ECB watching Japan impact 'very carefully': Trichet

(BRUSSELS) - The president of the European Central Bank said Monday he was watching very closely the global impact of the earthquake and tsunami on Japan, the world's third-largest economy.

"We are looking very carefully at all what has happened in terms of the impact on the Japanese economy and the impact of the partners of Japan," Jean-Claude Trichet told the European Parliament in Brussels.

Earlier Monday, the World Bank warned that the disaster could cost Japan up to $235 billion, or 4.0 percent of output, and reconstruction could take five years.

Trichet said that the usual pattern after such a catastrophe was to have a sudden dip in activity followed by a recovery as reconstruction work begins.

It is a "very delicate balance" to judge what the overall impact would be, Trichet added.

On Friday, Japan and its economic allies, including the ECB, intervened jointly in world currency markets for the first time in a decade to calm the turmoil sparked by the huge earthquake and resulting nuclear crisis.

"We consider that it was a right way to capture what was the best signal possible in the circumstances," Trichet said.

On monetary policy, Trichet said he had "nothing to add" to the ECB's statement on March 3, during which he said the bank was "vigilant" on risks to inflation, a hint that interest rates are set to rise.