By Masaki Kondo

Sept. 8 (Bloomberg) — Japanese stocks rose, giving the Nikkei 225 Stock Average its first back-to-back gain in three weeks, as the incoming government pledged faster cuts to greenhouse gases and investors speculated earnings will recover.

Meidensha Corp., the builder of the motor for Mitsubishi Motors Corp.’s electric vehicle, and GS Yuasa Corp. surged more than 9 percent on optimism demand for cleaner technologies will increase. JVC Kenwood Holdings Inc. soared 31 percent after the Nikkei newspaper said its earnings may exceed its forecast. Japan Tobacco Inc. gained 3.4 percent after Goldman Sachs Group Inc. recommended the stock.

“Earnings and the economy will continue to improve,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co., which oversees the equivalent of $14 billion. “There are still a lot of things to be worried about, but the economic cycle will take care of them naturally.”

The Nikkei 225 rose 0.7 percent to close at a one-week high of 10,393.23 in Tokyo after changing direction six times today. The broader Topix added 0.2 percent to 946.40, with five stocks advancing for every three that retreated. Mitsubishi UFJ Financial Group Inc. led a decline among banks after a report showed lending growth slowed.

Trading volumes on the Tokyo Stock Exchange have stayed below the 12-month average on all but one day since Aug. 5, as investors evaluated whether the Nikkei 225’s rally of more than 45 percent since March was justified and as Japan prepared for parliamentary elections on Aug. 30. Yukio Hatoyama’s Democratic Party of Japan won the vote by a landslide that ended single- party government of almost half a century by their opponents.

Hatoyama’s Pledge

Hatoyama pledged yesterday to cut Japan’s greenhouse-gas emissions by 25 percent by 2020 from 1990 levels. Prime Minister Taro Aso, whose Liberal Democratic Party was ousted by Hatoyama’s party, in June proposed cutting emissions 8 percent during the same period.

Meidensha climbed 12 percent to 569 yen, its biggest jump since July 21. GS Yuasa, which works with Honda Motor Co. to make car batteries, added 9.2 percent to 871 yen and was the most-actively traded stock by value in Japan.

Meidensha and GS Yuasa had the steepest increases in the Nikkei 225. Both companies are in the Topix Electric Appliances Index, which contributed the most out of 33 industry groups to the Topix’s increase.

JVC soared 31 percent to 64 yen for the sharpest gain among the 1,691 companies in the Topix. The electronics maker may have twice as much operating profit as forecast in the quarter to Sept. 30, the Nikkei said. JVC expanded its share of the U.S. market for car navigation systems and audio devices, the newspaper said.

Tobacco, Dome

Japan Tobacco, the world’s third-largest publicly traded maker of cigarettes, added 3.4 percent to 291,700 yen. Goldman lifted its rating to “buy” from “neutral,” saying it’s cheap even considering the new government may raise cigarette taxes.

Tokyo Dome Corp. advanced 8.8 percent, the third-steepest gain in the Nikkei 225, and Hokuetsu Paper Mills Ltd. climbed 4.2 percent after Nikkei Inc. retained them in the gauge in its annual review. Analysts had expected them to be removed, Osamu Shintani, an analyst at Nomura Holdings Inc., said by phone.

Mitsubishi UFJ, Japan’s largest publicly traded bank, retreated 1.8 percent to 543 yen, and Mizuho Financial Group Inc. slid 2.9 percent to 204 yen. The stocks were the biggest individual drags on the Topix, and banks collectively dropped the most among the index’s 33 groups.

Lending growth at Japanese banks slowed in August for an eighth-straight month, the Bank of Japan said today, as companies cut spending and unemployment climbed to a record.

Banks Decline

The panel that oversees the Basel Committee on Banking Supervision agreed on Sept. 6 that lenders should raise the quality of their capital by including more stock. Financial firms will also have to introduce a leverage ratio and devise ways to boost reserves when the economy is robust.

“Talk about banks raising capital levels is going to put pressure on Japanese lenders because of their small cushions,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd., which manages the equivalent of $37 billion. “We could be looking at additional equity financing from some lenders. Their interest income from loans isn’t picking up.”

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

Last Updated: September 8, 2009 04:57 EDT

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