The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥92.80 level and was supported around the ¥92.30 level. Data released in Japan overnight reinforced the view that deflation remains a serious problem in Japan. First, Tokyo-area headline consumer price inflation was off 1.8% y/y with the ex-food and energy component off 1.2% y/y. Second, nationwide consumer price inflation at the headline level was off 1.1% y/y and off 1.1% y/y at the ex-food and energy core level. These data suggest deflation will remain a problem in Japan through 2011. Bank of Japan's Policy Board is likely to keep a very accommodative monetary policy for several more business quarters. New Policy Board member Miyao reported Lowering interest rates even a little bit, or keeping interest rates at very low levels amid a recovery, may be able to provide more stimulus and help sustain economic growth...it is important for the central bank to maintain its accommodative policy stance and provide monetary support for companies and households...the economy has been picking up recently, but incomes and employment remain in a severe state, and there are various risks and uncertainties to the outlook. The three-month euroyen futures rate is trading around 0.439% with the December 2010 rate currently trading at 0.380%, evidencing a lower market bias on interest rates through the end of the year. The Nikkei 225 stock index climbed 1.55% to close at ¥10,996.37. 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 ¥124.15 level and was supported around the ¥122.95 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥137.95 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥86.80 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8270 in the over-the-counter market, down from CNY 6.8271. China announced it will launch stock index futures trading from 16 April on the CSI 300 Index. Traders are focusing on a report from the U.S. due on 15 April that may possibly label China as a currency manipulator. Some observers suggest a major trade war might develop if China is labeled a currency manipulator by the Obama administration. People's Bank of China advisor Fan Gang said the central bank may adopt a managed float of the yuan currency.