Bank of Japan looking likely to raise rates Friday

Interest rate rise fever will probably continue to grip global markets this week, with speculation growing that the Bank of Japan could finally end its zero interest rate policy when it begins a two-day meeting on Thursday.

Before that - perhaps the climax of the week - the Bank of Canada meets, the European Central Bank puts out its monthly bulletin and a raft of economic data will continue to feed global speculation about rate rises.

The UK starts the week today with June producer price data. The focus will be on whether there are signs that consistently high input prices are feeding through into output costs and fromthere into wider inflation measures.

Elisabeth Weise at Action Economics said: "Inflationary pressure is still in the pipeline and end-users are likely not yet to have been hit by the full effect of rising energy prices. We expect [producer price index] output prices to rise further in 2006."

Tomorrow the UK also laun-ches another theme of the week - trade data - with May numbers from the US on Wednesday to follow. The reports have the potential to reignite economists' debate about the dangers for currencies with trade deficits.

The UK deficit is expected to narrow slightly from April's £5.75 billion (€8.31 billion), helped perhaps by a strong euro-zone. Philip Shaw at Investec said: "Given signs of a continued strengthening in euro-zone domestic demand, we are hopeful that continental Europe will support UK export growth for some time."

In the US, the deficit is forecast to widen a little from April's $63.4 billion (€49.49 billion), partly as a result of rising oil prices, which will have pushed up imports while exports are expected to have remained relatively stable. Also tomorrow, the BoC will announce its rate decision. Not normally as closely watched as the Federal Reserve or the BoJ, the jitters about globally tighter monetary policy will ensure investors pay attention. After raising rates last month to 4.25 per cent, the bank is expected to hold steady this time although a series of strong data has injected some uncertainty into the market.

For euro-zone watchers, reeling from the ECB's strong rate rise hints last week, the highlight this week will be Thursday's release of the bank's monthly bulletin. Last week, the bank made the unusual decision to hold a meeting in August - normally just a conference call - which added to suspicions that rates would rise next month. Also this week, final June inflation data from euro-zone members should support the impression that price pressures are already above the ECB's comfort range.

But in market terms, Canada and the euro zone are only a warm-up for Friday's announcement from the BoJ. A rate rise had looked less likely as the furore grew over the personal investment of Toshihiko Fukui, the BoJ governor, in a fund run by Yoshiaki Murakami, who was arrested for insider trading.

But as the fuss has calmed, a quarter-point rate rise is expected. After years of Japan's battle against deflation through ultra-loose monetary policy, a rate increase would be seen as a vote of confidence in the strength of the global economy - and confirmation that the recent trend of tighter monetary policy is continuing.