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Tokyo - The yen struggled in Asian trading on Wednesday after tumbling to a seven-year low against the dollar on speculation that Japanese Prime Minister Shinzo Abe will delay a planned sales tax hike.
In Tokyo, the dollar fetched ¥115.83 in afternoon trade, after topping ¥116 for the first time since October 2007 in New York.
The euro bought ¥144.30, against ¥144.38 in US trade, while it bought $1.2458 compared with $1.2474.
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, effectively printing cash, and it fell further Tuesday on speculation Abe may put off the sales tax increase.
The rumours come after an April hike hit a tentative recovery by slamming the brakes on consumer spending 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 on Wednesday that Abe may call a snap election next month if he decides to put off the sales tax hike.
Abe has said he will decide by the end of the year whether to go ahead with plans to raise the tax to 10% in October 2015.
Top government spokesperson 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.
Abe's 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 mixed against other Asia-Pacific currencies.
It firmed to Sg$1.2928 from Sg$1.2923 on Tuesday, to 1 099.54 South Korean won from 1 091.00 won and to 32.86 Thai baht from 32.84 baht.
It also climbed to 12 193.00 Indonesian rupiah from 12 149.00 rupiah and to Tw$30.64 from Tw$30.54.
The dollar was at 61.54 Indian rupees against 61.55 rupees while it weakened to 44.94 Philippine pesos from 44.99 pesos.
The Australian dollar rose to 86.73 US cents from 86.29c while the Chinese yuan edged up to ¥18.89 from ¥18.82.
