Feb. 14 (Bloomberg) -- Japan's Nikkei 225 Stock Average surged the most in six years after the economy grew twice as fast as economists expected last quarter and retail sales in the U.S. unexpectedly climbed.

Tokyo Electron Ltd. sparked a rally among chip-related companies on a report it will beat its profit forecast, while Pioneer Corp. led electronics makers higher, surging by its daily trading limit. Automakers including Honda Motor Co. gained after the yen fell to the lowest in a month against the dollar.

Japan's gross domestic product increased at a 3.7 percent annualized pace in the three months ended Dec. 31, compared with an estimate by economists for 1.7 percent growth. The U.S. retail sales figures alleviated concern the world's biggest economy has entered a recession.

The Nikkei 225 surged 558.15, or 4.3 percent, to close at 13,626.45 in Tokyo, its steepest rise since March 2002. The broader Topix index gained 47.09, or 3.7 percent, to 1,332.44.

``Japan's economy may not be great, but it's never as bad as investors think,'' said Masayuki Kubota, who helps oversee $2.2 billion in assets at Daiwa SB Investments Ltd. in Tokyo. ``Japan's GDP figure and the U.S. retail data are evidence for a more positive view on the market outlook today.''

Today's gain pared the Nikkei's decline this year to 11 percent. The index is still down 25 percent from a seven-year high in July. All 33 industry groups on the Topix rose, while only two shares in the Nikkei declined.

Pioneer, Japan's third-largest maker of audio-visual gear, rose by its exchange-imposed limit of 100 yen, or 11 percent to 1,043. Asics Corp., the maker of Onitsuka Tiger brand sneakers, rallied from a two-day, 24 percent plunge, jumping 11 percent to 1,128 yen. The companies derive more than half their profit from outside Japan.

GDP, Retail Sales

Exports to Asia and emerging markets helped Japan's economy weather a slowdown in U.S. expansion last quarter. Japan's growth rate exceeded that of the U.S. in the three months to Dec. 31 and is also estimated to have surpassed the European Union's.

U.S. retail sales rose 0.3 percent in January, the Commerce Department said yesterday, compared with a 0.3 percent drop forecast by economists.

``The growth figure, propelled by capital spending and overseas demand, beat market expectations, as did the U.S. retail numbers,'' said Kenichi Hirayama, who helps oversee $20 billion in assets at Tokio Marine Asset Management Co. in Tokyo. ``That's putting a stop to the pessimism that had been spreading throughout the market.''

Chip Makers

Tokyo Electron, the world's second-biggest maker of semiconductor-production equipment, gained 6.2 percent to 6,900 yen after the Nikkei newspaper said the company may post net income of 108 billion yen ($998 million) this fiscal year, more than the company's 104 billion yen forecast.

Semiconductor shares also rose after Applied Materials Inc., Tokyo Electron's larger rival, said orders may rise next quarter, sending its shares rallying by 10 percent yesterday in the U.S.

``As semiconductor prices dropped, investors became very negative about the outlook for equipment orders and stock prices were sold off extensively,'' said Daisuke Shimazu, an investment manager at Sumitomo Trust Banking Co. in Tokyo, which has about $200 billion in assets. ``Applied Materials' outlook provided the catalyst the industry needed to relieve some of that pessimism and get people buying again.''

Sumco Corp., the second-largest maker of silicon wafers globally, jumped 13 percent, a record gain. Advantest Corp., the world's biggest maker of equipment used to test memory chips, soared 12 percent to 2,355 yen, the most since November 2002.

Asia Construction

Hitachi Construction Machinery Co., which boosted its sales to China by 75 percent last quarter, climbed 225 yen, or 9.5 percent, to 2,590, the most in two weeks. Takeuchi Manufacturing Ltd., a mini-shovel maker that exports more than 90 percent of its product, surged 13 percent to 2,490.

Shipments of construction machinery may rise 9 percent to a third-straight record next fiscal year as building and mining booms in Asia drive demand for earthmovers and cranes, the Japan Construction Equipment Manufacturers Association said today.

Honda, Japan's second-largest automaker, jumped the most in almost three weeks, rising 5.4 percent to 3,300 yen, while Nissan Motor Co., the third-biggest, rose 4.7 percent to 966 yen.

The carmakers rely on North America for as much as 65 percent of their operating profit and a weaker yen inflates the value of their dollar-denominated earnings. The yen fell to 108.38 per dollar yesterday, the lowest level since Jan. 14.

Toyama Chemical Co. rose by the daily limit for a second day, advancing 14 percent to 831 yen. Fujifilm Holdings Corp. said yesterday it would buy the drugmaker for 880 yen per share. Analysts at brokerages including Credit Suisse Group and UBS AG said they view the deal favorably.

Mitsui Chemicals Inc. jumped 9.2 percent to 710 yen, the sharpest gain since September 2003. Koichi Ishihara, an analyst at Mizuho Securities Co., boosted his recommendation on the maker of ethylene and other petrochemicals to ``buy'' on the view that lower naphtha prices in the coming year should boost the company's profit.

Nikkei 225 futures expiring in March rose 4.1 percent to 13,630 in Osaka and jumped 4.3 percent to 13,625 in Singapore.

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

Last Updated: February 14, 2008 03:22 EST