I hope before you bought the car you've read up on the potential issues?
So yes Your right it's the O2/Lambda sensor in the exhaust your system is showing a fault on. But I would also look at replacing the top O2 sensor as well as that will fail in time.
I hope the car you bought has a full service history? As the car requires to be serviced every 6 months. The in between services are for engine and filter changes. Also I take it the auto box has been serviced? Needs to be done every 3 to 6 years with autobox filter and gear box oil change. This is an Achilles heal on these cars with many owners reporting issues with a flashing D4 on startup to gearbox issues. Rear anti-roll bar brackets should have been changed to thicker ones under the cars initial warranty as they are prone to snapping. Mine weren't and luckily a member on here had a spare one off a scrapper car so got it sorted. Also the water pump is known to fail ( Mine did ), so got that replaced. The standard y-shaped double ended exhaust is prone to rotting, a lot of owners went for aftermarket made exhausts which causes turbo over boosting in some cases and thus you may need to look for a fuel cut denfender (Car feels like it hits a brick wall effect when you gun it), front brakes are an uprated 246mm discs and not 234mm on the standard YRV, this catches many garages and brake places out as it's not correctly listed, mainly because Daihatsu only imported in the UK 210 of these cars. Apart from that can't remember what else at the moment. After 8 years of owning one I'm about to get rid if mine to a fellow enthusiast. Happy motoring!