[DanRath]

The Tertiary Industry Index came in +0.1%, above expectations at -0.3% - since services account for 63% of the Japanese economy this is a positive number, however questions remain regarding sustainability given the recent large cash handouts. Minutes from the July BoJ meeting suggested that the CP purchasing programme might be extended if financial conditions have not sufficiently improved by year-end. Given the weak state of the Japanese economy some expect that this will be the case. With lower yields in both the US and in Europe overnight both USDJPY and EURJPY have been under some mild pressure, but in general once again the market has been extremely quiet. Next week the return to the market of Japanese corporates and investors should clarify the picture somewhat. Speculation regarding the likely policy direction of an incoming DPJ government should also increase with only 2 weeks before the 30th August election. In the meantime, USDJPY holds just above the bottom of the weekly ichimoku cloud at 94.80, a break of which would set a bearish tone for next week.