“Victory for Tokyo's Olympics bid is seen as helping to renew faith in Abe and his efforts to reflate the economy,” said Mike Jones, a currency strategist in Wellington at Bank of New Zealand Ltd. “That's weighing on the yen.”

Japan's gross domestic product rose an annualized 3.8 percent in the second quarter from the previous three months, compared with a preliminary estimate of 2.6 percent, the Cabinet Office said in Tokyo today.

The yen has depreciated 9.9 percent this year, according to Bloomberg Correlation-Weighted Indexes. The dollar is up 4.8 percent and the euro has gained 5 percent.

Eoin Treacy's view Inertia is one of the most important effects of deflation on sentiment. The longer one waits to make a purchase the lower the eventual price is likely to be. Consumers learn to delay purchases and investments not least in housing.. That type of mind-set leads to a slowing in the velocity of money which has profoundly inhibiting effects on the potential for an economy to grow. Therefore in order to break the inertia and motivate consumers, corporations and investors to speed up their decisions, some bold moves are required. The devaluation of the Yen represents the thin end of the wedge in terms of the reforms required to sustain growth now that the economy is beginning to perform once more.

An additional effect of deflation is that expectations tend to deteriorate. As a result we have seen companies beating their earnings guidance by a wide margin and this is likely to remain the case until managements are encouraged to make large capital allocations.

The Nikkei-225 had been drifting back towards the moving average for much of August and rallied last week to break the short-term progression of lower rally highs, A sustained move below 13,000 would now be required to begin to question medium-term scope for continued upside. The Topix Banks Index has a similar pattern. The Topix 2nd Section, which is so often a leader, broke successfully above 3200 today and a clear downward dynamic would be required to check potential for additional strength.