FRANKFURT -- Japanese investors should have full confidence in the stability and strength of the euro as the currency is launched in its physical form at the start of next year, according to the European central banker coordinating the project.

Eugenio Domingo Solans, one of the five members of the European Central Bank's executive board, gave an unwavering message of confidence during an interview in his office atop the ECB's tower in Frankfurt.

Responding to fears among Asian investors that the euro -- which has depreciated against other key currencies since its inception at the start of 1999 -- will remain weak, making the euro-zone assets less attractive, the central banker was adamant.

"I don't think that Japanese and Asian investors have lost confidence in the euro. They have been good investors and know that the euro is an international currency alongside the dollar and the yen," he said. "They know it is stable and they know the importance of diversifying assets."

He described the euro as a "strong and stable" international currency, and the launch of euro bank notes will enhance this concept.

The Spanish central banker noted that at least 50 central banks are using the euro to a greater or lesser extent in their foreign-exchange policy, and this figure will only grow.

"The euro is already considered by central banks as a possible investment. After the introduction of cash, what could happen? The assessment is that with the enhancement of EMU (European monetary unit), this should be positive for the use of the euro. Its use should increase."

Domingo Solans was also convinced preparations for the new currency are at an advanced stage, and now nothing will delay the official launch.

"Although Sept. 11 was a tragic event, life has to go on, and it's business a usual for the euro changeover. We wouldn't even consider a delay," he said.

Recently, Jean-Pierre Chevenement, a leftwing candidate for the French presidency who opposes monetary union, ruffled some feathers by calling for the currency introduction to be delayed because of a "new context of concern and instability" caused by the terrorist attacks and the greater economic uncertainty they produced.

"Our overall message is one of confidence. The euro system has prepared everything in advance and in the proper way," Domigo Solans added.

In the wake of the attacks on the U.S., security has been beefed up at the ECB and for the distribution process, and "there are new risks, and security will be tighter," he said. But for now, there is no need to use the army to guard shipments that will be transported around the continent and beyond at the start of next year.

"We have done everything possible by way of planning and contingency. From here on, success depends on the public," he said.

Reports on the state of preparations have largely backed up this stance. A European Council report on the preparation for the notes and coins, adopted on Oct. 19, stressed preparations are on track, but said more effort is needed by small and medium-size firms to adjust to the new currency.

"We would like to have seen better preparations by some, but retailers will be prepared to accept the euro as their new unit of account," he stressed.

The key sector now is the public. "If they understand -- and I'm sure they will -- that this is good for Europe and that it brings great advantages over the old national currencies, they will support the changeover and it will be a success.

"I like to compare the project to doing household renovations -- when the changes are being made, there is some noise and inconvenience, but when the job is done, the situation is much clearer and neater."

So far, this year has been devoted to informing citizens of the euro zone about their new currency. The information campaign has started and banks already have "starter kits" of coins and notes.

On Nov. 1, leaflets were sent to the euro zone's 300 million citizens in 12 countries: Germany, France, Italy, Spain, the Netherlands, Greece, Belgium, Portugal, Finland, Austria, Ireland, and Luxembourg.

On Dec. 1, retailers will begin receiving the new cash, followed by starter kits for citizens on Dec. 15.

After that, the euro officially becomes legal tender on Jan. 1, by which time armored vans will have begun distributing the more than 50 billion coins and 15 billion notes that will be needed by shops on Jan. 1. All public-sector transactions will be in euros from day one. Shops in most members will finally stop accepting the old currencies on Feb. 28.

There will be seven denominations of notes: five, 10, 20, 50, 100, 200 and 500 euros -- the last worth around 55,000 yen.

The notes will be uniform in appearance, with no national variations. The designs will feature, in an abstract way, Europe's architectural heritage, with gates, windows and bridges to symbolize openness and cooperation in the EU.

The euro coins will come in eight denominations: two euros, one euro, then 50, 20, 10, five, two cents and one cent. Every coin will feature a common European face and a map of the EU. On the obverse, each member state will decorate the coins with its own motif.

The preparation scenario was completed in 1999. Since then, some members of the European Parliament and at least two finance ministers have tried to bring forward the date for "front loading" the coins. But there is now no chance these dates will be changed, Domingo Solans said.

"All the players have known the rules of the game for a long time," he noted. "We're convinced that we took the right decisions. If we'd allowed the distribution of notes before they became legal tender, it would have led to confusion."

