Dec. 20 (Bloomberg) -- Japan's Topix index rose for the first time in seven days after a report said the country's three biggest banks will refuse a request to contribute as much as $15 billion to a subprime-asset bailout fund.

Mitsubishi UFJ Financial Group Inc., Japan's largest publicly traded bank, Mizuho Financial Group Inc., and Sumitomo Mitsui Financial Group Inc., the No. 2 by market value, led gains. The banks said it doesn't make sense to put as much as $5 billion each into the fund as requested by U.S. counterparts when they were relatively unscathed, the Nikkei newspaper reported.

``The refusal by banks to participate is of course positive news,'' said Seiji Iwama, who helps oversee $47 billion at Daiwa SB Investments Ltd. in Tokyo. ``The amount they were asked to contribute was excessive and could have resulted in some major losses.''

Advances were pared after the Bank of Japan refrained from raising interest rates in the first unanimous decision since June. Nintendo Co. and Sony Corp. led declines by exporters after U.S. retail sales slumped.

The Topix advanced 0.77, or 0.1 percent, to 1,457.56, as of the end of trading in Tokyo, after paring a gain of as much as 0.9 percent. It dropped 7 percent between Dec. 11 and yesterday's close. The Nikkei 225 Stock Average added 1.09 points to 15,031.60, also snapping a six-day decline.

Almost four stocks dropped for every one that advance on the first section of the Tokyo Stock Exchange.

Lenders also gained after Morgan Stanley, the second- largest U.S. securities firm, received a $5 billion cash infusion from state-controlled China Investment Corp.

`Safety Net'

``The investment helped assuage worries over bank stocks,'' said Takashi Ushio, head of investment department at Marusan Securities Co. in Tokyo. ``A government-backed fund with massive capital reserves serves as a safety net for the finance industry.''

Nippon Steel Corp. advanced for a second day after the company and Sumitomo Metal Industries Ltd. and Kobe Steel Ltd. said they will raise their mutual stakes.

Mitsubishi UFJ rose 23 yen, or 2.2 percent, to 1,054. Sumitomo Mitsui gained 30,000 yen, or 3.6 percent, to 859,000. Mizuho Financial, the No. 3 by market value, climbed 10,000 yen, or 1.9 percent, to 539,000. The shares of all three lenders had their biggest gain since Dec. 6.

U.S. banks including Citigroup Inc. are organizing a bailout fund to buy assets at structured investment vehicles, or SIVs, in hopes of preventing a fire sale as the vehicles' need for cash rise. Japanese banks would have to reply this week to the request by U.S. banks, the Nikkei newspaper said on Dec. 17.

Mitsubishi UFJ is still considering the request, said Yusuke Fukui, a spokesman at the Tokyo-based bank. Spokesmen for Mizuho and Sumitomo Mitsui declined to comment.

China Fund

China Investment, advised by New York-based investment bank Lazard Ltd., is buying securities that convert into Morgan Stanley shares and pay annual interest of 9 percent. China Investment won't get a seat on the board or play a role in management, Morgan Stanley said in the statement.

Nintendo, the world's biggest maker of handheld game players, fell 1,000 yen, or 1.6 percent, to 61,600. Sony, the world's second-largest electronics maker, declined 70 yen, or 1.2 percent, to 6,040. Honda Motor Co., which generates 55 percent of its sales in North America, dropped 30 yen, or 0.8 percent, to 3,660.

BOJ Governor Toshihiko Fukui and his colleagues voted to leave the benchmark overnight lending rate at 0.5 percent, the bank said today. After the end of stock trading in Tokyo, the bank downgraded its overall assessment of the economy, saying the pace of growth will ``slow for the time being.''

Slowing Exports

Holiday sales at U.S. retailers declined for the third straight week as winter storms and rising gasoline prices discouraged shoppers during the worst holiday season in five years, according to ShopperTrak RCT Corp. Sales fell 0.4 percent in the week through Dec. 15 compared with a year earlier, the report said.

Japan's export growth cooled in November as the U.S. housing recession cut demand for automobiles and construction equipment, the Finance Ministry said. Exports rose 9.7 percent from a year earlier, after growth doubled in the previous month.

Nippon Steel, the world's second-largest steel producer, rose 13 yen, or 2.1 percent, to 630. Sumitomo Metal Industries rose 21 yen, or 4.7 percent, to 470. Kobe Steel gained 5 yen, or 1.5 percent, to 345.

Nippon Steel, Sumitomo Metal and Kobe will each spend 260 billion yen ($2.3 billion) to buy more of each other's shares, they said in a joint statement to the Tokyo Stock Exchange yesterday. The purchases will roughly double the amount of cross-shareholdings they have in each other.

Ibiden Drops

The three mill operators on Oct. 30 said they were expanding an alliance to make more steel and were considering increasing cross-shareholdings. Rising raw materials costs and Mittal Steel Co.'s $38 billion takeover of Arcelor SA last year to form the world's biggest steelmaker is spurring consolidation.

Kirin Holdings Co., Japan's largest brewer, gained 40 yen, or 2.4 percent, to 1,693, the biggest gain since Nov. 1. Sapporo Holdings, the third-biggest, advanced 4 yen, or 0.5 percent, to 893.

The brewers will raise prices of so-called ``third-beer'' products because of rising costs for soybeans and other ingredients, Yomiuri newspaper reported. Sapporo may raise prices by as much as 5 percent by April 1 and Kirin will boost prices in February, it said.

Ibiden Co., an electronics and ceramics maker, fell 360 yen, or 4.9 percent, to 6,970, after JPMorgan Chase & Co. lowered its earnings forecast for the company. It was the stock biggest drop since Nov. 21.

Nikkei futures expiring in March fell 0.5 percent to 15,010 in Osaka and dropped 0.4 percent to 15,030 in Singapore.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net;

Last Updated: December 20, 2007 02:08 EST