As expected, the Bank of Japan held rates unchanged at 0.50% on Monday evening, citing a continuing weakening economic situation both locally and abroad, followed by promises to act flexibly versus uncertainties surrounding the Japanese economic outlook.

Rising food and oil prices, along with the risk of a U.S. economic slowdown spilling into the global economy, were putting downward pressures on Japanese growth prospects. However, with interest rates already very low, the expected moderation in GDP would only be temporary, according to the statement released with the decision.

The BOJ also cut its GDP target to 1.5% from 2.1%, adding that it expects core CPI to grow 1.1% rather than the previous 0.4% growth expected for 2008. The BOJ also said GDP and core CPI would average around 1.7% and 1.0% respectively in 2009. The bank also said the path of monetary policy was difficult to determine given the large amount of uncertainty surrounding the economic situation in the region.

In a press conference following the announcement, Maasaki Shirakawa, the Bank's newly appointed governor, said monetary policy was more flexible than ever given the uncertainties surrounding the Japanese economic outlook. He said the Monetary Policy Board was carefully paying attention to consumer inflation expectations, adding that the recent jump in price growth was due to both supply and demand factors. Shirakawa also said the risks to the Japanese economy would be more balanced in 2009.

According to estimates from Eurostat, euro zone CPI rose by 3.3% in April, slightly below economists' expectations for a 3.4% rise. April's estimate is lower than the 3.6% CPI increase observed in March. Eurostat also published data on euro zone unemployment and announced that it has remained stable at 7.1% in March, unchanged from February's reading and in line with the consensus forecast.

Consumer confidence in the UK declined further in April according to a report from GfK on Tuesday evening, whose index of consumer confidence declined to a reading of -24 despite calls for a -20 level. In March, the index stood at -19.

The euro zone consumer confidence indicator remained at -12 in April, unchanged from the previous month's reading and higher than the -13 figure expected by economists. However, the euro zone economic, industry and services confidence indicators all slipped lower than both their expected readings and previous figures.

The euro zone economic confidence indicator fell to 97.1, down from both the 98.9 expected and March's figure of 99.6. Industry confidence decreased to -2 following the previous month's figure of 0. Economists had predicted a reading of -1. The services confidence indicator also declined, falling to 7 from the expected and previous level of 9.

The euro zone business climate indicator saw a decrease as well in April, slipping to 0.44 from the previous month's figure of 0.79. Economists had expected a reading of 0.69. March's reading was revised down from 0.8.

The German seasonally adjusted unemployment rate rose to 7.9% in April, unchanged from the previous month. Economists had expected a reading of 7.8%. March's figure was revised up from 7.8%. In terms of the number of unemployed, 7,000 fewer persons were searching for work compared to the prior month. The consensus had forecast a fall of 30,000 in the number of unemployed. March saw a drop of 48,000 individuals looking for work, revised down from an initial decrease of 55,000 persons.

As measured by the International Labour Organization, German seasonally adjusted unemployment fell to 7.4% in March from February's revised reading of 7.6%. February's figure had been revised up from 7.4%. According to the Federal Statistics Office (Destatis), the number of individuals looking for work decreased 1.7% to 3.15 million, while the number of employed persons rose 0.2% to 40.23 million.

Conditions in the Japanese manufacturing industry deteriorated further according to a report from Nomura and JMMA, whose manufacturing index of purchasing managers declined to a reading of 48.6 in April compared to March's 49.5 level.

The Japanese unemployment rate fell to 3.8% in March despite calls for no change to the previous month's 3.9% level. The job-to-applicant ratio was 0.95, slower than forecasts for no change to the prior month's 0.97 level.

Japanese household spending unexpectedly weakened in March, falling 1.6% year-over-year despite forecasts for a 0.5% increase. Spending was flat in February.

A preliminary look at Japanese industrial production suggested a 3.1% month-over-month decline in March despite forecasts for a 0.8% fall. In February industrial production rose 1.6%. Meanwhile annual industrial production pulled back 0.4% compared to forecasts for a 2.0% rate of growth and the previous month's 5.1% increase.

Japanese vehicle production rose 2.3% year-over-year in March compared to Febuary's 9.0% gain.

Annualized housing starts in Japan totalled 1.088 million in March, compared to forecasts for a 1.201 million level and the previous month's 1.150 million.

Japanese constructing orders rose 6.4% year-over-year in March compared to the previous month's 18.4% gain.

The small business confidence index for Japan deteriorated to 43.1 in April, down from March's 46.6 reading.

Private sector credit in Australia rose 0.8% month-over-month in March, in line with forecasts and above the previous month's downwardly revised 0.7% gain. Annual private sector credit was up 14.9% in March, compared to forecasts for a 15.2% gain and the previous month's downwardly revised 15.4% gain.

New home sales in Australia declined 6.0% month-over-month in March following February's 5.3% decline.

Preliminary estimates released on Wednesday show that inflation in Italy rose 0.1% monthly in April, down from both the 0.5% increase seen in the previous month and the 0.3% rise forecast by economists. Annually, CPI increased by 3.3%, lower than the 3.4% forecast but unchanged from March.

