The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.70 level and was supported around the ¥90.20 level. Many traders are concluding an additional quantitative easing measure by Bank of Japan next week seems like a foregone conclusion. Central bankers are known to be concerned that deflationary pressures are likely to remain in Japan through at least fiscal year 2012 and the Japanese government continues to pressure the BoJ into loosening policy further. Deputy finance minister Noda today said the BoJ and government share the view that the economy is in a mild deflationary state. Data released in Japan overnight saw Q4 gross domestic product rise at an annual 3.8% rate, notably less than the preliminary 4.6% figure reported last month. Also, the GDP deflation tumbled a record 3.8%, underscoring the seriousness of deflation in the Japanese economy. Demand across Asia is improving, however, and this may allow Japanese companies to increase capital expenditures. Capital spending was up 0.9% q/q in Q4 but approximately one-third of factory capacity is idle now in Japan. Japan's fiscal situation remains critical and the government's ability to increase fiscal spending through supplementary budgets to counter deflationary pressures is limited. Dealers continue to cite strong repatriation flows during the Australasian sessions. The Nikkei 225 stock index gained 0.96% to close at ¥10,664.95. 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 ¥123.85 level and was supported around the ¥123.00 figure. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥136.45 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥84.80 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 6.8260. Data released in China overnight saw inflation increase a significant 2.7% y/y and this has led to speculation that People's Bank of China could hike rates or tighten policy further as early as tomorrow. The M2 money supply measure has increase more than 25% over the previous twelve months and this will invariably lead to inflationary pressures. It was also reported that Chinese banks provided CNY 700 billion in new loans last month.