The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.60 level and was capped around the ¥91.05 level.  Traders are paying very close attention to a funds scandal involving Prime Minister Hatoyama and the Democratic Party of Japan.  This scandal has been brewing for several months but some traders believe the problems are worsening and could prevent the government from enacting needed reforms and budget agreements.  Data released in Japan overnight saw November industrial production downwardly revised to +2.2% from +2.6% m/m.  Bank of Japan lifted its economic assessment in four of Japan's nine regions, noting the economy picked up in all regions...many regions continued to point to the low level of economic activity.  BoJ Governor Shirakawa reported The Bank of Japan recognized its is a crucial challenge for Japan's economy to overcome deflation and return to a sustainable growth path with price stability. The central bank is aiming to maintain an extremely accommodative financial environment.   There is increasing speculation the central bank will extend its near-zero per cent interest rate policy and possibly ramp up fund injections into the economy.  Group of Seven finance ministers are expected to discuss exchange rates in Canada when they convene on 5-6 February.  The Nikkei 225 stock index lost 1.16% to close at ¥10,855.08.  U.S. dollar offers are cited around the ¥94.75 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥130.05 level and was capped around the ¥130.95 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥148.90 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.75 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8268 in the over-the-counter market, down from CNY 6.8269.  China International Capital Corporation reported China attracted US$ 48.7 billion of hot money in December, the largest amount in eight months.  Some economists are predicting China's inflation rate could accelerate to as high as 8% in 2010, requiring probable monetary tightenings by People's Bank of China.  PBoC last week decided to lift reserve requirements at commercial banks by 50bps from 15.50% to 16.00%, effective today. It is expected that China's consumer price inflation may have expanded by as much as 1.4% last month. China is expected to release December inflation, investment, industrial output, retail sales, and Q4 gross domestic product data on Wednesday.