The euro is highly likely to be strong against the dollar, the Japanese Vice Finance Minister, Mr Eisuke Sakakibara, said in an interview published in Paris yesterday.

He told Le Monde that the likelihood of the euro being strong was "very great" but that "at this stage it is very difficult to judge the impact of the euro on the yen or dollar".

He feared that macro-economic factors would put the euro on a strong footing against the dollar when it was launched on January 1st and that the competitive position of European exporters would be damaged.

Mr Sakakibara, known in Japan as "Mr Yen" owing to the influence of his remarks on financial markets, said the arrival of the euro would change the nature of the dollar-based international monetary system.

The launch of the single currency would bring about a multi-currency international system, he said. If the euro became a significant factor, there would be two key currencies, the euro and the dollar, with the yen as "a kind of stand in".

He stressed that there would be a need to develop mechanisms for consultation and for stabilising links between these currencies, between the European, US and Japanese authorities which had to increase co-operation.

"The stability between the three big currencies, the dollar, euro and yen, will be vital in 1999," Mr Sakakibara said.

"We must try to stabilise this trilateral relationship between the euro, dollar and yen but, for our part, we must strengthen our relationship with the euro," he said.

He wanted to discuss this with the Europeans because, for him, the relationship between the yen and the euro would become as important as the relationship between the yen and the dollar.

Deregulation of Japanese markets, which were closed to foreign investors, should eventually enable the yen to play the same international role as the euro and dollar.

Mr Sakakibara forecast that the euro would be a "great success" even though many outstanding matters of adjustment, notably in the field of tax, had yet to be settled.

Creation of a single currency in Asia would be "very difficult" to achieve because "Asia is too vast a zone and the differences between stages of development are too big", he said.

In Asia there should be flexible co-operation "but not unification, it is impossible for Asia".