WASHINGTON (Bloomberg) — Finance ministers and central bankers from the Group of Seven nations said they are confident disparities in global trade and growth are starting to narrow, a trend that will extend the strongest expansion since the 1970s.The G-7 said in a statement yesterday that world growth is now more even, offsetting a slowdown in the US, Asian and European economies picked up in the past year, narrowing the US trade deficit and putting the world economy on course to grow about 5 percent this year, the International Monetary Fund said this week.

The world's richest nations pledged to take steps to protect the expansion by reducing labor regulations and budget deficits. The finance chiefs also intensified a plea for a conclusion to global trade talks and reiterated that Asian nations must make their currencies more flexible.

"The first message is that global imbalances have started to diminish," French Finance Minister Thierry Breton said after G-7 officials met in Washington. "The future will hinge on structural reforms and budget policies to lower imbalances further."

The G-7 gathered at the end of a week in which government reports showed, counter to economists forecasts, that the US trade gap narrowed in February and China's current-account surplus shrank last month. The IMF on April 11 forecast a 4.9 percent increase in world gross domestic product this year even while predicting the weakest US expansion since 2002.

"We have always wanted the world economy to fly on more than one wing," said UK Chancellor of the Exchequer Gordon Brown. US Treasury Secretary Henry Paulson agreed and said "more needs to be done".

Since a meeting in Dubai almost four years ago, the G-7 has identified differences in trade accounts of key economies as a risk to global growth. Yesterday's statement was the first since then in which the group indicated progress is being made.

American deficits have fuelled calls from lawmakers for protectionism and contributed to a slump in the dollar that has sometimes alarmed European officials.

China's trade surplus swelled to a record $177.5 billion last year, while the US deficit reached an unprecedented 6.5 percent of GDP. At the same time, surging American exports, fuelled by strengthening demand abroad, has helped keep the US expansion going. Trade contributed the most to growth in a decade in the fourth quarter of 2006.

"We are confident that the continuation of our policies will support economic growth and contribute to reduce international imbalances," the ministers said.

The G-7 didn't refer to World Bank president Paul Wolfowitz, who is being investigated by the bank's board for personally dictating the terms of a promotion for a woman with whom he had an intimate relationship. Paulson said the US, which is the bank's biggest shareholder, continued to support him.

Much of the G-7's frustration in recent years has been directed at China, whose currency was again the only one singled- out for criticism. The group reiterated its call from its last meeting in Essen, Germany Feb. 10 for flexibility in emerging nations' currencies -- "especially China."

Many US lawmakers and companies charge China with restraining gains in its currency to stoke exports. The yuan has risen 7.2 percent since a peg to the dollar was scrapped in July 2005. It has fallen 3.2 percent versus the euro.

"It is crucial China move now with greater urgency," Paulson said yesterday. He meets with Chinese officials April 16 in Washington to prepare for the second round of a new dialogue designed to reduce trade tensions.

Japan escaped censure as the G-7 papered over differences on the slump in the yen. The statement omitted specific mention of the yen while saying currencies should reflect economic fundamentals and Japan's recovery should be "recognised by market participants."

That language, adopted in Essen, is a compromise between European concerns that a weak yen threatens exports and a US preference that governments refrain from meddling in markets.

European Central Bank President Jean-Claude Trichet told reporters Japanese economic leaders agree the yen should reflect their strengthening economy, a point reinforced when a finance ministry official said the solid state of the world's second largest economy doesn't warrant a weakening in its currency.

Finance Minister Koji Omi and Bank of Japan Governor Toshihiko Fukui told the G-7 that "the fundamentals were very encouraging in Japan and this should be reflected in the exchange market," Trichet said.

The reluctance to criticise the yen's slide in clearer terms may spur the carry trade, where investors borrow at the world's lowest interest rates in Japan and invest in higher-yielding assets abroad. The yen reached a record low against the euro before the meeting as investors bet the G-7 wouldn't seek to halt its slide.

"This opens the way for the yen downside," said Samarjit Shankar, director of global strategy for the foreign exchange group at Mellon Financial Corp. in Boston.

G-7 officials said they were "committed to reducing protectionist sentiment," days after the IMF warned that the erection of barriers to imports posed a "serious danger" to global growth. Concluding struggling trade talks was an "imperative," they said.

The G-7 oversees almost two-thirds of the world economy and is composed of the US, Japan, Germany, UK, Italy, France and Canada.