TOKYO (Reuters) - Japan's Nikkei share average extended gains on Tuesday, propelled by buying in futures and call options as speculators pondered the possibility Prime Minister Shinzo Abe may postpone a planned sales tax increase.
The Nikkei share average rose more than 2.0 percent to 17,133.50, a level last seen in October 2007.
Local media reported on Tuesday that Japanese Prime Minister Shinzo Abe might call a snap election before the end of the year if he decides to delay a planned hike in the sales tax to 10 percent from next October. No election for parliament's lower house need be held until 2016.
Abe's junior coalition partner said on Tuesday his party should be prepared for a possible early election.
Financial markets have long expected that Abe will go ahead with the planned tax hike, partly because a delay could be seen as a sign of failure of his economic policies to boost growth.
Market players said the rally was led by buying in Nikkei futures and options, likely by short-term speculators, as the Nikkei sharply outperformed the broader market.
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The broader Topix gained 1.2 percent while the new JPX-Nikkei Index 400 rose 1.3 percent.
(Editing by Jacqueline Wong)