Japanese prime minister Shinzo Abe has told senior politicians he will delay a proposed sales tax rise and call a snap election in December, according to reports.
Abe informed the leaders of his ruling Liberal Democratic Party of his decision to call an election next month ahead of a news conference today, Japanese public broadcaster NHK reported.
The move comes after Japan's economy slipped back into recession, with GDP shrinking for a second successive quarter.
After taking power in 2012, Abe launched 'Abenomics', a mixture of stimulus and reform measures designed to break the deflationary cycle and return Japan to growth. Markets responded, with the TSE Topix and Nikkei 225 indices both outperforming the MSCI AC World index in 2013.
However, 2014 has proved to be much more difficult. After the introduction of a sales tax earlier this year, GDP plunged 7% in the second quarter compared to the same time last year. A second hike in the tax was planned for October 2015.
JO Hambro Capital Management Japan fund manager Scott McGlashan said: "If Abe can maintain his two-thirds majority in the lower house his position will be greatly strengthened as he can force legislation through.
"His main opposition in recent months, however, has not been parliamentary but from the Ministry of Finance. Yesterday's poor GDP figures have weakened the Ministry's ability to frustrate the prime minister and his Abenomics."