By Masaki Kondo and Satoshi Kawano Dec. 18 (Bloomberg) -- Japan’s Nikkei 225 Stock Average advanced, led by banks and developers, on optimism central bank rate cuts will ease lending. Gains were limited as the surging yen and Honda Motor Co.’s forecast cut sent auto shares lower. Sumitomo Mitsui Financial Group Inc., Japan’s No. 3 listed bank, jumped 8.5 percent as traders bet the Bank of Japan will reduce rates this week, following a record cut by the Federal Reserve. Mitsui Fudosan Co., Japan’s biggest developer, jumped more than 4 percent for a second day. Orix Corp., which provides corporate loans and develops real estate, surged 10 percent. Honda slumped 3.5 percent, while larger rival Toyota Motor Corp. declined 2.3 percent as the yen traded near a 13-year high. “The U.S. rate cut boosts expectations countries like Japan will further reduce borrowing costs, easing credit turmoil,” said Takanori Miyajima, a fund manager at the investment- management affiliate of Tokai Tokyo Securities Co. “That’s spurring investors to snap up real-estate and bank shares.” The Nikkei 225 rose 54.71, or 0.6 percent, to close at 8,667.23 in Tokyo, reversing a 0.9 percent drop. The broader Topix index inched up 0.23, or less than 0.1 percent, to 838.69, with three stocks falling for each that rose. There’s a 58 percent chance the central bank will lower borrowing costs from the current 0.3 percent level after concluding its two-day meeting tomorrow, according to calculations by JPMorgan Chase & Co. using overnight interest- rate swaps. The Fed on Dec. 17 cut its benchmark rate to as low as zero for the first time and said it will do whatever is needed to end the longest recession in a quarter-century. The collapse of the U.S. mortgage market has prompted banks to tighten lending, stripping businesses of cash. On Dec. 15, Matsumoto Kenko Co. became the 24th listed Japanese property- related company to file for bankruptcy this year. Total bankruptcies of listed companies reached 32, the most for a single year since World War II, according to research firm Teikoku Data Bank Co. Nikkei futures expiring in March added 0.1 percent to 8,660 in Osaka and dipped 0.2 percent to 8,650 in Singapore. To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.netSatoshi Kawano in Tokyo at skawano1@bloomberg.net.

Source