Sept. 27 (Bloomberg) -- Japanese stocks advanced to their highest in seven weeks. Banks such as Mizuho Financial Group Inc. led gains after a report that Warren Buffett will buy a stake in Bear Stearns Cos. boosted confidence lenders will recover from the subprime crisis.

The New York Times report ``sparked a notion that the subprime issue may not have been that serious,'' said Hiroshi Chano, who helps manage $7.3 billion at Yasuda Asset Management Co. in Tokyo.

Exporters such as Toyota Motor Corp., also gained after the yen weakened against the dollar, increasing the value of their overseas sales.

The Nikkei 225 Stock Average added 396.48, or 2.4 percent, to 16,832.22 in Tokyo. The broader Topix index gained 39.13, or 2.5 percent, to 1,615.15. That was the highest close for both gauges since Aug. 14. All of the 33 industry groups in the Topix gained. About nine stocks rose for each that fell on the first section of the Tokyo Stock Exchange.

Mizuho, Japan's second-biggest bank by assets climbed 30,000 yen, or 4.8 percent, to 658,000. Sumitomo Mitsui Financial Group Inc., the third largest, jumped 58,000 yen, or 7 percent, to 891,000. Nomura Holdings Inc., the country's largest brokerage, surged 112 yen, or 6.1 percent, to 1,956.

The New York Times reported that Bear Stearns is in ``serious talks with several outside investors'' including Buffett to sell as much as 20 percent of the firm, citing unidentified people familiar with the matter.

Yen Weakens

A Bear Stearns spokesperson declined to comment. The company's shares soared 7.7 percent yesterday in New York.

Toyota, poised to become the world's biggest automaker, rose 80 yen, or 1.2 percent to 6,690. Sony Corp., which generates about 70 percent of its sales outside Japan, gained 160 yen, or 3 percent, to 5,590.

The yen recently traded at 115.56 against the dollar, down from 114.76 at yesterday's equity market close. Versus the euro, the yen dropped to 163.57, near the lowest since Aug. 9.

A weaker yen means Japanese exporters get more for their overseas sales when they are converted back to the local currency.

Toyota's annual operating profit increases about 35 billion yen ($303 million) for every 1 yen that Japan's currency weakens against the dollar, according to Koji Endo, an analyst at Credit Suisse Group in Tokyo.

Stocks also advanced on increased speculation that the Federal Reserve will lower interest rates after demand for U.S.- made durable goods dropped 4.9 percent in August, the most in seven months. Orders were forecast to fall 4 percent, according to economists surveyed by Bloomberg News.

Property Ratings Raised

Futures contracts yesterday suggested an 86 percent chance the Fed will lower its target overnight lending rate between banks by a quarter-percentage point to 4.50 percent at its next meeting on Oct. 31, compared with 72 percent a week ago.

``Overall, investor sentiment is recovering,'' said Yoshinori Nagano, who helps oversee about $70 billion at Daiwa Asset Management Co. in Tokyo. ``The crisis mode triggered by the subprime loan crisis is receding and money has started to flow back into the stock market.''

Suruga Bank Ltd. surged 141 yen, or 11 percent, to 1,402 after the regional bank said it's discussing an alliance with Japan Post, the world's largest financial institution by assets and set to become a private company on Oct. 1, to offer mortgages and other individual loans to individuals.

Mitsui Fudosan Co., Japan's largest real estate developer, gained 230 yen, or 7.7 percent, to 3,210. Sumitomo Realty & Development Co., the third biggest, rallied 300 yen, or 7.9 percent, to 4,090. Deutsche Bank lifted its rating on shares of both companies to ``buy'' from ``hold.''

Consumer Lenders

Consumer lenders soared after the Nikkei newspaper reported Takefuji Corp., the fourth largest in the industry, may post a profit of about 51 billion yen ($442 million) in the current financial year, compared with a 481.2 billion loss last year.

Takefuji gained by the exchange-imposed daily limit of 303 yen, or 16 percent, to 2,155. Aiful Corp., the biggest consumer credit company by assets, rose 294 yen, or 15 percent, to 1,909. Promise Co., the third biggest, jumped 365 yen, or 15 percent, to 2,850.

Hitachi Ltd., Japan's No. 1 electronics group, jumped 49 yen, or 7 percent, to 750 after the company reported that it may sell part or all of its hard-disk drive business, which hasn't posted an annual profit since the electronics maker bought it in 2002.

Nippon Electric Glass Co., the world's third-biggest supplier of glass for liquid-crystal displays, surged 264, or 16 percent to 1,870. That was the largest percentage move among 1,891 stocks globally in the Morgan Stanley Capital International World Index. The company boosted its earnings forecast yesterday and Deutsche Bank, UBS AG and Nomura lifted their ratings on the stock.

Japan Tobacco Inc., the world's third-largest traded cigarette maker, advanced 27,000 yen, or 4.5 percent, to 634,000 after the London-based Times reported the company plans to offer about $1.5 billion to buy Tekel, Turkey's state-owned cigarette maker. Japan Tobacco declined to comment on the matter.

Nikkei futures expiring in December climbed 2.2 percent to 16,860 in Osaka and rose 2.1 percent to 16,845 in Singapore.

Hitachi Ltd. (6501 JT)
Japan Tobacco Inc.(2914 JT)
Mitsubishi UJF Financial Group Inc. (8306 JT)
Mitsubishi Estate (8802 JT),
Mitsui Fudosan (8801 JT)
Mizuho Financial Group Inc. (8411 JT)
Nippon Electric Glass Co. (5214 JT)
Nomura Holding Inc. (8604 JT)
Sony Corp. (6758 JT)
Sumitomo Mitsui Financial Group Inc. (8316 JT)
Sumitomo Realty & Development Co. (8830 JT)
Suruga Bank Ltd. (8358 JT)
Takefuji Corp. (8564 JT)
Toyota Motor Corp. (7203 JT)

To contact the reporter on this story: Kiyori Ueno in Tokyo at kueno2@bloomberg.net; Kotaro Tsunetomi at ktsunetomi@bloomberg.net

Last Updated: September 27, 2007 03:16 EDT