* Japan PM Noda says open to dissolving parliament on Friday
* General election likely to follow soon afterwards
* Dollar/yen, euro/yen surge after Noda's comments
By Masayuki Kitano
SINGAPORE, Nov 14 The yen fell broadly on
Wednesday after Japanese Prime Minister Yoshihiko Noda said he
was open to dissolving the lower house of parliament later this
week and to hold elections next month.
Noda told parliament he would be willing to dissolve
parliament on Nov. 16 and hold elections in December if the
opposition agreed to pass reforms to the electoral system.
The prospect of an early election is regarded as negative
for the yen, as the most likely victor would be the main
opposition Liberal Democratic Party and an LDP-led government
would probably put pressure on the Bank of Japan to ease
Shinzo Abe, the LDP's leader, said last week that the BOJ
should continue monetary easing until it achieved 3 percent
inflation. The central bank had set a 1 percent inflation target
Market players are also worried that the LDP may be less
committed to fiscal belt-tightening measures such as planned tax
hikes than Noda's ruling Democratic party.
"The yen could weaken for both of those reasons," said
Masafumi Yamamoto, chief FX strategist at Barclays in Tokyo.
The yen slid following Noda's comments.
The dollar rose 0.6 percent to 79.86 yen and the euro
climbed 0.7 percent on the day to 101.53 yen.
A recent Japanese media poll showed that Japan's ruling
Democratic party was headed for a drubbing, with voter support
for Noda's government at its lowest since he took office last
The euro inched up 0.1 percent versus the dollar to $1.2714
, hovering near a two-month low of $1.2661 set on Tuesday,
when the euro fell on weak German economic sentiment data.
Uncertainty over when international lenders may agree to
release the next tranche of aid for Greece have also weighed on