Nov. 29 (Bloomberg) -- Japanese stocks climbed after comments by Federal Reserve Vice Chairman Donald Kohn raised expectations the central bank will cut interest rates, easing concern growth will stall in Japan's biggest overseas market.

Nintendo Co. led gains by exporters after the yen weakened against the dollar, bolstering the value of companies' overseas sales. Mitsubishi UFJ Financial Group Inc., Japan's largest bank by market value, jumped on speculation increased liquidity will offset investment losses.

``Kohn's comments increased expectations of a rate cut, and we might even see a large reduction this time, which should help to support the U.S. economy and stocks at home as well,'' said Naoki Fujiwara, who helps oversee $3.2 billion as chief fund manager at Shinkin Asset Management Co. in Tokyo. ``The yen is a function of the economic outlook, which is why investors are buying dollars.''

The Nikkei 225 Stock Average gained 359.96, or 2.4 percent, to 15,513.74 at the close of trading in Tokyo. The Topix index rose 38.83, or 2.6 percent, to 1,514.47. Both benchmarks climbed the most since Nov. 14.

Nintendo, the world's biggest maker of handheld game players, rose 2,900 yen, or 4.7 percent, 65,100 in Osaka. Mitsubishi UFJ gained 62 yen, or 6.1 percent, to 1,076. Mizuho Financial Group Inc., Japan's second-largest bank by market value, climbed 26,000 yen, or 4.7 percent, to 583,000.

Nintendo also gained after the Kyoto-based company yesterday said U.S. consumers bought 350,000 Wii video-game consoles last week, the most since the first days of sales a year ago.

Deterioration `Not Anticipated'

Honda Motor Co., which generates 55 percent of its sales in North America, jumped 130 yen, or 3.6 percent, to 3,740. Toyota Motor Corp., the world's largest automaker by market value, rose 190 yen, or 3.2 percent, to 6,190, the biggest gain since Oct. 26.

``The degree of deterioration that has happened over the last couple of weeks is not something that I personally anticipated,'' Kohn said in New York yesterday. ``We are going to have to take a look at'' the stress in credit markets ``when we meet in a couple of weeks.''

Traders boosted bets that the Fed will cut its benchmark lending rate when it meets Dec. 11.

The yen weakened as rallying stocks persuaded investors to buy higher-yielding assets funded by loans in the Japanese currency.

The yen fell to as low as 110.31 against the dollar, from 108.41 at the close of trading in Tokyo yesterday. A weaker yen increases the value of exporters' sales when converted into local currency.

Industrial Production Gain

Automakers also gained after Japan's industrial production rose more than expected to a record in October as the companies increased output, the Trade Ministry said in Tokyo today. The measure climbed 1.6 percent from a month earlier, beating economists' forecast for a 1.5 percent gain.

Daiei Inc. rose the most in three years after Lehman Brothers Holdings Inc. increased its rating on the supermarket operator to ``overweight'' from ``underweight,'' citing an improving profit outlook. The stock soared by the exchange- imposed daily limit of 100 yen, or 17 percent, to 673, its biggest percentage gain since September 2004.

``We think that a long period of weak earnings and drastic restructuring is drawing to a close, and that earnings are likely to bottom out,'' Yasuyuki Sasaki, an analyst at Lehman in Tokyo, wrote in a note to clients dated yesterday.

Glassmakers Soar

Nippon Sheet Glass Co. and Asahi Glass Co. surged after Asia's two largest glassmakers were fined a smaller-than- expected 205 million euros ($304 million) by the European Union for price-fixing in the construction industry. Nippon Sheet Glass on May 22 said it set aside 350 million pounds ($727 million) for possible fines, including a separate automotive industry investigation.

Nippon Sheet Glass jumped 43 yen, or 7.9 percent, to 590, the biggest advance since Aug. 8. Asahi Glass rose 118 yen, or 8.4 percent, to 1,526, gaining the most since March 2002.

Meiji Dairies Corp., soared 73 yen, or 14 percent, to 585, the biggest gain since February 2000. It was the best percentage performance of the 1,852 members of the MSCI World Index during Asian trading.

The company yesterday said it will raise the suggested retail prices of 58 types of dairy products by 3 to 10 percent in March to pass higher import costs of their ingredients on to consumers.

Nikkei futures expiring in December rose 2.7 percent to 15,570 in Osaka and added 2.5 percent to 15,555 in Singapore.

Asahi Glass Co. (5201 JT)
Daiei Inc. (8263 JT)
Honda Motor Co. (7267 JT)
Inpex Holdings Inc. (1605 JT)
Meiji Dairies Corp. (2261 JT)
Mitsubishi UFJ Financial Group Inc. (8306 JT)
Mizuho Financial Group Inc. (8411 JT)
Nintendo Co. (7974 JO)
Nippon Sheet Glass Co. (5202 JT)
Sumitomo Mitsui Financial Group Inc. (8316 JT)
Toyota Motor Corp. (7203 JT)
Komatsu Ltd. (6301 JT)

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

Last Updated: November 29, 2007 01:41 EST