TOKYO (Reuters) - The Nikkei average rose 1.6 percent on Monday to hit its highest close in over a month, helped by Japanese government steps to bolster an economy in recession, with investors also relieved that struggling U.S. automakers won a $17.4 billion government loan.
Bank shares including top lender Mitsubishi UFJ Financial Group (8306.T) were among the biggest gainers after the Bank of Japan on Friday cut its key policy rate to 0.10 percent from 0.30 percent and took other steps to ease corporate credit strains.
Toyota Motor Corp (7203.T) trimmed earlier losses on a report that it would slash its annual outlook on Monday to a consolidated operating loss of 150 billion yen ($1.67 billion) -- its first such loss ever.
After the close it confirmed that number in its second profit warning in less than seven weeks, due to a relentless global slide in car sales and a crippling rise in the yen.
Trade was light on the Tokyo exchange as many investors head for the holidays, while Japanese markets will be closed on Tuesday for the Emperor's Birthday.
"The market is growing hopeful about the situation as a whole as the government looks willing to do everything it can to stabilize the financial system, including a rate cut by the BOJ and the announcement to buy commercial paper," said Soichiro Monji, a chief strategist at Daiwa SB Investments.
Tokyo also joined governments worldwide in pledging hundreds of billions of dollars of fiscal stimulus to lessen the impact of the crisis on their economies, many of which, Japan's included, are already in recession.
Its extra 4.79 trillion yen ($54 billion) budget, approved by the cabinet on Saturday, will help finance two already-unveiled spending packages totaling 10 trillion yen.
"The U.S. autos bailout is also positive as it's better to help the automakers than let them fail, but the bailout conditions are pretty strict and trouble could resurface in March," Monji said.
The benchmark Nikkei .N225 added 135.26 points to 8,723.78, the highest finish since November 11.
The broader Topix climbed 1.7 percent to 848.72.
President George W. Bush bailed out U.S. automakers on Friday with $17.4 billion in emergency loans as he sought to stave off a collapse that would have cost hundreds of thousands of jobs.
But Bush attached a string of conditions to the 3-year loans and set an end-March deadline for General Motors Corp (GM.N) and Chrysler LLC CBS.UL to prove they can restructure enough to ensure their survival or have the loans called back.
As 2008 comes closer to an end, analysts said trade will likely quiet down from now on partly due to suspension of some stocks in connection with the transition to the paperless share system in Japan to be implemented on January 5, 2009.
Trade in 14 stocks listed on the Tokyo Stock Exchange including NTT (9432.T) and Mizuho Financial Group (8411.T) will be suspended between December 25-30 and will be resumed on January 5, according to the bourse. Continued...
