TOKYO- The yen trimmed some of its losses in Asia on Wednesday after tumbling to a seven-year low against the dollar on speculation that Japanese Prime Minister Shinzo Abe would delay a planned sales tax hike.
In Tokyo, the greenback fetched 115.34 yen in midday trade, after topping 116 yen for the first time since October 2007 in New York.
The euro bought 143.79 yen, down from 144.38 yen in US trade, while it bought $1.2464 against $1.2474 in US trade.
The dollar may stabilise around current high levels against the yen for now, with investors sitting on sidelines ahead of Abe’s final decision on next year’s tax hike, said Marito Ueda, director at FX Prime by GMO Corp.
The yen has tumbled since the Bank of Japan widened its monetary base last month, and it fell further Tuesday on speculation Prime Minister Shinzo Abe may put off next year’s planned sales tax increase.
The rumours come after an April hike hit a tentative recovery and now threatens to send the economy into recession.
“Both stocks and the US dollar are unlikely to jump straight to another high from here, but investors can’t sell at this point,” Ueda told Dow Jones Newswires.
Major Japanese newspapers also reported Wednesday that Abe may call a snap election next month if he decides to put off the sales tax hike planned for next year.
Abe has said he will decide by the end of the year whether to go ahead with plans to raise the tax to 10 percent in October 2015 after a rise to 8.0 percent from 5.0 percent in April this year
Top government spokesman Yoshihide Suga said the premier would make up his mind after seeing preliminary July-September growth data Monday and revised figures on December 8.
Holding off the second tax hike could delay Japan’s fiscal reform and weaken the yen further.
His ruling coalition would be likely to win the election, which would be greeted positively by the stock market and trigger fresh yen-selling, analysts said.