Japan should take measures to stabilize its financial system and stimulate the economy, U.S. Ambassador Thomas Foley urged Monday, stressing that the nation's economic performance greatly affects Asia and the rest of the world.

His appeal came during a morning meeting with Finance Minister Hiroshi Mitsuzuka. Ministry officials said Mitsuzuka's response was that Tokyo is studying every possible step to boost its economy and financial sector without abandoning efforts in fiscal consolidation.

Calling this a critical time, Foley said it was imperative for Tokyo to take action that would gain the support of markets, the officials said. They added that the ambassador made no direct reference to using public money to deal with the problems of the financial sector, something the government is currently considering.

There was also a reiteration of Washington's desire to see Japan secure economic growth through greater domestic demand, indicating there was concern over the recent increases in Tokyo's external surpluses. One reason why the government is reluctant to take fiscal pump-priming steps to reduce its deficit, Foley was quoted as saying, is because it is seen as a medium-term objective.

However, he said that short-term stimulus measures now would have a positive effect on longer term efforts to improve Japan's fiscal situation. Foley added that reviving Japan's economy would benefit other Asian economies currently experiencing turmoil in stock and currency markets.