* Sterling bounces from 13-year low vs yen 

* Pound grabs respite as risk aversion eases

* UK outlook remains grim despite resilient retail sales

LONDON, Nov 21 (Reuters) - Sterling bounced from a 13-year low against the yen on Friday, as the low-yielding unit's rally on global recession worries stalled after Japan's finance minister warned about extreme market moves.

Japanese Finance Minister Shoichi Nakagawa said on Friday the authorities must be ready to deal with big swings in markets.

Sterling's drive higher against the yen also allowed the pound to gain against the dollar and euro as rallying stock markets reflected an easing in extreme risk aversion.

European stock markets rose 1.2 percent in early trade , while U.S. stock futures pointed to a stronger Wall Street open.

But analysts warned that any sterling rally would prove relatively short-lived as the sharply slowing economy retains massive exposure to the flailing global financial sector.

"Risk aversion is the dominant force. Investor sentiment remains shaky," said Geraldine Concagh, economist at AIB Group Treasury in Dublin.

"Sterling continues to face downside risks given the poor outlook for the economy and expectation for aggressive easing from the Bank of England," she added.

By 0847 GMT, the pound was up 2.7 percent at 141.35 yen having earlier hit its lowest since mid-1995 at 137.77 yen according to Reuters data.

Sterling rose 0.9 percent to $1.4855, while the euro fell 0.3 percent to 84.33 pence.

Against a backdrop of gloom across all sectors of the British economy, official data on Thursday showed that British retail sales fell by only 0.1 percent in October from the previous month, far less than the 0.9 percent decline economists had forecast.

But separate figures showed that Britain's public finances were in deficit in October for the first time since 1994.

Meanwhile, minutes released this week from the Bank of England's last rate-setting meeting showed policymakers considered slashing rates earlier this month by more than the 150 basis points ultimately delivered.

Economists polled by Reuters say the BoE is certain to follow up the stunning 1.5 percenage point chop with another 50 basis point easing in December as it tries to drag Britain out of recession .