To monitor the changeover, the ECB established a committee called CASHCO earlier this year. It comprises members from national central banks, the EU Commission and the ECB. It will be the key body for coordinating work on backup systems and reacting to problems, and will meet on the evening of Dec. 31.

The contingency preparation scenario has been compared with that for Y2K, although there are fewer fears this time of the possibility of computer-driven technological meltdown.

To date, no official source has provided an estimate for the cost of introducing euro notes and coins, and Domingo Solans was reluctant to offer any figures. The ECB has received estimates from different countries, but they are not based on the same methodology or time frame.

"We have this information, but we must be very careful with it. It could be misleading," he said.

Most of the costs are being met by national governments -- transport, security, minting, technology, the information campaign -- and the private sector, which has borne some of the costs for technology upgrades. The companies that will produce the vending machines carried out their sensor tests last year.

Turning to the macroeconomic impact of the introduction, Domingo Solans was convinced that benefits will accrue through economies of scale, but most will be seen over the medium term.

"It is very difficult to quantify the economic effects. Our models are telling us that there could be some effect on consumption, but it will be very limited." For example, consumers might delay some planned purchases for a month.

"But the general conclusion is that the introduction of the euro -- the complete adoption of the common unit by all EMU agents -- will enhance monetary union and should be positive for consumption and competition, raising the transparency of prices," he said. "From a medium-term macroeconomic perspective, there are clear advantages."

As the EU's own Web site helpfully puts it: "A French citizen will be able to buy a hot dog in Berlin using a euro coin carrying the imprint of the king of Spain." And that should make life easier for all economic agents.

The ECB official stressed, however, it is inappropriate to compare the introduction of the euro with decimalization in the U.K. in February 1971, because the two projects are greatly different in scope and scale and are separated by 30 years.

In the former case, there was a macroeconomic impact: U.K. retail sales plunged 3.5 percent month-on-month during the conversion month before rebounding by 4 percent a month later.

In the meantime, Domingo Solans is playing down fears that inflation might rise in the euro zone as a result of retailers "rounding up" their prices as they convert from the old units into the euro.

"So far, there has been no meaningful rounding up of prices" from national currency quotes being converted into euros, he said. "And there should be no meaningful effect on prices in future."

Indeed, the opposite will be true further out. The adoption of euro bank notes by 300 million consumers "will increase transparency levels by introducing a common unit of account -- that will be a force which will tend to offset price rises, if anything."

Some analysts are expecting some effect on monetary aggregates from the changeover, expecting the M-1 component (currency in circulation and overnight deposits) of M-3 to surge around the start of the year, as M-1 did in January 1999 -- when the euro was first launched. But again, the central banker said this is being overstated.

He said the overall trend for currency in circulation is falling, regardless of the introduction of the euro, as people use less cash while notes and coins are transferred into other assets.

The introduction of the euro might add to this process; around the start of the year, there will probably be higher usage of credit and debit cards in lieu of cash for the first phase.

"M1 shouldn't be distorted by the events, but the composition of M1 could change," he said. "Any falls in the levels of currency in circulation should be compensated for by a rise in deposits."

Domingo Solans would not be drawn on the issue of whether -- as some have speculated -- funds from the underground economy have been and will continue to be converted from old national currency cash into dollars, or other assets such as luxury goods or real estate.

"We don't want to speculate on the issue of black economy funds and where they might go. We need solid evidence of this trend, and we haven't seen that yet," he said.

Some economists, including Hans-Werner Sinn, president of Germany's respected Ifo institute for economic research, believe the exchange of cash deutsche marks for dollars has been a key factor in the currency's weakness, or at least its failure to rally in recent months.

One-third of mark notes are held in Eastern Europe and Turkey, Sinn said. Uncertainty about the changeover to euro notes and coins has meant much of that has been changed into dollars, keeping the euro weak. The European Commission estimates the size of the "undeclared economy" to be even bigger -- between 500 billion euros ($456 billion) to 1.1 trillion euros, or 7 percent to 16 percent of the European economy.

And retailers all over Europe have noted that cash sales of luxury goods, fine art, electrical goods and even fine wine are picking up, or were, prior to Sept. 11. The housing market on Spain's Costa Del Sol has seen double-digit price growth in the last few years, and reports have linked much of the activity with East European mafia, using cash holdings.