Nov. 30 (Bloomberg) -- Japanese stocks rose, driving the Topix index up by the most in almost seven months, on speculation the impact from Dubai World’s request to delay debt payments will be limited.

Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, jumped 8.6 percent and was the most actively traded stock in Tokyo trading. Mizuho Financial Group Inc. soared 9.5 percent, the biggest gain on the Nikkei 225 Stock Average. Kajima Corp., which has a contract to help build an unmanned train system in Dubai, climbed 3.1 percent as the United Arab Emirates’ central bank pledged to support its banks if Dubai World defaults. Taisei Corp., a general contractor, rallied 4.1 percent.

The Topix index rallied 3.6 percent to 839.94 at the close in Tokyo, the sharpest advance since May 7. The Nikkei 225 Stock Average added 2.9 percent to 9,345.55, the steepest climb since Aug. 24.

“Investors are buying back shares as there’s expectation the impact of the Dubai shock won’t spread,” said Hideo Arimura, a senior fund manager at Mizuho Asset Management Co., which oversees the equivalent of $35 billion in Tokyo. “People had feared the Dubai shock would upset the recovery of emerging nations and cause a double bottom in the global economy.”

Japanese banks and contractors rebounded after the United Arab Emirates’ central bank eased credit for lenders and said it “stands behind” the country’s local and foreign banks as they face losses from Dubai World’s possible default.

Contractors Rally

Mitsubishi UFJ jumped 8.6 percent to 482 yen, the first gain in five days. Mizuho Financial Group climbed 9.5 percent to 162 yen, the most since May 7. Sumitomo Mitsui Financial Group Inc. advanced 8.8 percent to 2,850 yen, the biggest increase since May 7.

“A sense of security arose in the market as no losses from the Dubai shock have been reported by financial companies in developed nations,” said Ayako Sera, a strategist at Sumitomo Trust & Banking Co. in Tokyo, which manages the equivalent of $266 billion in assets.

Kajima rallied 3.1 percent to 167 yen from a 14 percent plunge on Nov. 27. Taisei rose 4.1 percent to 151 yen after falling 7.1 percent. Shimizu Corp. added 3.1 percent from a fall of 4 percent and Obayashi Corp. added 1.4 percent from an 8.7 percent retreat.

“If construction companies that have projects under way can’t get paid, Taisei Corp., Shimizu Corp., Obayashi Corp. and Kajima Corp. stand to lose tens of billions of yen in revenue,” according to a Daiwa Securities Group Inc. report dated Nov. 27.

Topix Lags Behind

The Topix has fallen 6.1 percent this month, compared with increases of 5.3 percent for the Standard & Poor’s 500 Index in the U.S. and 2.4 percent for the Dow Jones Stoxx 600 Index in Europe. Stocks in the benchmark are valued at 35 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx.

Japan’s stocks have slid on concern a stronger yen will make the nation’s exports more expensive and reduce revenue when companies convert overseas sales into the local currency.

Real-estate companies advanced, led by Mitsubishi Estate Co., after a report from Daiwa Securities Group Inc. said home builders’ shares have not fully priced in their potential to grow even under asset deflation. The brokerage said it takes a bullish stance on the sector.

Mitsubishi Estate jumped 7.7 percent to 1,345 yen, while Mitsui Fudosan Co. climbed 8 percent to 1,490 yen. Both advanced the most in eight months.

Yen Rate

Arnest One Corp., a homebuilder, surged by the daily limit of 100 yen to 1,020 yen, after Daiwa analyst Jiro Kojima maintained his “buy” rating on the stock and called it a top pick, citing low valuations and relatively short inventory asset turnover period.

The index that includes Mitsubishi Estate, Mitsui Fudosan and Arnest One, advanced 7.3 percent, the most among the 33 industry groups in the Topix index.

The yen depreciated to as low as 86.85 to the dollar today, compared with 84.83 on Nov. 27, the strongest since July 1995. It was at 86.21 to the dollar at the close of stock trading in Tokyo. Against the euro, Japan’s currency weakened to as low as 130.80 from 128.21 on Nov. 27 and traded at 129.76 at the close of the Tokyo Stock Exchange. The weaker yen boosts the value of sales generated overseas when converted into local currency by Japanese companies.

Sony Corp., which earns 75 percent of its sales abroad, rose 2.7 percent to 2,325 yen while Nissan Motor Co., a carmaker that gets about 75 percent of its revenue overseas, rallied 3.5 percent to 626 yen. Canon Inc., the world’s largest camera maker which earns about 80 percent of its revenue from abroad, added 4.1 percent to 3,330 yen.

Government Measures

Prime Minister Yukio Hatoyama yesterday ordered his Cabinet ministers to propose economic measures to deal with the impact of the strengthening yen, the Mainichi newspaper reported today, without saying where it obtained the information. The Asahi newspaper said yesterday Hatoyama and Bank of Japan Governor Masaaki Shirakawa may meet as early as tomorrow to discuss deflation and the yen’s appreciation.

“We expect additional measures to curb the high yen and falling stock prices,” said Takeru Ogihara, chief strategist at Mizuho Trust & Banking Co.

Gauges of electric appliance and automobile companies were the second and the third-largest contributors respectively to gains by the broader Topix.

Shin-Etsu Chemical Co. rallied 4.5 percent to 4,690 yen, the largest contributor to the Nikkei’s gain. Macquarie Group Ltd. analyst Damian Thong raised the chemical products maker to “neutral” from “underperform.”

Sumitomo Corp., Japan’s No. 3 trading company by market value, advanced 4.7 percent to 850 yen after the stock was raised to “outperform” from “neutral” at Credit Suisse Group.

DeNA Co., an Internet auction operator, surged by the daily limit of 12 percent to 473,000 yen, the highest close since September 2008. Mitsubishi UFJ Financial Group Inc. analyst Masato Araki raised his rating on the stock to “outperform” from “market perform.”

To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Kotaro Tsunetomi at ktsunetomi@bloomberg.net.

Last Updated: November 30, 2009 03:24 EST