Japan's economy is facing rising "downside risks" as the global financial crisis intensifies, Bank of Japan Gov. Masaaki Shirakawa said Friday.
Economic growth will remain "sluggish for the time being," Shirakawa told an annual meeting of credit cooperatives in Tokyo.
"We're concerned that Japan will face negative effects should the overall global economy deteriorate significantly," he added.
Japanese stocks plunged 23 percent this month on concern that a global recession will weaken exports, the main driver of the economy's expansion.
Shirakawa said a rise in bankruptcies in Japan's construction and real estate sectors has raised the cost of credit, although the financial system remains "stable overall."