European Trade Commissioner Sir Leon Brittan and Japanese Trade Minister Kaoru Yosano poured cold water on suggestions that the exchange rates between the US dollar, the EU's Euro and the Japanese Yen should be fixed, even in a very loose manner, when they met in Brussels on January 7. While both the Minister and the Commissioner hailed the successful launch of the Euro, they said exchange rates should reflect economic fundamentals. The two also proclaimed a joint front on global trade negotiations, with Mr Yosano offering his support to the idea of a 'Millennium Round' of packaged trade issues. Sir Leon reminded the Minister of the European Union's list of 200 policy recommendations for deregulation in the Japanese economy, while Mr Yosano pointed to 50 Japanese requests of the EU.

According to Sir Leon, interest in the Euro is as strong in Japan as it is in the European Union. But after the successful fixing of currency rates for the 11 Euro members, there was no talk of doing the same - even in the most informal manner - for the Euro, the Yen and the dollar. Japanese Prime Minister Keizo Obuchi, also visiting Europe, said on January 6 that a 'tripolar' system linking Japan, the United States and the EU should be set up to ensure stability of key currencies. Mr Yosano said it was not true that Mr Obuchi was seeking a fixed exchange rate between the yen, dollar and Euro. "Certainly we do not consider violent fluctuations of exchange rate to be desirable. But exchange rates will certainly fluctuate through the market mechanism in the world and I think we can't avoid it," he said. "I expect exchange rates to reflect economic fundamentals." The Yen has risen by more than 30% against the US dollar since last autumn. The Minister added that it would be wrong if the current Yen rate was achieved thanks to "indiscreet remarks, or very affected by indiscreet remarks and unfortunate situations".

Sir Leon said that efforts to fix exchange rates risked diverting governments from tackling other economic problems. In a joint statement issued after the meeting, Sir Leon and Mr Yosano welcomed the launch of the Euro and said support of the single currency "by sound macroeconomic and structural policies will create stability and ensure that the euro will be beneficial for international trade and financial markets."

Mr Obuchi visited three countries - France, Italy, and Germany - and held talks with their leaders, including French President...

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