The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥89.15 level and was capped around the ¥90.15 level. Many data were released in Japan overnight. First, December industrial output was off 9.6% m/m, a staggering decline that underscores the severity of the Japanese recession. Second, December household spending was off 4.6% y/y. Third, the December jobless rate ticked higher to 4.4%. Fourth, December annual core consumer price inflation moderated to +0.2% from +1.0% in November, the lowest level since October 2007. Tokyo-area provisional January core CPI fell to 0.5% from 0.8% in December. Fifth, the January manufacturing PMI fell to 29.6 from 30.8 in December, the eleventh consecutive monthly contraction and a record low. Sixth, December housing starts were off 5.8% y/y. Bank of Japan reported credit market spreads, including those for corporate bonds, remained high through the latter half of 2008. Liquidity in government bond markets has not improved, and volatility in share prices and currency rates remains at high levels. The government confirmed it did not intervene in the FX market in January. The decline in industrial production will likely have a negative impact on Q4 GDP data and economists are closely watching the CPI data to see if Japan re-enters a phase of deflation. The Nikkei 225 stock index gained lost 3.12% to close at ¥7,994.05. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥114.60 level and was capped around the ¥116.65 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥129.95 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥76.85 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar today as the greenback closed at CNY 6.8405 in the over-the-counter market, up from CNY 6.8392.