Italian EU harmonized CPI also surprised on the downside with readings of 0.5% and 3.5% on a monthly and yearly basis, respectively. Economists had expected HICP to rise 0.7% in April following the previous month's increase of 1.6%. Year-over-year, the consensus had forecast inflation at 3.7%, up from the 3.6% HICP reading observed in March.

The European Central Bank will act to prevent second round inflation effects, the Bank of Spain said in its monthly bulletin presented on Wednesday. While the tight labour market and rising oil prices are affecting inflation, the central bank stated that it expects slowing economic growth to reduce inflation pressures. The euro zone economy will grow below potential for several quarters, the Spanish central bank suggested.

According to data from Statistics Portugal, consumer confidence edged up to a reading of -41.8 in April from March's -42.9 figure. "In April, the Consumer confidence indicator recovered, stopping the downward trend started in November 2006, after recording the minimum value since June 2003," noted Statistics Portugal in a press release.

In a press release published on its website on Wednesday, Statistics Portugal announced that industrial production contracted 3.4% on a monthly basis in March. This is following the 0.8% expansion seen in the previous month. February's rise was revised up from 0.3%. Annually, industrial production shrank 5.2%. This decline follows February's growth of 0.6%, which was revised down from 1.0%.

Retail sales in Portugal also saw some decline in March following growth in the previous month. Monthly, Portuguese retail sales fell 4.1% following February's growth rate of 2.3%. On an annual basis, retail sales decreased by 2.4%. February had registered retail sale increases of 3.8%, revised up from 2.9%.

According to data from Nationwide, UK house prices fell 1.1% on a monthly basis in April, following March's decline of 0.7%. Economists had been expecting a contraction in house prices of 0.5%. March's decrease was revised up from 0.6%. On a yearly basis, house prices fell 1.0%, down from the previous month's increase of 1.1%. The consensus had called for no change in house prices for April.

Inflation in Slovenia rose 0.8% for the month of April on a monthly basis, according to the Statistical Office of the Republic of Slovenia. This figure was higher than the expected rise of 0.5% but lower than the previous increase of 1.3%. Annually, CPI expanded by 6.5%, down from the rise of 6.9% seen in March. Economists had forecast a reading of 6.4% for April.

UK GfK Consumer Confidence April -24 vs. Exp: -20 Prior: -19

JN Nomura/JMMA Manufacturing PMI April 48.6 vs. Prior: 49.5

JN Jobless Rate March 3.8% vs. Exp: 3.9% Prior: 3.9%

JN Job-To-Applicant Ratio March 0.95 vs. Exp: 0.97 Prior: 0.97

JN Household Spending (Y/Y) March -1.6% vs. Exp: +0.5% Prior: 0.0%

JN Industrial Production (M/M) March Preliminary -3.1% vs. Exp: -0.8% Prior: 1.6%

JN Industrial Production (Y/Y) March Preliminary -0.4% vs. Exp: +2.0% Prior: +5.1%

AU Private Sector Credit (M/M) March +0.8% vs. Exp: +0.8% Revised: +0.6% Prior: +0.7%

AU Private Sector Credit (Y/Y) March +14.9% vs. Exp: +15.2% Revised: +15.4% Prior: +15.5%

AU HIA New Home Sales (M/M) March -6.0% vs. Prior: -5.3%

JN BOJ Target Rate 30-April 0.50% vs. Exp: 0.50% Prior: 0.50%

JN Vehicle Production (Y/Y) March +2.3% vs. Prior: +9.0%

JN Housing Starts (Y/Y) Mar -15.6% vs. Exp: -6.7% Prior: -5.0%

JN Annualized Housing Starts March 1.088M vs. Exp: 1.201M Prior: 1.150M

JN Construction Orders (Y/Y) March +6.4% vs. Prior: +18.4%

JN Small Business Confidence April 43.1 vs. Prior: 46.6

UK Nationwide House prices (SA) (M/M) April -1.1% vs. Exp: -0.5% Revised: -0.7% Prior: -0.6%

UK Nationwide House prices (NSA) (Y/Y) April -1.0% vs. Exp: Unchanged Prior: +1.1%

EU German ILO Unemployment Rate March 7.3% vs. Exp: 7.4% Prior: 7.4%

EU German Unemployment Rate (SA) April 7.9% vs. Exp: 7.8% Revised: 7.9% Prior: 7.8%

EU German Unemployment Change April -7K vs. Exp: -30K Revised: -48K Prior: -55K

EU Euro Zone CPI Estimate (Y/Y) April +3.3% vs. Exp: +3.4% Prior: +3.5%

EU Euro Zone Unemployment Rate March 7.1% vs. Exp: 7.1% Prior: 7.1%

EU Business Climate Indicator April 0.44 vs. Exp: 0.69 Revised: 0.79 Prior: 0.8

EU Euro Zone Consumer Confidence April -12 vs. Exp: -13 Prior: -12

EU Euro Zone Economic Confidence April 97.1 vs. Exp: 98.9 Prior: 99.6

EU Euro Zone Industry Confidence April -2 vs. Exp:-1 Prior: 0

EU Euro Zone Services Confidence April 7 vs. Exp: 9 Prior: 9

By Erik Kevin Franco This email address is being protected from spam bots, you need Javascript enabled to view it with contributions from Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it