Central bank chief Toshihiko Fukui expressed concern Dec. 3 that a downturn in the U.S. economy could slow global growth, suggesting that the Bank of Japan won't raise interest rates anytime soon.

"The U.S. economy is widely expected to slow in the fourth quarter this year and the first quarter of 2008 on the back of a continued adjustment in the housing market," Fukui told reporters Dec. 3 after meeting with business leaders in Nagoya.

Fukui said the BOJ needs to watch whether the U.S. credit crisis, triggered by defaults in risky mortgages, puts a dent in consumer spending, suggesting the bank won't be able to raise rates until it confirms that the U.S. economy hasn't fallen into recession. Christmas shopping figures will be key to gauge that impact, he said.

U.S. economic growth may slow to around 1.5 percent for the next two quarters, he said, down sharply from the 4.9 percent growth rate in the third quarter. That could put a drag on global growth.

"The global economy may worsen if risks, such as a worsening of the U.S. and European economies, were to materialize," Fukui told the business leaders earlier.

Still, Fukui was relatively upbeat about the domestic economic outlook, saying that the subprime mortgage crisis was unlikely to seriously impact the country's financial system.

"Japanese financial institutions' exposure to credit markets is relatively small so it appears each financial institution or group can absorb losses sufficiently," he said. "I don't think this issue will greatly affect the stability of Japan's financial system at this point."