keep a close watch on international developments, although the fallout from problems in U.S. sub-prime mortgages to risky borrowers does not appear to be hurting Japan significantly, he said.
""There remains uncertainty regarding the outlook of the global economy, such as the volatility on international financial markets that was triggered by problems in U.S. sub-prime housing loans, and a risk of a U.S. economic slowdown,"" Fukui said in a speech to a meeting of Bank of Japan branch managers.
""Therefore, we need to closely observe the trend in the international financial market and the global economy,"" he said.
However, Fukui added that Japan's financial system remains stable overall.
""The sub-prime problem is not seen as having a serious impact on the stability of Japan's financial system at the moment,"" he said.
Fukui reiterated the central bank's view that Japan's economy is gradually expanding and is set to maintain sustained economic growth.
The Bank of Japan last week left its benchmark interest rate on hold at 0.5 percent, where it has been since February, opting to wait for clearer evidence that recent financial market distress has fully subsided.
Market views are mixed on when the next rise in Japanese interest rates will come, with some analysts predicting a possible hike in November or December.