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Japan's Nikkei leads gains in Asia on tax hopes

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[HONG KONG] Japanese stocks led most Asian markets higher Monday following a report that the government plans to delay a planned sales tax hike.

After last week's sell-off, investors in Tokyo cheered a report Saturday that said Prime Minister Shinzo Abe had told officials he wants to put off the consumption tax rise to avoid damaging the already tottering economy, the Nikkei business daily said. It is not know how long he intends to postpone it.

The last rise, in April 2014 - the nation's first in 17 years - was blamed for stalling a nascent recovery and pushing Japan into recession from which it has hardly recovered.

While experts say Tokyo must lift tax revenues to deal with soaring debts and to pay for the ballooning cost of welfare as the population ages, a delay is seen as crucial to support economic growth.

Attention now turns to the release Wednesday of economic growth figures for the first quarter of the year.

The Nikkei ended the morning one per cent higher, with a weaker yen also providing support.

Speculation the Federal Reserve could lift borrowing costs sooner than later boosted the dollar after data Friday showed US consumer spending jumped far quicker than expected in April, reversing a worrisome stall in the first quarter of the year.

The greenback bought 108.85 yen in the morning, up from 108.63 yen in New York.

However, the strong US data fuelled talk of another increase in interest rates, with the prospect hitting New York traders. All three main indexes ended lower.

Among other Asia markets Hong Kong was up 0.3 per cent and Sydney gained 0.6 per cent while Seoul was marginally higher.

However, Shanghai retreated 0.5 per cent after figures at the weekend showed more weakness in the Chinese economy. Industrial output, retail sales and fixed asset investment all came in below expectations.