Nomura announced earlier this week it plans to enter the interbank forex business in August, becoming the first non-banking institution in Japan to do so.

The brokerage is aiming for forex transactions of nearly 10 trillion yen ($71.9 billion) per month, Nomura's foreign exchange section manager Norihiro Nishino in Tokyo, told Reuters in an interview.

``We are aiming to be level with domestic city banks in terms of (forex) trading volume by the end of this century, but the challenge will be accomplishing this goal,'' Nishino said.

As the securities firm moves into the forex arena, it is paying close attention to next January's debut of Europe's united currency.

``There is no doubt that the euro will play a key role in the financial market along with the dollar,''Nishino said. ``The market will be attracted by the euro as a key currency and the euro bonds' high liquidity,'' he said.Nishino said demand has increased for European currency unit (Ecu) bonds and interest has been booming since May when the European Union held a landmark summit where 11 nations agreed to launch a united currency, the euro, on January 1, 1999.

``Japanese investors are showing strong interest in buying Ecu bonds,'' Nishino said. ``There are still uncertainties about the euro's role in trade settlements, but for financial investment purposes the euro clearly will be attractive.''

On the other hand, the yen's status appears to be falling, Nishino said, citing its volatility over the past two months.

``The yen has been very volatile recently. The yen is still treated as a hard, or major, currency, but it's acting like a local Asian currency,'' he said.

Nomura's entry into the forex business follows the revised Foreign Exchange and Foreign Trade Control Law which was implemented in Apriland which signalled the start of Japan's version of ``Big Bang'' reforms. The law allows open participation in Japan's foreign currency markets, scrapping a rule under which only foreign exchange banks were allowed to conduct forex transactions.

``The deregulation could actually reshuffle domestic players in the forex market. Banks that had the right to handle forex transactions could shrink their operations, while some new player may enter,'' Nishino said.

``We believe that the forex business can stand alone as a product and can become a decent business (for Nomura), just like equities or bonds,'' he said. In recent years, US securities houses, which were long only customers in the forex market, have become influential interbank forex market players.

``If US securities firms can do it, why can't a Japanese brokerage do the same? '' Nishino said.

He said infrastructure costs required to set up systems to take part in the forex business as well as the good credit ratings required would likely make theentry of new participants limited, however.

As for Nomura, Nishino said the company's next step will be to set up a netting system so that it can reduce foreign exchange costs on its international operations.

Netting is a technique by which firms operating globally calculate the difference between receivables and payables among group companies and settle the balance.