BUSINESSES in the North-East could be among the first to benefit from Japan's economic recovery when it happens, delegates to the Anglo-Japanese Economic Institute's conference in Chester-le-Street, County Durham, were told yesterday.

But the benefits of Japan's economic revival could be outweighed by the UK's continued refusal to join the euro.

Yasumasa Nagamine, economics minister from the Japanese Embassy told almost 100 delegates at the conference at Lumley Castle that Japanese inward investors would be happier if the UK chose to enter the euro zone.

He said: "Global competition and the fact that the UK remains outside the euro-zone is making the exchange rate a worrying factor for Japanese investors looking to invest in the UK.

"While Japanese companies are increasingly looking to establish research and development facilities around the globe, they are becoming less willing to establish manufacturing operations in the UK.

"If the UK was to join the euro then this region in particular would be among the first to benefit, as companies like Toshiba could turn R&D facilities into production facilities."

He said despite Japan's current problems, it had a large economy and a sound industrial base.

"Over the next two to three years, as Japan recovers from its problems we are looking at zero growth in the economy, but at the end of that period, Japan will have regained its strength and be ready to grow."

He said: "Japan had a slight recovery in 1999, but has sunk back into decline. The Government has admitted that it now needs a thorough overhaul and the economic reforms introduced are already showing signs of working.

"Fewer and fewer Japanese companies are wholly owned by Japanese ventures, and many of them have entered into partnerships with European operations. The links between Nissan and Renault are a good example."

The UK is one of the largest markets for Japanese investment, with a share of 40 per cent of all projects.

"The UK, and the North-East, is still getting a steady stream of investment from Japan," said Mr Nagamine.

"There are about 280 Japanese companies in the UK, employing in excess of 88,000 people. That is the single largest figure in Europe."

Also speaking was Masayuki Ihori, president and chief executive of Toshiba in Europe, which has had a research and development operation in Durham City since July, 2000.

Mr Ihori said: "We are currently redesigning our technology to conform with European standards, particularly in the field of power generation and distribution.

"That will strengthen our global operations and make us more competitive in Europe and our products more relevant to the customer."

Other speakers included Alan Jones, managing director of Toyota Motor Manufacturing in Europe, Takuma Kiso, chief economist at the Fuji Research Institute, and Dr John Bridge, chairman of development agency One NorthEast.