Sept. 14 (Bloomberg) -- Japanese stocks rose by the most in two weeks, led by lenders, as concern eased that the U.S. subprime mortgage fallout will create ongoing turmoil in credit markets.

Mizuho Financial Group Inc. surged 4.5 percent after JPMorgan Chase & Co. recommended investors buy bank stocks. Canon Inc. jumped on renewed confidence U.S. consumer demand will not be curbed and after the yen weakened against the dollar.

A Federal Reserve report showed the decline in the U.S. commercial paper market slowed, while Countrywide Financial Corp. secured new financing. Jobless claims also rose less than expected. That boosted confidence tighter credit won't derail the U.S. economy and that the subprime problem will be contained to the housing market.

Commodity-related stocks such as Sumitomo Metal Mining Co. rose after prices of metals including nickel jumped and oil climbed to a record for a second day.

``There isn't a real sense of calm regarding the contraction of the credit market, but we're getting some temporary relief from all of the confusion,'' said Yasuhiro Kunii, who helps manage about $38 billion at Dai-Ichi Mutual Life Insurance Co. in Tokyo. ``If rate cuts are able to provide some support to the U.S. economy, that will give investors more confidence to buy exporters.''

The Nikkei 225 Stock Average added 306.23, or 1.9 percent, to 16,127.42 at the close of trading in Tokyo. The broader Topix index gained 21.84, or 1.4 percent, to 1,544.71. That was the steepest climb for both gauges since Aug. 31. For the week, the Nikkei was little changed and the Topix lost 0.8 percent.

Credit Market Calms

Mizuho, Japan's second-biggest lender, advanced 28,000 yen, or 4.5 percent, to 657,000, its largest gain since Aug. 23. Mitsubishi UFJ Financial Group Inc., the No. 1 bank, jumped 40,000 yen, or 4 percent, to 1.04 million. Sumitomo Mitsui Financial Group Inc., the third biggest, gained 31,000 yen, or 3.9 percent, to 821,000.

The Fed reported short-term debt in the U.S. dropped by $8.2 billion to $1.92 trillion, compared with a decline of $54.1 billion a week earlier.

Countrywide, the biggest U.S. mortgage lender, said it has lined up $12 billion of financing, easing concern the company would default on its debt obligations and create additional turmoil in the financial markets. Meanwhile, jobless claims rose by 4,000 to 319,000, lower than economists forecast for an increase to 325,000.

``Bank stocks look attractively valued,'' Katsuhito Sasajima, an analyst at JPMorgan in Tokyo wrote in a note to clients dated yesterday. ``We think they have little connection to subprime mortgage problems and face little risk related to domestic non-performing loans.''

New Toyota Factory?

Canon, the world's largest maker of digital cameras, added 160 yen, or 2.7 percent, to 5,990.

Toyota Motor Corp., poised to become the world's largest automaker this year, rose 150 yen, or 2.4 percent, to 6,530. The Nikkan Kogyo newspaper reported the carmaker will spend 100 billion yen ($871 million) to build a new automobile factory in Japan for the first time in 17 years to meet surging global demand for its models.

The yen recently fell to 115.24 against the dollar from 114.22 at the close of trading in Tokyo yesterday. A weaker yen increases the value of Japanese exporters' dollar-denominated sales when converted back into local currency.

Sumitomo Metal Mining, Japan's biggest nickel producer, climbed 155 yen, or 6.8 percent, to 2,420. The company boosted its net income forecast for the six months ending Sept. 30 by 46 percent yesterday to 89 billion yen. Sumitomo Titanium Corp., the world's second-largest processor of the metal, surged 670 yen, or 9 percent, to 8,120, rebounding from a nine-day, 19 percent slide.

Nintendo Recommendation

A measure of six metals traded on the London Metal Exchange, including copper and zinc, gained 2 percent yesterday. Copper rose 1.6 percent, nickel increased 3 percent, and zinc jumped 4 percent.

Crude oil for October delivery rose 0.2 percent to close at $80.09 a barrel in New York, a record.

Nintendo Co., the world's biggest handheld game maker, surged 2,900 yen, or 5.6 percent, to 55,100 in Osaka. CLSA Ltd. boosted its price estimate on the shares by 25 percent to 100,000 yen on the view that earnings growth will continue to beat the market's expectations.

Matsushita Electric Industrial Co., the world's largest maker of consumer electronics, gained 77 yen, or 3.9 percent, to 2,045. Goldman, Sachs & Co. lifted its rating on the shares to ``buy'' from ``neutral.''

Sapporo Surges

Sapporo Holdings Ltd., Japan's third-largest brewer, soared 54 yen, or 7.9 percent, to 742, after earlier rising as much as 15 percent. The stock gained 13 percent during the past three sessions.

Warren Lichtenstein, chief executive of buyout group Steel Partners, which proposed acquiring the company in February, visited Sapporo's offices on Sept. 11 and delivered an information request dealing with the company's management and corporate governance policies, spokesmen for the companies said.

``Investors think Steel Partners hasn't given up on the acquisition,'' said Toshihiko Matsuno, an analyst at SMBC Friend Securities Co.'s in Tokyo. ``They expect it to continue its pursuit.''

The settlement price for Japan's Nikkei 225 futures and options contracts for September delivery was fixed at 15,890.95, traders said. The price, also known as the ``special quotation,'' is calculated after all stocks in the benchmark begin trading.

Nikkei futures expiring in December climbed 2.2 percent to 16,090 in Osaka and rose 2.2 percent to 16,105 in Singapore. Japan's market will be closed on Sept. 17 for a holiday.

Canon Inc. (7751 JT)
Matsushita Electric Industrial Co. (6752 JT)
Mitsubishi UFJ Financial Group Inc. (8306 JT)
Mizuho Financial Group Inc. (8411 JT)
Nintendo Co. (7974 JO)
Sapporo Holdings Ltd. (2501 JT)
Sumitomo Metal Mining Co. (5713 JT)
Sumitomo Mitsui Financial Group Inc. (8316 JT)
Sumitomo Titanium Corp. (5726 JT)
Toyota Motor Corp. (7203 JT)

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

Last Updated: September 14, 2007 03:00 EDT