VIENNA (AFX) - Asian Development Bank president Haruhiko Kuroda said the Bank of Japan should be cautious about raising interest rates from their current near zero levels.

He said the BoJ was right to recently end its policy of "quantitative easing", which involved flooding the money market with excess liquidity, because the Japanese economy is now recovering, corporate balance sheets have improved and deflation is coming to an end.

But he said short-term rates will need to remain near zero until liquidity has been reduced to a certain level.

And the central bank should be cautious in its decision on when to end the zero rate policy because consumer prices are still not rising significantly, he said.

"Though the economy has recovered very strongly, the prices situation has not changed much, so I think and I hope that the Bank of Japan should be very careful and cautious in executing monetary policy," he told a news conference at the end of a meeting EU and Asian finance ministers.

Kuroda noted that the US Federal Reserve and European Central Bank are having to strike a balance between the inflationary impact of high oil prices and the need to maintain a good level of economic growth in their monetary policies. But he declined to make any specific recommendations for US and euro zone interest rates. steve.whitehouse@afxnews.com sw/sw

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