The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥92.05 level and was supported around the ¥91.30 level.  Poor Japanese economic data contributed to the yen's weakness. First, Bank of Japan's consumer sentiment diffusion index printed at -67.0 in December, an improvement from -72.3 in September but a higher number of respondents reported they expect the economy to worsen by the end of the year.  This pessimism is coincident with worsening deflationary pressures in the Japanese economy.  Data released in Japan overnight saw December domestic corporate goods price inflation climb +0.1% m/m and decline 3.9% y/y.  Also, November core machinery orders were off 11.3% m/m, significantly below positive expectations and worse than November's print.  Traders are closely monitoring the yen's progress given recent policy announcements from People's Bank of China.  New finance minister Kan reported he plans to address the yuan at the Group of Seven meeting in February and indicated there are still various policy measures that could be taken by Bank of Japan to relax monetary conditions further.  BoJ reported households' inflationary expectations fell to their lowest level in more than four year as consumers expect prices to rise 1.7% in the next year - the smallest projected increase since June 2005.  The Nikkei 225 stock index gained 1.61% to close at ¥10,907.68.  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 ¥133.65 level and was supported around the ¥132.40 level.  The British pound moved higher vis-à-vis the yen as sterling tested bids around the ¥150.00 figure while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.30 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8272 in the over-the-counter market, up from CNY 6.8267.  Traders are still talking about People's Bank of China's decision to lift reserve requirements at commercial banks by 50bps from 15.50% to 16.00%, effective 18 January.  This is PBoC's most effective weapon to enact implement a contractionary monetary policy and follows a move to reduce monetary accommodation last week by selling one-year bills at higher rates.  China Investment Corporation executive Peng moved the markets this week when he said I think the dollar is at its bottom now. There will be very limited space for the dollar to drop further.  The yen is what, I think, has the worst outlook. The yen will continue to drop, unlike the dollar, which will not serve for long as a source of funding carry trades.