Yen drops to multi-year lows on tax delay, snap elections

The Japanese currency fell to multi-year lows against most of its major peers in forex trading today (November 19th) as the delay of a planned sales tax hike and news of a snap election weighed on international markets.

On Monday, it emerged that the Far East nation had entered a technical recession in the three months to September 2014, with gross domestic product contracting 1.6 per cent against expectations for a gain of 2.1 per cent.

Shortly afterwards, prime minister Shinzo Abe confirmed that a scheduled increase in sales tax - the second this year, after a similar hike in April - would be postponed. He also called elections for December in an effort to reinforce support for his economic policies.

As of 07:30 GMT, the yen had slipped to a fresh seven-year low against the US dollar, with the  USD/JPY currency pairing at 117.34 - an increase of 0.41 per cent on the close of yesterday's Asian session.

It also touched six-year lows against the euro, with EUR/JPY up 0.39 per cent to 147.01.

Speaking to Bloomberg, Shinji Kureda - head of the Sumitomo Mitsui Banking forex trading group in Tokyo - said that the yen's weakening trend "remains intact".

"Should Abe's coalition fail to retain a majority in the election, that would damp dollar-yen's ascent," he added, "but the government should be able to clear such an easy challenge."

The new economic data out of Japan has not affected the central bank's decision to increase its bond-buying stimulus programme, which at the end of October it announced would be stepped up to a record 80 trillion yen per year.

Elsewhere in forex trading, the EUR/USD currency pairing slipped 0.09 per cent to 1.2520, weighed on by expectations for fresh stimulus measures from the European Central Bank.