San Francisco Federal Reserve President Robert Parry said he thinks the economy could remain sluggish through early 1994.

He said that the weak defense industry will continue to be a downward force.

With a Federal Open Market Committee Meeting slated for tomorrow, Mr. Parry Declined to comment on inflation, but indicated a keen interest in nominal income targeting as a potential inflation indicator.

Mr. Parry said Japan could open its markets further to permit U.S. exports.

In response to questions asked at a presentation he made to the National Association of Business Executives, Mr. Parry said the main concern with the U.S. trade deficit is the nation's faltering savings rate.

Exports tend to be affected by cyclical factors, he said.

Targeting exchange rates by the Fed or the federal government are not advisable policy objectives, he said.

Mr. Parry added that increased investment will lead to a higher economic growth rate.

He would favor government savings policies where "we can do better that the status quo."

In answer to questions on the North American Free Trade Agreement, Mr. Parry acknowledged that emotional premium placed on the issue of job creation, but added officials must consider comparative advantages which the U.S. may possess and "which may not relate to more jobs."

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