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U.S. Treasury Secretary Henry Paulson said the global economy faces “downside risks'' from the rout of capital markets that is “serious and persisting.''

“It will take time to work through the current financial turmoil,'' Paulson said in a statement after a meeting in Tokyo of finance ministers and central bankers from Group of Seven nations. “As the financial markets recover from this period of stress, as of course they will, we should expect continued volatility as risk is repriced.''

G-7 policy makers ended their meeting by noting that the U.S. economy may slow and hurt world growth, without proposing measures to counter the threat. The countries differ on how to address a global economic slowdown, with Japan and Canada rejecting suggestions to use fiscal policy.

“Today's meeting gave us the opportunity to discuss policy responses to these downside risks as well as the need to craft effective policy and regulatory responses that institute sounder frameworks better able to withstand risks and stresses,'' Paulson said, without specifying measures.

Speaking to reporters, Paulson said he didn't urge his G-7 colleagues to use fiscal policy to boost domestic demand in the way the U.S. has. Treasury Undersecretary David McCormick earlier this week called on other nations to “take prudent steps to strengthen their economies' demand components.''

`Times of Stress'

“Ever country has different economic situations, and every country has to focus on their own economic situation,'' Paulson said. He did say that both China and Japan should rely less on exports for economic growth “and more on domestic demand.''

The speed at which credit problems in the U.S. have spread to other parts of the world demonstrates “the increasing need for frequent communication and close coordination during times of stress,'' he said free instant credit score estimator.

“I always thought that decoupling was a myth,'' Paulson said. “What happens in any country, that's a major country, impacts what happens in the rest of the world.''

The group discussed rising oil prices, and called on the Organization of Petroleum Exporting Countries to boost production, as well as the need to remain open to foreign investment, Paulson said.

The Treasury chief reiterated his view that the U.S. won't fall into a recession, while acknowledging that the worst housing slump in a quarter-century will hurt growth.

Stimulus Package

“I am confident in the long-term health of the United States economy and I expect that it will continue to grow in 2008,'' he said. “The housing correction, high energy prices, and capital market turmoil have combined to weigh on near-term growth.''

The U.S. Congress this week passed and sent to President George W. Bush a $168 billion stimulus package that Paulson said “will provide a much-needed boost this year.''

Stocks world-wide have tumbled on concerns the collapse of the subprime mortgage market will hurt growth around the world. The U.S. Standard & Poor's 500 Index has lost 15 percent since reaching a record on Oct. 9, while the Dow Jones Stoxx 600 Index in Europe and Japan's Nikkei 225 Index has fallen 13 percent and declined 15 percent, respectively.

Paulson said the international economy would be “significantly enhanced'' by lowering tariffs and trade barriers around the world.

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