GOP speaker John Boehner’s plan seemed on course for defeat, with up to 25 Republican rebels set to oppose the measures.
Boehner requires 216 votes to pass the House of Representatives, yet Tea Party-sympathising Republicans are reluctant to pass the plan.
With no end in sight for the efforts to raise the government’s self-enforced $14.3 trillion debt ceiling, the Nikkei sank by half a per cent in the opening minutes of trading.
Analysts said that the Nikkei is expected to trade between 9,800 and 9,950 today.
And with America’s ticking time bomb growing louder, US bond yields rose above their UK equivalents for the first time in almost two years.
The yield on UK 10-year gilts had earlier dropped within sight of an eight-month low at 2.931 per cent, while US yields exceeded 2.97 per cent.
The collapse of Boehner’s plan left him scrambling to secure Republican backing once the vote reconvenes.
Democrats hope to pounce on the Republican strife, by proposing an alternative plan, with politicians under intense pressure to come to an agreement. The US Treasury has said that it will run out of cash to service its debts at midnight next Tuesday, 2 August.