TOKYO (AFP) - Tokyo stocks opened 0.78 per cent higher Wednesday after the yen plunged to a seven-year low against the US dollar, in a boost to Japanese exporters.
The Nikkei 225 index gained 129.01 points to 17,253.12 at the start.
The yen has plummeted on growing speculation that Prime Minister Shinzo Abe may put off next year's planned tax increase.
"Speculation about the sales tax deferment is going to cause the currency markets to be volatile for a while, and that could result in more stock market volatility as well," said Masayuki Doshida, senior market analyst at Rakuten Securities.
Abe needs to decide whether to go ahead with plans to raise the nation's sales tax to 10 percent in October 2015 after a rise to 8.0 percent in April this year.
Tax hikes are designed to help curb Japan's massive public debts, but consumer spending remains lacklustre following the rise in April.
A delay in raising the tax could result in a delay in Japan's fiscal reform and a weaker currency.
A weak yen benefits Japanese exporters, making them more competitive abroad and boosting the yen value of their repatriated profits.
Eyes are now on Japan's July-September gross domestic product data due out Monday.
Major newspapers also reported Wednesday that Abe may call a snap election on December 14 or 21 if he decides to put off the second tax hike.
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.
The dollar was at 115.65 yen early Wednesday after topping 116 yen for the first time since October 2007 on Tuesday.
The euro also jumped to 144.24 yen, down from 144.38 yen in US trade but up from 143.11 yen in Tokyo.
The common European currency bought US$1.2473 on Wednesday against US$1.2474 in New York.