“While I doubt very much that monetary policy played a major role in triggering the crisis, I also believe that it can — and should — help in the future to better contribute to financial stability,” Noyer told a Europlace forum in Tokyo.

“It should be made clear in particular that whatever the new tasks and functions of central banks price stability should remain the primary objective of monetary policy,” said Noyer, who is also the governor of the Bank of France.

Noyer also said central banks will need to pay more attention to the impact of their decisions on financial systems, adding that abundant liquidity may increase risk appetite and lead to growth in leverage, the main factors behind the latest crisis.

Asked about the difficulties facing manufacturing firms in advanced economies, Noyer said:

“It would be extremely helpful that exchange rates would reflect the productivity levels of the different countries. That is the reason why in the G7 we have … called for the necessary flexibility in the evolution of exchange rates between the advanced economies and the emerging economies.”

Bank of Japan Governor Masaaki Shirakawa, speaking at the same forum, said the BOJ should not look just at short-term price indicators such as the consumer price index in measuring price stability.

With the world’s biggest economies emerging from recession, debate has turned to how and when policymakers should start cutting back on the trillions in public support pledged to ease the impact of the worst economic downturn since World War Two, while at the same time maintaining credible fiscal policies.

Central bankers are starting to wind down some measures designed to provide ample liquidity to financial markets during the crisis, but with inflation largely subdued policymakers are expected to keep interest rates at ultra-low levels in the United States, Europe and Japan for some time.

Group of 20 finance ministers and central bankers pledged on November 7 to prepare strategies to end emergency support for their economies, but to keep the stimulus flowing until a recovery was ensured.

Noyer agreed later with Japan’s finance minister on the need to cautiously watch the economic outlook even though both Japan and the euro zone economies logged expansion in the third quarter, a Japanese official said after the two held a meeting.

“They agreed the economic recovery is fragile and is being greatly supported by fiscal spending and loose monetary policy,” the official told reporters. “They shared the view that they would need to cautiously watch growth trends in 2010 and beyond.”

Noyer and Hirohisa Fujii also agreed on the need to work with each other in pressing ahead with financial sector regulations at G20 and Basel meetings, the official said, and that authorities should learn from the European and Japanese models instead of the pushing the U.S. way of handling financial-sector regulations.

The two touched on currency issues while discussing the economy in general, the official said without elaborating.

G20 countries have agreed to come up with policies to rebalance global growth by encouraging debt-laden nations such as the United States to save more and by encouraging countries with large trade surpluses, such as China, to consume more.

A stronger Chinese yuan is also part of the reforms that Beijing needs to implement to increase domestic consumption and help ease global imbalances, International Monetary Fund Managing Director Dominique Strauss-Kahn said on Monday.

His remarks come as U.S. President Barack Obama is in Shanghai on the first leg of a four-day visit that will grapple with economic imbalances and the future of the yuan.

Noyer, in comments last month, made light of the impact of the euro’s strength against other currencies, putting him at odds with French politicians who have repeatedly complained that it is hurting competitiveness.

At a meeting in October, G7 finance ministers and central bankers repeated that excess volatility and disorderly moves in currency markets had adverse implications for financial stability.

(Additional reporting by Tetsushi Kajimoto; Editing by Michael Watson)