14 May 2007, 17:59  ECB, Trichet: Japanese economy to be on a sustainable path of recovery

European Central Bank President Jean-Claude Trichet reiterated that Japan has said it is on track for sustained economic growth, in an interview with the Nikkei Business Magazine, published Monday. "I will also repeat that I have noted that the Japanese authorities have said they believe the Japanese economy to be on a sustainable path of recovery and the exchange rates should reflect these economic fundamentals," he said. Trichet's remarks reiterate the sentiment that emerged from meetings of the Group of 10 leading nations' finance ministers and central bankers Feb. 10. Trichet also repeated that he signed the G7 communique April 14 which states that "excess volatility and disorderly movements in exchange rates are undesirable for economic growth," when asked about the euro's value. The G7 view on countries such as China, where "it is desirable that their effective exchange rates move so that necessary adjustments will occur," was also noted by Trichet in the interview. Trichet also reminded euro-zone governments to press ahead with structural reforms. "It is simply that we have to continue to reform all our markets - the goods, services, labor and financial markets - to make them more flexible," Trichet said. Trichet noted the E.U. Commission considers the E.U.'s growth potential to be around 2.25%, "but this could be increased through improved labor productivity, which is precisely why the agenda of structural reforms embedded in the Lisbon Program must be implemented." The ECB and national central banks are set to release fresh economic forecasts June 6. In March, ECB staff projected growth of around 2.5% this year and 2.4% in 2008. Concerning new euro-zone members, Trichet repeated that 25 of the 27 E.U. members have no "opt-out" clause for joining the currency union and are committed to doing so.

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