The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.05 level and was supported around the ¥90.30 level. Traders reacted to news that Japan Airlines will file for bankruptcy, a move that had been anticipated for weeks. Data released in Japan overnight saw December consumer confidence print at 37.6. Former Bank of Japan Policy Board member Hirano reported a weak yen is positive for Japan's economy. Prime Minister Hatoyama, whose government is embroiled in a funds scandal, said the government and BoJ must cooperate in combating deflation. 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 yesterday saw November industrial production downwardly revised to +2.2% from +2.6% m/m. Yesterday, 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 yesterday reported The Bank of Japan recognized it 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 0.83% to close a ¥10,764.90. 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 ¥129.60 level and was capped around the ¥130.70 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥149.05 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.80 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8277 in the over-the-counter market, up from CNY 6.8268. People's Bank of China guided its benchmark one-year bill yield to its highest level in fourteen months to moderate record loan growth and slow asset bubbles. PBoC sold bills at a rate of 1.9264% in open-market operations and this is the central bank's latest signal that it is intent on tightening monetary policy this year. The State Administration for Foreign Exchange reported non-U.S. dollar reserves account for about 40% of China's reserves now. China International Capital Corporation reported China attracted US$ 48.7 billion of hot money in December, the largest amount in eight months. Premier Wen said China will encounter inflationary expectations this year and said China must be prepared to deal with trade frictions. Also, Wen said proactive fiscal policies will help expand domestic demand.