The Japanese Eco Watchers Index fell to 32.1 from 35.5, far below expectations of a 34.0 reading. Sentiment for Japanese merchants dropped for a second month as rising inflation continues to diminish consumer’s purchasing power. Indeed, expectations for households, manufacturing, business, retail and housing all fell. The Japanese economy which is already seeing a slowdown from declining U.S. demand may not be able to count on domestic spending to drive the economy. Inflation concerns have policy makers looking to raise interest rates but the slowing economy may make it prohibitive for them to make a change at their next meeting on Friday. – [I]John Rivera, Currency Analyst[/I]