TOKYO (Reuters) - Japanese stocks jumped on Wednesday as investors cheered reports that Prime Minister Shinzo Abe will delay a planned sales tax rise to rejuvenate Japan's fragile economic recovery, and call a snap election to secure his political position.
Abe will postpone a planned second sales tax hike by eighteen months and call a general election on the issue next month, the Sankei newspaper reported.
The Nikkei benchmark gained 1.4 per cent to 17,356.75 by 0157 GMT, hitting fresh seven-year highs.
"That the market would fall on a sales tax rise was a big fear. This is hugely positive," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.
Given a fragmented opposition, a snap election could cement Abe's grip on power, despite declining approval ratings.
With third quarter GDP figures due on Monday expected to show the economy still struggling to shake off the pain of the April sales tax rise, a delay in the second-stage tax hike was seen as positive for Japan's stuttering recovery.
Economists have warned that given the parlous state of Japan's public finances, fiscal consolidation through tax increases is essential if the country is to maintain its credibility in international debt markets.
For now, however, market players were focused on policy steps to recharge Japan's economy.
"Markets are here and now. They're watching liquidity and reform," said Gavin Parry, managing director of Parry International Trading, referring to the Bank of Japan's radical easing steps and Abe's planned structural reform policies.
Japanese stocks were also encouraged by a solid Wall Street performance, and the US dollar's rise to a seven-year high of 116.11 yen overnight. The dollar was last at 115.84 at 0056 GMT. The weak yen helped Japanese exporter shares, such as Toyota Motor, which jumped 1.6 per cent and Panasonic, up 1.0 per cent.
Fujifilm Holdings shone, its shares jumping 4.7 per cent after it said its Avigan anti-influenza drug will likely be approved for treating Ebola patients early next year.