A Reuters report that Japanese Prime Minister Abe was considering delaying a planned sales tax increase sent the yen plummeting to a seven year low at 116.10.
The news story hit the market just after the European open. Citing an unnamed "government official close to Abe's office", it said that the government was likely to delay the tax increase, "judging that the economic recovery remains too fragile to weather a further blow".
"There's a high probability that the consumption-tax hike will be delayed," the person told Reuters. "It looks like the government will begin full-fledged consideration of this."
Another source noted that the delay could be for as long as 18 months.
The government was also said to have begun preparing for a snap election to take advantage of the popularity of the tax delay, two-thirds of the Japanese public are opposed to the increase. Several ruling party LDP legislators confirmed that planning is underway but Prime Minister Abe later denied that is the case.
Reuters had reported the same information about the tax and election plans early Sunday New York time but they garnered no market reaction.
The U.S. bond market is closed today for the Veteran’s Day holiday, stocks are open.
Chief Market Strategist
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