The Nikkei average rose 3.9 percent on Tuesday after the Japanese government said it would offer public funds to firms whose capital has been hurt by the financial crisis and after the yen retreated against the dollar. Exporters gained and Honda Motor Co (7267.T) surged nearly 8 percent following the announcement of further production cutbacks in North America and Japan, while a newspaper said it would increase production capacity in China by 23 percent. Shipping firms climbed after a key freight index .BADI gained partly on expectations that imports to China may start picking up as the country carries out recently adopted economic stimulus policies. Japan's trade ministry said capital will be provided only while the companies are facing difficulty in fund-raising due to market turmoil, and firms receiving the funds will be required to draw up plans to boost profitability within three years. "Bankruptcies have been increasing, and not only just among financial firms. There have been reports that funding has been tight at many large corporations," said Soichiro Monji, chief strategist at Daiwa SB Investments. "This is a plus in that it should help ease that funding squeeze." The benchmark Nikkei .N225 gained 321.51 points to 8,003.65 a day after hitting a three-month closing low, while the broader Topix rose 4.1 percent to 799.76. But others said that further gains could be difficult. "This will be positive, but it's hard to say by how much," said Noritsugu Hirakawa, a strategist at Okasan Securities, noting that details of the plan came out in news reports at the weekend. "We're facing the peak of the earnings season later this week, and it will be hard to actively buy stocks until we're through this and see how it went." Honda was the greatest contributor to the Nikkei 225 by volume weight, rising 7.8 percent to 2,100 yen. Toyota Motor Co (7203.T) rose 6.5 percent to 2,930 yen and Canon Inc (7751.T) gained 3.9 percent to 2,550 yen after the dollar climbed to 89.50 yen, a rise of 0.4 percent. Nippon Yusen (9101.T), Japan's largest shipping firm, rose 6.3 percent to 492 yen and Mitsui O.S.K. Lines (9104.T) climbed 6.5 percent to 587 yen.

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