The source is Nikkei’s Morning Post and claims that Nintendo will release a newer version of the DSi with 4″ screens (the current DSi has 3.25″ screens).  The source also claims that Nintendo will release it in Japan ‘within the year’.  We’ll keep you posted if anything comes of this.

Update: This is no longer a rumor.  IGN reports that the new DSi will be released in Japan before the end of the year for 18,900 yen ($205 USD), the same price as the current DSi in Japan.  No word on a release outside of Japan just yet, but stay tuned!

Link and IGN Link