Following the results of Sunday's Upper House election in Japan attention will focus on the speed and intensity with which the new government implements structural reform. During the campaign, LDP candidates for the most part supported Prime Minister Koizumi's reform plans. However, the strength of the commitment will be tested now. The short term impact of the proposed reforms will be painful, especially on the LDP's traditional constituency.

Both the Bank of England and European Central Bank meet this week. Calls for the Bank of England to lower interest rates again grew with intensity after the weak second quarter GDP results were released. The data showed that the service sector, which had been strong, is beginning to weaken. And manufacturing continues in recession, hurt by both the relatively high value of sterling with its major trading partners and faltering demand, the result of slowing growth especially in the United States and Europe. Virtually no one expects the ECB to do anything until they return from vacation at the end of August.

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