My 1998 LS400 with 175K miles is throwing a P0161 OBD2 code, which appears to indicate a failed O2 sensor. I have cleared it and it came right back so I doubt it's a transient condition. I've noticed zero difference in the performance or smoothness of the car, but my gas mileage as reported by the trip computer has improved significantly, from 23-24 to 26. I know the O2 sensor helps with setting the fuel/air mixture, so I'm guessing my car is now running much leaner.

Leaving aside considerations of OBD2 emissions inspections, is there any downside to just leaving it? I seem to be getting better fuel economy as an upside.

 

That's the heater control circuit failure of the o2 sensor. Could be the heater circuit itself, the connector, the sensor's circuit, etc. Go under there and check it out.

If you run too lean, you'll start killing things. Be careful, and replace it soon.