Dec. 7 (Bloomberg) -- Japanese shares rose to a one-month high after U.S. President George W. Bush announced a plan designed to stem defaults on home loans, increasing expectations the world's largest economy will dodge a recession.

Komatsu Ltd., the world's second-largest maker of construction machinery, and Shin-Etsu Chemical Co., the No. 1 maker of silicon wafers globally, jumped after the yen weakened against the dollar.

``The U.S. is taking definitive steps to deal with the subprime problem,'' said Shigeharu Shiraishi, who helps manage about $14 billion as a managing director at Societe Generale Asset Management Co. in Tokyo. ``Compared with Japan, where the housing bubble took almost 15 years to work out, these policies are coming quick, demonstrating that one of the biggest potential hurdles is being cleared.''

Mitsui & Co. led commodities producers higher after the price of crude oil rose by the most in two weeks.

The Nikkei 225 Stock Average climbed 82.29, or 0.5 percent, to 15,956.37 at the close of trading in Tokyo, a level not seen since Nov. 7. The broader Topix index advanced 9.49, or 0.6 percent, to 1,561.76, the highest since Nov. 6.

Komatsu rose 80 yen, or 2.5 percent, to 3,240. Shin-Etsu surged 290 yen, or 4.4 percent, to 6,960. Toyota Motor Corp., which gets as much as 70 percent of its profit from operations in North America, climbed 100 yen, or 1.6 percent, to 6,340.

Rate Freeze

Bush announced a plan yesterday that would freeze rates for five years on some variable rate mortgages and provide assistance to as many as 1.2 million homeowners. The agreement, negotiated between Treasury Secretary Henry Paulson and financial companies, would also assist in refinancing into new mortgages and obtaining loans backed by the Federal Housing Administration.

The plan was celebrated by U.S. investors as the Standard & Poor's 500 Index rallied 1.5 percent to finish at the highest level since Nov. 6.

The U.S. housing market is its third year of recession. Borrowers delinquent on home loan payments has risen to the highest level since 1986, the Mortgage Bankers Association said yesterday. National land prices in Japan rose for the first time in 16 years in 2006 after the bursting of the ``Bubble Economy'' in 1990 sparked a deflationary price spiral.

Credit Easing

Exporters also rose after the yen weakened against the dollar, boosting the value of overseas sales when converted into the local currency. The yen recently fell to as low as 111.46 per dollar, down from 110.94 at the close of trading in Tokyo yesterday.

``It's obviously better the policy was created than not, but it remains to be seen how effective it will be in addressing the fundamental issues such as falling home prices,'' said Hideyuki Ookoshi, who oversees $365 million at Chiba-Gin Asset Management Co. in Tokyo. ``The gains in New York and weaker yen are boosting investor sentiment today.''

Real estate companies jumped on speculation Bush's policy will ease credit markets, allowing developers cheaper access to funds. Mitsubishi Estate Co., Japan's biggest property developer by market value, rose 60 yen, or 2.1 percent, to 2,975. Mitsui Fudosan Co., the largest by revenue, surged gained 65 yen, or 2.3 percent, to 2,865, the highest close since Nov. 7. Mitsui had 1.12 trillion yen ($10 billion) in net debt at the end of the latest financial year.

Property and housing companies also gained after the Nikkei reported the government is planning to extend tax breaks on new home purchases. Sekisui House Ltd., Japan's biggest homebuilder, climbed 45 yen, or 3.5 percent, to 1,340. Daiwa House Industry Co., the nation's second-largest, jumped 98 yen, or 6.5 percent, to 1,597, the steepest climb since October.

The stock also extended yesterday's 2.5 gain after it confirmed it's in alliance talks with Odakyu Construction Co. Odakyu soared 85 yen, or 35 percent to 330.

Oil, Metals Prices

Mitsubishi Corp. Japan's largest trading company, added 80 yen, or 2.6 percent, to 3,140. Mitsui & Co., the No. 2, surged 100 yen, or 4.4 percent, to 2,395, its biggest rally in a week. Both companies derive the largest portion of their profits from commodities dealing. Inpex Holdings Inc., the nation's No. 1 oil explorer, rose 30,000 yen, or 2.6 percent, to 1.2 million.

Crude oil for January delivery jumped 3.1 percent to $90.37 a barrel in New York yesterday, the steepest climb since Nov. 20. Copper futures gained 0.3 percent and nickel advanced 0.7 percent.

``Rising prices for commodities like oil and copper are certainly a boon for trading houses and metals producers,'' said Soichiro Monji, who helps oversee $47 billion at Daiwa SB Investments Ltd. in Tokyo.

Sumitomo Chemical Co., the nation's second-biggest chemicals producers by market value, rose 16 yen, or 1.7 percent, to 980. The company is in talks to build a 200 billion yen plastics plant in Saudi Arabia by 2012 to match one currently under construction, the Nikkei newspaper reported.

Nikkei futures expiring in December gained 0.1 percent to 15,940 in Osaka and were little changed at 15,915 in Singapore. For the week, the Nikkei advanced 1.8 percent and the Topix jumped 2 percent. Both gauges rose for a second week.

Daiwa House Industry Co. (1925 JT)
Inpex Holdings Inc. (1605 JT)
Komatsu Ltd. (6301 JT)
Mitsubishi Corp. (8058 JT)
Mitsubishi Estate Co. (8802 JT)
Mitsui & Co. (8031 JT)
Mitsui Fudosan Co. (8801 JT)
Sekisui House Ltd. (1928 JT)
Shin-Etsu Chemical Co. (4063 JT)
Sumitomo Chemical Co. (4005 JT)
Toyota Motor Corp. (7203 JT)

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

Last Updated: December 7, 2007 02:23 EST