Governor of the Bank of Japan Masaaki Shirakawa said Monday the US Federal Reserve should be careful to make sure that reduced interest rates do not lead to a devaluation of the dollar or lead to a rise in long term interest rates.

"If the continuation of low interest rates leads to a substantial rise in long-term interest rates by raising inflation expectations or by generating expectations for a weak dollar, this may give rise to another problem, namely that the fiscal burden increases and in turn the need for adjustments in the government's balance-sheet arises," Shirakawa said in a speech at the Paris EUROPLACE Financial Forum in Tokyo.

As in most economies, the US has kept interest rates low to try to spur economic development as the credit crisis that started last summer has sent markets worldwide on a downward spiral.

Shirakawa did, however, say that the US economy did stand a good chance of making a full recovery because of the nature of its economic structure. "If labor and capital shift swiftly from low-productivity sectors to high-productivity sectors, this should sustain high productivity growth in the economy overall," he said.

(Xinhua News Agency November 16, 2009)