Japanese shares rose and the yen eased Tuesday morning after a report that Prime Minister Shinzo Abe is considering a corporate tax cut to offset a planned two-stage increase in the sales tax.
Abe is trying to spur growth and pull the world's third-largest economy out of 15 years of deflation with fiscal and monetary expansionary policies.
The Nikkei newspaper quoted government sources as saying Abe has called for a study on lowering the corporate tax rate as a way of easing the burden on Japanese companies and attracting foreign investment.
"The media report on Abe's move to consider lowering the corporate tax is positive for the stock market," Mitsushige Akino, a fund manager at Ichiyoshi Asset Management, told Reuters.
Meanwhile, Japan's core machinery orders fell 2.7 percent in June from the previous month, government data showed Tuesday, a sign that the Abe government's reflationary policies have yet to encourage companies to boost capital spending.
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Tokyo's Nikkei share average climbed 1.7 percent, rebounding after it fell to its lowest point since late June following Monday's GDP data, to break above its 100-day moving average.
The yen slipped 0.4 percent to 97.265 to the dollar, pulling further away from a seven-week high of 95.810 touched last week.
Against a basket of major currencies, the dollar was up 0.2 percent, extending gains into a third day in anticipation that U.S. data will point to the Federal Reserve rolling back its monetary stimulus program sooner rather than later.
Asian shares as measured by MSCI Asia-Pacific ex-Japan index dipped 0.1 percent, pulling back from a two-week high reached on Monday, while South Korean shares gained 0.5 percent.