Eurozone finance ministers sounded the alarm about the yen's recent weakness, with the monetary bloc's top political official saying the Japanese currency should better reflect the strength of the economy.

Preparing for an upcoming meeting of G7 finance chiefs in Germany, eurozone ministers focused "intensely" on exchange rates amid growing concern in Europe about possible political pressure in Japan to keep interest rates low.

"Japan's current economic recovery should be reflected in the yen's exchange rate," said Luxembourg Prime Minister Jean-Claude Juncker after chairing the eurozone ministers' meeting.

With Japanese growth improving after years of lacklustre performance, Japan's rock-bottom interest rates are seen in Europe to be the result of political pressure on the Bank of Japan.

The yen has fallen to record lows recently against the euro and the dollar on expectations that Japan would keep its super-low interest rates.

The Japanese currency's weakness is fuelling concerns in the eurozone because it makes exports from the 13-nation European currency club more expensive on international markets compared to those from Japan.

Juncker said in a carefully worded statement that the eurozone finance chiefs had agreed "excessive exchange rate volatility is not conducive to an improvement in economic growth" in their preparations for the G7 meeting.

Spanish Finance Minister Pedro Solbes, a former European commissioner for economic and monetary affairs, also sounded the alarm about exchange rates.

"We are always concerned about excessive volatility," he said as he arrived for the meeting.

During the last G7 finance ministers' meeting in Singapore in September, Japanese officials successfully fended off attempts to get a reference to the yen's weakness included in the final communique.

Suspicions of political pressure on the Bank of Japan surged earlier this month after the Japanese central bank decided against expectations to keep its main interest rate unchanged at a rock-bottom 0.25 percentage points.

Monday the yen was trading at 157.53 to the euro, not far from an all-time low of 158.62 to the euro, which was reached on January 24.

Meanwhile, the dollar rose to above 122 yen for the first time in more than four years.

With the eurozone economic outlook looking bright, excessive exchange rate volatility is one of the few clouds on the horizon for the bloc's growth prospects.

EU Economic and Monetary Affairs Commissioner Joaquin Almunia voiced optimism about economic growth in the 13 countries sharing the euro, saying his forecasts needed to be lifted.

"The current economic situation remains very positive and the economic growth in the euro area last year, 2006, has probably been at least as high as we predicted, 2.6 percent, and maybe even better," he told journalists after the meeting.

Looking ahead to this year, he said that "growth should be better than we thought in November" when the European Commission forecast that the combined eurozone economy would expand 2.1 percent.

Almunia said that the brighter outlook would be reflected in economic forecasts that the commission is due to publish on February 16.

He noted that consumer confidence was at record high levels, unemployment was falling, labour productivity was rising and an increase in German value added tax had had a limited impact so far.

The eurozone ministers are to be joined by their EU counterparts on Tuesday for a monthly gathering, with the highlight expected to be the end of sanctions against France that were put in place in 2003 after its public deficit broke EU rules the previous year.