Japan Stocks Post Biggest Rally in Two Weeks on U.S. Spending

By Patrick Rial and Toshiro Hasegawa

Dec. 8 (Bloomberg) -- Japan stocks surged, sending the Nikkei 225 Stock Average to the steepest jump in two weeks, on speculation U.S. demand will rebound after President-elect Barack Obama pledged the biggest public works program since the 1950s.

Komatsu Ltd., the world’s No. 2 maker of earthmovers, soared by its trading limit after Obama said he’s planning the largest spending program since President Dwight D. Eisenhower created the interstate highway system. Bridgestone Corp., the world’s leading tiremaker, jumped 6.5 percent after oil prices dropped the most since 1991 last week, reducing costs. Tokio Marine Holdings Inc., Japan’s largest listed insurer, gained 8.9 percent after targeting a ninefold boost in profit by 2012.

The Nikkei climbed 411.54, or 5.2 percent, to 8,329.05 at the close in Tokyo, the biggest rally since Nov. 25. The broader Topix index rose 26.06, or 3.3 percent, to 812.08, with almost seven shares rising for each that fell.

“At the moment, governments are the only ones feeding cash into the system, and I think it’s a fair bet to say the policies of the U.S. will support demand,” said Masaru Hamasaki, who helps oversee about $3.3 billion as a senior strategist at Toyota Asset Management Co. in Tokyo. “Stocks are up on hopes that U.S. spending on public works will help businesses grow and falling oil prices will lower costs.”

Obama will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs, he said on Dec. 6 in his weekly radio speech. In an interview broadcast yesterday on NBC’s “Meet the Press,” he said the recession would worsen before a recovery took hold. The Labor Department said on Dec. 5 that U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993.

Public Spending

Komatsu added 11 percent to 1,007 yen, after having lost a fifth of its value in the previous five days. Hitachi Construction Machinery Co., the world’s largest maker of giant excavators, leapt 12 percent to 963 yen. Nippon Sheet Glass Co., which makes glass used for building facades, jumped 8.1 percent to 279 yen, the steepest gain since Nov. 4.

“A worsening employment situation usually gives lawmakers a mandate to take countermeasures,” Chisato Haganuma, a Tokyo- based strategist at Nomura Securities Co., said in an interview with Bloomberg Television. “These policies may trigger a rally in equity markets.”

Bridgestone rallied 6.5 percent to 1,466 yen. Tokyo Electric Power Co., Asia’s largest electricity generator, added 2.2 percent to 3,050 yen. Kao Corp., a user of petrochemicals as the nation’s biggest maker of household and personal care products, rose 3.9 percent to 2,910 yen.

Oil Slides

Crude oil tumbled 25 percent last week to $40.81 a barrel, the biggest weekly drop since 1991, as the recession deepened in the U.S., Europe and Japan. The contract for January delivery added 5.3 percent today after the Organization of Petroleum Exporting Countries’ president said there was consensus for a “significant” production cut when the group meets next week.

Tokio Marine gained 8.9 percent to 2,315 yen. The company said after the close of trading on Dec. 5 it aims to boost net income to 220 billion yen ($2.4 billion) by March 2012 as two overseas acquisitions begin contributing to earnings.

Rival Sony Financial Holdings Inc. surged 13 percent, while Mitsui Sumitomo Insurance Group Holdings Inc. advanced 10 percent.

Mizuho Financial Group Inc., Japan’s second-largest listed bank, rose 3.6 percent to 218,300 yen, while Sumitomo Trust & Banking Co. leapt 8.8 percent to 420 yen. Regional lender Fukuoka Financial Group Inc. climbed 5.9 percent to 305 yen, boosted by an upgrade to “neutral” from HSBC Holdings Plc.

Aeon Rallies

Loans, excluding those by credit associations, increased 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today. That was the biggest advance since at least 1992, when the measure was initiated.

Aeon Co., Japan’s second-largest retailer, jumped 6.2 percent to 879 yen, while Mitsubishi Corp., Japan’s largest trading house by value, rose 8.5 percent to 1,093 yen. Mitsubishi will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.

Nikkei futures expiring in December added 6 percent to 8,370 in Osaka and gained 5.8 percent to 8,350 in Singapore.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.