The yen appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the Â¥95.80 level and was capped around the Â¥96.85 level. New Economy and Fiscal Policy minister Hayashi warned €œJapan may slip back into deflation if the strength of the recovery is weak and the output gap keeps falling. We don€™t want deflation to become the main scenario.€ Prime Minister Aso must call a general election by September and current polls show his Liberal Democratic Party of Japan trailing the opposition Democratic Party of Japan. Data released in Japan overnight saw the June monetary base up 6.4% y/y. Vice finance minister Sugimoto said he is unaware if Group of Eight leaders will discuss a replacement of the U.S. dollar as the world€™s key reserve currency when policymakers convene this month. Notably, the yen€™s value on a trade-weighted basis declined to its lowest level since October 2008, trading at Â¥114.80. The Nikkei 225 stock index lost 0.64% to close at Â¥9,876.15. U.S. dollar offers are cited around the Â¥104.15 level. The euro moved lower vis-Ã -vis the yen as the single currency tested bids around the Â¥134.10 level and was capped around the Â¥136.75 level. The British pound moved lower vis-Ã -vis the yen as sterling tested bids around the Â¥156.85 level while the Swiss franc moved lower vis-Ã -vis the yen and tested bids around the Â¥88.30 level. In Chinese news, the U.S. dollar moved lower vis-Ã -vis the Chinese yuan as the greenback closed at CNY 6.8304 in the over-the-counter market, down from CNY 6.8331. Vice foreign minister He Yafei reiterated China€™s calls for a diversification of foreign reserves and a stable dollar. Group of Eight officials convene in Italy next week and may discuss China€™s proposal regarding a new international reserve currency.