Pressure appeared to be building for Abe to call a snap
election and postpone the tax hike. The last hike in
April - part of a plan to rein in public debt - sent
Japan's economy into a slump.While a postponement of the sales tax would boost sentiment towards Japanese stocks in the near term, in the medium to longer term it is unlikely to be welcomed by investors as it would delay much needed fiscal reforms.
The dollar hit 116.11 yen on trading platform EBS, its highest since October 2007. It was last trading at 115.85, up 0.9 percent on the day.
The yen had already been weakened by the Japanese central bank's announcement on Oct. 31 that it would expand its huge stimulus programme, with the greenback surging over 6 percent since then against the Japanese currency.
Elsewhere, the Swiss franc hit a 26-month high against the euro, fuelling talk that the Swiss National Bank might buy euros to honour its 2011 promise to keep the euro above 1.20 francs.
The market is now looking ahead to this week's batch of U.S. data - including retail sales and consumer sentiment - that may further underscore the brighter U.S. economic outlook relative to Europe and Japan.
The dollar did weaken a little after U.S. non-farm payroll (NFP) data on Friday failed to live up to more optimistic expectations, hitting 113.86 yen on Monday.
"Dollar buyers took advantage of the post-NFP dip to build on longs," RBC Capital Markets senior currency strategist, Elsa Lignos, wrote in a note to clients, noting that she expected the dollar to strengthen this week.
