By Masaki Kondo Oct. 30 (Bloomberg) -- Japan stocks rose, sending the Nikkei 225 Stock Average toward its sharpest three-day rally in at least 38 years, as a gain in commodity prices and a weaker yen boosted the earnings prospects for resource companies and automakers. Inpex Corp., the nation's largest oil explorer, jumped 10 percent. Honda Motor Co., which gets more than half its profit from North America, added 8.4 percent after the yen weakened to 99.12 against the dollar. Mobile-phone carrier Softbank Corp. surged by its daily limit of 13 percent after saying it will generate positive cash flow from this year. The Nikkei 225 climbed 495.51, or 6 percent, to 8,707.41 as of 12:47 p.m. in Tokyo, set for a three-day gain of 21 percent, the most since at least 1970, the limit of Bloomberg pricing data. The broader Topix index rose 38.64, or 4.7 percent, to 868.96. The Nikkei had fallen 41 percent in the past six months, steeper than the Standard & Poor's 500 Index's 33 percent decline and a 34 percent drop in Europe's Dow Jones Stoxx 600 Index. ``Japan's market will likely rebound faster as it has slumped more than other major markets'' said Masaru Hamasaki, senior strategist at Toyota Asset Management Co. in Tokyo, which manages about $15 billion. If the yen stays at about 100 versus the dollar, ``it'll lead to a decline in material costs in a few months' time, benefiting manufacturers.'' Rate Cuts Japanese Prime Minister Taro Aso will today announce economic stimulus measures worth 5 trillion yen, the Yomiuri newspaper reported today. That would follow interest rates cuts by central banks in the U.S., China and Taiwan in the past two days to stimulate demand. European Central Bank Governor Jean- Claude Trichet said on Oct. 27 he may cut rates next week. Crude oil for December delivery climbed 3.2 percent to $69.68 a barrel, after having risen the most in a month yesterday. A $1 gain in a barrel of crude boosts Inpex's annual profit by 2.2 billion yen ($22 million), the company said in May. Inpex climbed 10 percent to 549,000 yen. Closest rival Japan Petroleum Exploration Co. added 5.3 percent to 3,960 yen. Mitsui & Co., a trading company that gets more than half its profit from commodities, rose 12 percent to 935 yen. Honda, Japan's second-biggest automaker, added 8.4 percent to 2,645 yen, while market leader Toyota Motor Corp. advanced 7.1 percent to 3,750 yen. Hino Motors Ltd., Japan's biggest maker of heavy-duty trucks, declined 1.6 percent to 242 yen after cutting its full-year net income forecast by 91 percent. Of 183 Japanese companies that have reported first-half earnings so far, 53 percent lowered profit targets, according to Shinko Research Institute Co. The Japanese currency weakened against the dollar to as much as 99.12 from 96.92 at the close of stock trading in Tokyo yesterday, while depreciating against the euro to as weak as 131.04 from 123.29. A strong yen cuts the value of overseas sales of Japanese businesses, and has led companies including Canon Inc. and Sony Corp. to reduce profit targets in the past week. Debt Concern Softbank leapt 13 percent to 850 yen, bringing a two-day gain to 31 percent. The company yesterday said its surplus cash flow will increase by 79 percent next fiscal year, stemming concern the operator will be squeezed by the credit turmoil. Softbank had debt that was 8.4 times its common equity as of March 31, according to Bloomberg data. ``The biggest surprise was Softbank released its forecast on free cash flow,'' Daisaku Masuno, an analyst for Nomura Securities Co., wrote in a Japanese-language report. He raised his rating on Softbank to ``strong buy'' from ``buy,'' saying the stock is cheap. Komatsu Ltd., the world's second-biggest maker of earthmoving equipment, wasn't traded as orders to buy outnumbered those to sell by 5-to-1. The company yesterday lowered its annual earnings forecast by a tenth and said it would spend as much as 30 billion yen to buy back shares. ``The buyback clearly shows management sees the stock as undervalued at the current level,'' said Kunio Sakaida, a Tokyo- based analyst for Goldman Sachs Group Inc., wrote in a report today. He maintained his neutral rating on Komatsu. Nikkei futures expiring in December added 4.9 percent to 8,710 in Osaka and gained 5.3 percent to 8,715 in Singapore. To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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