Oct. 11 (Bloomberg) -- Japanese stocks advanced, driving the Nikkei 225 Stock Average to an 11-week high, after Moody's Investors Service raised its debt rating for the nation citing confidence the government led by Prime Minister Yasuo Fukuda will pursue debt-cutting measures.

Kawasaki Kisen Kaisha Ltd. led shipping companies higher after rates rose to a record. Mitsubishi Corp. set a new high after metals and oil prices climbed.

``I think the market was looking for a catalyst,'' said Jon Easton, who manages about $100 million in Japanese equities at EN Asset Management in Tokyo. ``It shows that Moody's has faith the Fukuda administration will take some measures to improve the fiscal deficit problem.''

The Nikkei 225 has added 1.4 percent this year compared with 21 percent for the Morgan Stanley Capital International Asia Pacific Index.

The Nikkei 225 gained 281.09, or 1.6 percent, to 17,458.98 at the close of trading in Tokyo, its highest since July 26. The broader Topix index added 19.34, or 1.2 percent, to 1,677.52.

Consumer lenders dropped after the Nikkei newspaper reported local governments are trying to seize refunds from companies such as Takefuji Corp. owed to borrowers who are delinquent in tax payments.

Japan's local-currency debt rating was raised one level to A1 by Moody's, citing confidence Fukuda will cut spending to reduce the nation's borrowings. That was the first time the agency has boosted its rating on Japan since assigning the country the top Aaa grade in 1993.

Mitsubishi Record

``It seems that Moody's upgrade was an opportunity for foreign investors to focus on Japanese stocks,'' said Hideyuki Ookoshi, who oversees $365 million at Chiba-Gin Asset Management Co. in Tokyo. ``The Japanese market has lagged behind others.''

Kawasaki Kisen, the country's third-biggest shipping line operator by sales, jumped 58 yen, or 3.5 percent, to 1,731, a record. Nippon Yusen K.K., the largest, advanced 59 yen, or 5.1 percent, to 1,213.

The Baltic Dry Index, a benchmark for the price of shipping bulk commodities such as iron ore and coal, jumped 3.6 percent to a record 10,218 yesterday, bringing the gains for this year to 130 percent.

Shippers also climbed after Nomura Securities Co. recommended investors buy shares of Inui Steamship Co. and Shinwa Kaiun Kaisha Ltd. Inui surged 13 percent while Shinwa gained 11 percent.

Mitsubishi Corp., Japan's largest trading company, rose 150 yen, or 4.3 percent, to 3,670, a new high. The company generates the second-biggest proportion of its sales from selling crude and industrial fuel. Mitsui & Co., the second biggest, gained 110 yen, or 3.9 percent, to 2,920.

Aiful, Takefuji

A measure of six metals traded on the London Metal Exchange, including copper and nickel, gained 1.7 percent, the most for three weeks. Copper increased 1.5 percent, nickel rose 2.6 percent, and zinc added 2.3 percent. Crude oil for November delivery rose 1.3 percent to $81.30 yesterday in New York.

``Demand for commodities such as copper will not be affected much by the U.S. economy, so trading houses and shippers are good bets,'' said Akihide Kinugawa, who helps manage the equivalent of $19 billion in Japanese stocks at T&D Asset Management Co. in Tokyo.

Aiful Corp., the nation's largest consumer lender by assets, plunged 180 yen, or 8.1 percent, to 2,055. Takefuji, the third biggest by market value, slid 105 yen, or 3.8 percent, to 2,690.

Consumer lenders previously were ordered to refund interest payments to borrowers that were in excess of the legal limit. If more municipal governments seek payments of refunds owed to delinquent taxpayers, it could substantially lower the lenders' profits, the Nikkei reported.

Retailers Gain

Lawson Inc. rose 40 yen, or 1.1 percent, to 3,780, the steepest climb since March 2006. Japan's No. 2 convenience store chain said yesterday profit in the three months ended on Aug. 31 rose 21 percent to 8.29 billion yen ($70.8 million) as it opened new stores with formats targeting women and seniors. Lawson also said it will buy back up to 5.1 percent of its outstanding stock.

FamilyMart Co., the third largest, added 50 yen, or 1.6 percent, to 3,130. Mitsubishi UFJ Securities Co. boosted its recommendation on the stock two levels to ``outperform.''

Aeon Co., Japan's second-biggest retailer, advanced 79 yen, or 4.4 percent, to 1,863 after saying yesterday it will ally with a Chinese company to open as many as 30 shopping malls in the world's most populous nation.

Boeing Suppliers

Parts suppliers for Boeing Co.'s 787 Dreamliner dropped after the aircraft maker postponed delivery of the plane by six months because of parts shortages and assembly delays.

Mitsubishi Heavy Industries Ltd., which supplies wings for Boeing's 787 long-range passenger aircraft, lost 9 yen, or 1.2 percent, to 719. Kawasaki Heavy Industries Ltd., which makes body parts, fell 10 yen, or 2.2 percent, to 444.

Sony Financial Holdings Inc. rose 3.8 percent to 415,000 on its first day of trading in Tokyo after raising 320 billion yen in Japan's largest initial public offering this year. The insurance unit is Sony Corp.'s biggest profit contributor after consumer electronics. Sony was unchanged at 5,780.

Nikkei futures expiring in December rose 1.7 percent to 17,530 in Osaka and gained 1.5 percent to 17,490 in Singapore.

Aeon Co. (8267 JT)
Aiful Corp. (8515 JT)
FamilyMart Co. (8028 JT)
Inui Steamship Co. (9113 JT)
Kawasaki Heavy Industries Ltd. (7012 JT)
Kawasaki Kisen Kaisha Ltd. (9107 JT)
Lawson Inc. (2651 JT)
Mitsubishi Corp. (8058 JT)
Mitsubishi Heavy Industries Ltd. (7011 JT)
Mitsui & Co. (8031 JT)
Nippon Yusen K.K. (9101 JT)
Shinwa Kaiun Kaisha Ltd. (9110 JT)
Takefuji Corp. (8564 JT)

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Kotaro Tsunetomi in Tokyo at ktsunetomi@bloomberg.net.

Last Updated: October 11, 2007 02:45 EDT