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The Bank of Japan Gov. Masaaki Shirakawa said today that the Japanese economy is slowing and uncertainty surrounding the global economy is increasing. Shirakawa said that inflation likely will follow its current trend, so the BoJ will have to continue to carefully monitor the global economy. The BoJ will implement policy based on the economy and inflation, he said.

The Japanese consumer sentiment index improved in March with the reading increasing slightly to 36.7 from 36.1 in February. Economists had expected the indicator to rise to 37.4. A year ago, the indicator stood at 46.8.

The yen that hit a high of 162.68 versus the euro at 11:50 pm ET weakened thereafter. The Japanese unit touched a new multi-month low of 163.56 by about 3:50 am ET. The pair was worth 163.08 at Thursday North American close.

Germany`s producer price annual inflation accelerated to 4.2% in March from 3.8% in February, the Federal Statistical Office reported today. Economists had expected the rate to increase to 4%. The statistical office said this is the highest year-on-year rate of price increase since December 2006, when it was up 4.4%. A year ago, producer price annual inflation stood at 2.5%. On a monthly basis, the Producer Price Index, or PPI, grew 0.7%, unchanged from February and faster than the 0.5% expected.

While uncertainty over the state of the global economy remains high, the Bank of Japan`s policy board agreed that its basic thinking on monetary policy remained unchanged, according to the minutes from the central bank`s March 6 and 7 policy meeting that were made public today morning.

The members of the board of governors felt they must be flexible in their policy response, the minutes also showed, but that careful study of the upside and downside risks to the economy were required.

The yen is now worth 159.48 against the euro and 100.86 against the franc, moving down from 13-day highs of 158.27 and 100.39 hit respectively at 12:40 am ET. The euro-yen pair closed last week`s trading at 159.54 and the franc-yen pair 100.96.

France`s business sentiment dropped to 105 in March from 106 recorded in February, a survey from the Bank of France revealed Monday. Economists were looking for a reading of 106 for March. The bank maintained its GDP growth estimate for the first quarter at 0.4%. The report added that growth carried over for 2008 should stand at 1.2% at the end of the first quarter.

Against the dollar, the yen weakened after hitting a 4-day high of 100.45 by about 3:55 am ET. Currently, the yen is trading at 101.04 per dollar, compared to Friday`s close of 100.93.

The yen reached a high of 198.16 versus the pound before losing ground at 3:55 am ET. The pound-yen pair, which closed Friday`s trading at 199.02, is now quoted at 199.44.

UK output prices for home sales of manufactured products rose 6.2% from the previous year in March, the Office for National Statistics said today. Output prices climbed more than February`s 5.9% growth and 5.6% expected by analysts. On a monthly basis, output prices climbed at a faster pace of 0.9% compared with 0.5% in the prior month.

Meanwhile, input price inflation accelerated to 20.6% annually from 19.7% in February. Compared to prior month, input prices climbed 2.9%, up from 1.5% in February.