The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥89.95 level and was supported around the ¥88.55 level. Japanese financial markets were closed overnight and will reopen tonight. Bank of Japan and the government remain embroiled in a disagreement about how best to address Japan's problem with deflation. On Friday, the government declared the economy was again suffering from deflation for the first time since 2006. The government is exerting pressure on the central bank to make sure it does not unwind its ultra-easy monetary policy anytime soon. Last week, Bank of Japan's Policy Board kept its overnight call rate target unchanged at 0.1%. BoJ Governor Shirakawa then said the government and the central bank share the view that prices will keep declining. Shirakawa also defended his belief that purchasing more corporate bonds will not help the economy, saying When there is a shortage of demand in the economy, providing liquidity alone won't help to push prices higher. Most BoJ-watchers believe the central bank will keep interest rates unchanged through at least most of 2010. Referring to the economy, the central bank on Friday reported Japan's economy is picking up mildly due to various policy measures taken at home and abroad, although the momentum of a self-sustaining recovery in domestic private demand remains weak. BoJ's Policy Board recently predicted core consumer prices will decline 1.5% in the year ending March 2010, decline 0.8% in the fiscal year ending March 2011, and decline 0.4% in the fiscal year ending March 2012. The Nikkei 225 stock index on Friday lost 0.54% to close at ¥9,497.68. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥133.45 level and was supported around the ¥132.05 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥148.20 level while the Swiss franc moved lower vis-à-vis the yen and tested offers around the ¥88.40 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8319 in the over-the-counter market, up from CNY 6.8289. People's Bank of China is said to have requested that its commercial banks slow down their rampant lending and increase their capital. People's Bank of China Governor Zhou on Friday reported China is passive on the U.S. dollar and that its value does not impact the Chinese economy. Zhou also said the central bank will continue to maintain the moderately loose monetary policy and expansionary fiscal policy for a while. U.S. Treasury Secretary Geithner last week reported he is quite confident China will relax controls on its currency.