May 28 (Bloomberg) -- Japanese stocks rose, led by automakers and battery-related companies after the yen weakened to a nine-day low and a newspaper said the government will try to boost usage of rechargeable cells.

Toyota Motor Corp., the biggest carmaker globally, jumped 2.7 percent. Sanyo Electric Co., the world’s largest maker of rechargeable batteries, leapt 5.2 percent. Sumitomo Osaka Cement Co. climbed 8.5 percent on a Nikkei newspaper report it will invest in equipment used to make battery materials. Japan Tobacco Inc. sank 6.9 percent as the company set terms for five- year bonds and after Reuters said an opposition lawmaker proposed increasing cigarette taxes.

The Nikkei 225 Stock Average drifted between gains and losses 11 times before closing higher by 12.62, or 0.1 percent, at 9,451.39. The broader Topix index added 2.74, or 0.3 percent, to 895.59, with three stocks rising for every two that retreated.

“As investors have excess liquidity, those who missed the recent rally are compelled to buy when they see a dip in share prices,” said Kazuyuki Terao, who oversees about $1.3 billion as chief investment officer of RCM Japan Ltd.

The Topix has risen 4.2 percent on the year, driving down its estimated dividend yield to 1.81 percent, the lowest level since September, according to Bloomberg data. The spread between that yield and the return on 10-year Japanese government bonds has narrowed by 80 percent from a record 168.7 basis points on Jan. 26.

‘Looking for Bargains’

The yen depreciated to 96.58, the weakest level since May 19, from 95.60 at the 9 a.m. open of stock trading, lifting earnings prospects for automakers.

Toyota added 2.7 percent to 3,800 yen, and Nissan Motor Co., which trades at below its shareholder’s equity, rose 2.8 percent to 561 yen. Automakers contributed the most to the Topix’s gain, followed by electronics.

“Investors who have been on the sidelines are looking for bargains,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $6.1 billion in Tokyo.

Sanyo Electric surged 5.2 percent to 241 yen. The government is considering standardization of safety guidelines in an effort to increase the use of rechargeable cells in homes, the Nikkei newspaper said. Sumitomo Osaka Cement climbed 8.5 percent to 218 yen after a separate Nikkei report said it will make lithium-iron phosphate for batteries. The company confirmed the report.

Yield Curve

Sumitomo Metal Mining Co., Japan’s No. 1 gold producer, surged 6.1 percent, sending its peers to the sharpest climb among 33 industry groups on the Topix, on expectations for increasing demand for gold as an inflation hedge. Mitsubishi Materials Corp. jumped 5 percent.

The so-called yield curve, which plots the difference in returns between bonds of varying maturities, steepened to a record 2.76 percentage points. A steeper curve suggests investors are demanding more to lend to the government for longer terms because of the risk an economic recovery will lead to faster inflation.

Japan Tobacco, the world’s No. 3 cigarette maker, tumbled 6.9 percent to 267,200 yen, making it the second-biggest loser on the MSCI World Index. The company set terms for a 100 billion yen ($1.03 billion) sale of five-year, 1.128 percent bonds at par, according to a Nomura Securities Co. banker. Motohisa Furukawa, a member of the opposition Democratic Party of Japan, said in an interview that cigarette taxes should be raised to curb smoking, Reuters reported yesterday.

Isetan Mitsukoshi Holdings Ltd., Japan’s largest operator of department stores, fell 2 percent, while smaller rival Uny Co. slumped 3.4 percent. The nation’s retail sales slid for an eighth month in April with a 2.9 percent decline from a year earlier, the Trade Ministry said today.

Nikkei futures expiring in June inched up 0.2 percent to 9,450 in Osaka and dipped 0.1 percent to 9,415 in Singapore.

To contact the reporters on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Kotaro Tsunetomi in Tokyo at ktsunetomi@bloomberg.net.

Last Updated: May 28, 2009 03:42 EDT