Japanese stocks jumped for a second day as better-than-expected indicators in the U.S. stoked speculation the world’s biggest economy is recovering. Komatsu Ltd., the world’s No. 2 maker of earthmovers, jumped 4.9 percent as the U.S. Institute for Supply Management’s manufacturing gauge rose for a third month. Sony Corp. surged 8.5 percent on speculation tax changes will reduce its yearly loss. Toyota Motor Corp., the largest automaker globally, leapt 6.4 percent on its narrower-than-estimated decline in U.S. sales. Mitsubishi UFJ Financial Group Inc. climbed 5.5 percent after U.S. Treasury Secretary Timothy Geithner said there are “encouraging signs” in the financial market. The Nikkei 225 Stock Average advanced 313.18, or 3.8 percent, to 8,665.09 as of 12:49 p.m. in Tokyo, adding to yesterday’s 3 percent gain to the highest since Jan. 9. The broader Topix index climbed 29.81, or 3.8 percent, to 823.63. “An initial recovery will be weak but at least the bottomless deterioration we’ve seen is now over,” said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “I’m shifting to cyclical shares, including automakers and financials, from defensives to reflect the possible recovery.” The Nikkei climbed 22 percent from a 26-year low on March 10, narrowing this year’s loss to 2.9 percent, as confidence increased in government and central bank efforts to boost growth and lending. High Correlation The Standard & Poor’s 500 Index climbed 1.7 percent in New York after the Institute for Supply Management said its factory index increased to 36.3 last month from 35.8 in February. Also, a gauge of U.S. pending home resales rose 2.1 percent in February from January, the National Association of Realtors said. Economists had estimated the index would be unchanged. “People have started to shrug off negative factors and focus on signs of recovery,” Juichi Wako, a strategist at Tokyo-based Nomura Securities Co., said in an interview with Bloomberg Television. “The ISM index has a high correlation with Japan’s factory output, and the gauge’s improvement points to a less severe sales drop for Japanese manufacturers.” Komatsu, which gets about 16 percent of its sales in the Americas, added 4.9 percent to 1,172 yen, while industrial-robot maker Fanuc Ltd. jumped 6.5 percent to 7,180 yen. Canon Inc., which gets a third of its sales from the Americas, rose 4.7 percent to 3,030 yen. ‘Surely Positive’ Sony, the world’s second-biggest maker of consumer electronics, climbed 8.5 percent to 2,305 yen. A change in Japan’s corporate tax code may boost earnings for Sony, Toyota and other companies as it exempts levies on dividends paid from overseas units to parents, making reserves for such tax redundant, the Nikkei newspaper reported today. The change is “surely a positive factor” for Sony’s earnings, though it’s uncertain how much of the 90 billion yen ($912 million) in provisions it set aside last fiscal year can be returned, spokeswoman Mami Imada said. Toyota gained 6.4 percent to 3,480 yen, and closest domestic rival Honda Motor Co. advanced 9.5 percent to 2,705 yen. Nissan Motor Co., Japan’s No. 3, soared 11 percent 429 yen. Toyota posted a 39 percent drop in U.S. sales last month, narrower than an estimated 41 percent tumble. Sales at Honda and Nissan fell 36 percent and 38 percent respectively, whereas analysts had projected a 42 percent slump for both companies. The Nikkei’s climb since March, along with falling profit estimates, has driven up the gauge’s price-to-earnings ratio to 269 times, compared with the S&P 500 Index’s 14 times, according to Bloomberg data. Banks Advance “Overseas investors never ignore valuations and the Nikkei’s high P/E will weigh on the market once people cool their heads,” Norihiro Fujito, senior investment strategist at Tokyo-based Mitsubishi UFJ Securities Co., wrote in a Japanese- language report yesterday. Mitsubishi UFJ rose 5.5 percent to 522 yen. Mizuho Financial Group Inc., Japan’s No. 2 listed bank, jumped 7.3 percent to 205 yen. Nomura Holdings Inc., the nation’s top brokerage, gained 7.4 percent to 549 yen. “You’re seeing encouraging signs of improvement in our markets,” Geithner said yesterday in a Bloomberg Television interview. He accompanied President Barack Obama to London for Group of 20 meetings of leaders from the world’s biggest economies.

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