Japan Prime Minister Abe announces snap election

Japanese prime minister Shinzo Abe has called a snap election and will dissolve parliament on Friday, with a general election expected to be held on 14 December.

At a press conference on Tuesday, hastily convened after data on Monday showed Japan had fallen back into a technical recession, Abe also said he had decided to delay an unpopular increase to a sales tax increase by 18 months to April 2017.

"We promise you there won’t be another postponement,” he said, adding that he will step down if his ruling coalition fails to secure a majority in the election.

The premier said he was calling the election just two years into his four-year term as he sought a public mandate on whether to push ahead with the "three arrows" of his "Abenomics" plan, explaining that a failure to gain a majority would effectively be a rejection of Abenomics by voters.

Abe said: “I have had to make a critical decision so I feel I must seek an immediate mandate from the public. I will ask voters to deliver their judgment.”

He said his ministers were putting together a spending package to support the economy, thought to total 2trn-3trn yen and focused on reviving consumer spending, and that he planned to discuss with his coalition partners the possibility of reducing tax rates on some items.

Monday's data confirmed the Japanese economy has contracted for two successive quarters since April's first hike in the consumption tax rate from 5% to the current 8%.

But, according to the Wall Street Journal, Abe turned on critics who have called Abenomics a failure, saying they "offered no solutions, and that Japan has no time to stand still".

The Japanese yen leapt about against the dollar around the time of the announcement, but after a short while was levelling off, with analyst Craig Erlam of Alpari UK saying the lack of reaction from the markets was because "it’s been rumoured for a week and therefore as far as the markets are concerned, it’s old news".

Earlier in the day, a government bonds sale as part of the Bank of Japan's huge quantitative easing plan saw the treasury bills sold at negative yields for the first time ever.

The Ministry of Finance bond sale saw 2.312trn yen ($19.84bn) of one-year treasury bills sold, with an average accepted yield of -0.0029%.

In an interview published on Sunday, one of the architects of Abe's 'Abenomics' policies agreed with comments of Marc Faber that Japan's recent policies have been a "mild Ponzi" scheme as the BoJ is buying up most of the debt that has been issued by the government.

Koichi Hamada has called for the second sales tax rise to be delayed after the first sales tax rise had "blunted" the impact of Abenomics’ “three arrows” of monetary easing, fiscal stimulus and structural reforms designed to break out of deflation, boost growth and help Japan recover.