The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥89.15 level and was capped around the ¥89.55 level. Traders continue to sell Japanese government bonds in the cash and futures markets as the markets continue to reduce exposure to sovereign risk. The benchmark 10-year JGB is now yielding around 1.355%. BoJ Deputy Governor Yamaguchi warned economic growth may stall temporarily and said growth may be in a pretty severe state through this summer, so we can't really expect a rapid expansion. The central bank continues to expect tepid economic growth with deflationary pressures at the consumer price inflation level through the fiscal year ending March 2012. Data released in Japan overnight saw bank lending off 1.5% y/y in January, highlighting the broad lack of capital in Japan at this time. The Nikkei 225 stock index lost 1.05% to close at ¥9,951.82. 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 ¥121.55 level and was capped around the ¥122.75 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥138.60 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.85 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8266 in the over-the-counter market, up from CNY 6.8265. The Chinese government reiterated it aims to keep inflation around 3% this year. It appears likely People's Bank of China will raise interest rates this year to control inflation and counter growing asset bubbles. Group of Seven policymakers this weekend issued a discussion paper that calls for more currency flexibility, hardly the approach that many traders wanted officials to take with China.