By Masaki Kondo Nov. 4 (Bloomberg) -- Japan stocks rose, rebounding from the Nikkei 225 Stock Average's worst monthly slump on record, after a drop in interest rates charged between banks raised speculation lending may recover as credit markets ease. Resona Holdings Inc., a bank that last week slashed its profit forecast by a third, jumped 8.3 percent, while Orix Corp., the nation's biggest non-bank financial company, climbed 9.7 percent. Sanyo Electric Co. was set to soar on speculation bigger rival Panasonic Corp. will buy the company. Nissan Motor Co. sank 9.5 percent after the carmaker cut its dividend and profit target. ``The stability of financial markets has been restored somewhat,'' said Hideyuki Ookoshi, who helps oversee about $365 million at Chiba-Gin Asset Management Co. in Tokyo. ``Investors are keeping a keen eye on government efforts to shore up banks' capital, which is the key to the recovery of global economies.'' The Nikkei climbed 392.10, or 4.6 percent, to 8,969.08 as of 12:42 p.m. in Tokyo. The broader Topix index rose 36.22, or 4.2 percent, to 903.34. Japan's markets were closed yesterday for a national holiday. On Oct. 31, the Nikkei lost 5 percent, capping a 24 percent drop for the month, the worst on record. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in U.S. currency slid 0.17 percentage point to 2.86 percent yesterday, according to the British Bankers' Association. That's the lowest level since the failure of Lehman Brothers Holdings Inc. on Sept. 15. Yesterday, Commerzbank AG, German's second-biggest bank, said it will get an 8.2 billion-euro ($10.3 billion) capital injection from the government. The collapse of Lehman and the U.S.'s takeover of American International Group Inc. rattled investor confidence in the global financial system, driving up the interbank lending rate to a near 10-month high on Oct. 8. The Bank of Japan lowered benchmark interest rates last week to spur growth, following similar cuts in the U.S. and China. Dividend Yield Dividend yields on the Nikkei's constituents reached 2.52 percent on Oct. 31, higher than the 1.48 percent yields on Japanese government 10-year bonds. The stock yields exceeded 2 percent on Oct. 3 for the first time since at least July 1989. Resona, Japan's fourth-largest listed bank, climbed 8.3 percent to 107,900 yen, while market leader Mitsubishi UFJ Financial Group Inc. gained 5.7 percent to 632 yen. Orix added 9.7 percent to 10,820 yen, and Tokio Marine Holdings Inc., the nation's biggest casualty insurer, rose 9.2 percent to 3,210 yen. Sanyo wasn't traded as orders to buy outnumbered those to sell by 11-to-1, while Panasonic, the world's largest maker of consumer electronics, leapt 6.4 percent to 1,609 yen. The companies will hold a press conference on Nov. 7 to announce details of Panasonic's plan to buy Sanyo, the Nikkei newspaper said, without saying where it obtained the information. A company official familiar with the negotiations earlier said Panasonic will seek to buy control of Sanyo from its biggest shareholders Goldman Sachs Group Inc., Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC Co. Paper Makers Nippon Paper Group Inc., Japan's second-largest papermaker, soared 15 percent to 298,200 yen, after saying on Oct. 31 net income surged 14 percent in the first half, and crude oil dropped by almost $4 a barrel yesterday. Oji Paper Co., the nation's biggest user of high-sulfur fuel oil, rose 7 percent to 399 yen, sending a gauge of papermakers to the biggest gain among 33 industry groups on the Topix. Crude oil for December delivery dropped 5.8 percent to $63.91 a barrel yesterday, having fallen 57 percent from a record on July 11. U.S. manufacturing contracted last month at the fastest pace in 26 years, the Institute for Supply Management said yesterday, signaling fuel consumption will decrease. Nissan Slump Nissan, Japan's third-largest carmaker, tumbled 9.5 percent to 446 yen, making it the worst performer on the Nikkei. The company expects net income of 160 billion yen ($1.62 billion) for the year ending March 31, compared with its May estimate of 340 billion yen, Nissan said on Oct. 31. Nikkei futures expiring in December added 6.3 percent to 8,980 in Osaka and gained 6.9 percent to 8,980 in Singapore. To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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