Aug. 11 (Bloomberg) -- Japanese stocks jumped, driving the Nikkei 225 Stock Average to a four-year high. Financial companies including Mizuho Financial Group Inc. climbed after a report showed overseas investors are buying more shares amid signs that economic growth is gathering pace.

``Japan is perhaps the world's most attractive'' among developed markets, said Brent Lynn, Denver-based manager of the $2.2 billion Janus Overseas Fund at Janus Capital Group Inc. ``The financial system is the lifeblood of an economy. After more than a decade in the doldrums, Japan has finally worked out its problems.'' Lynn holds shares of banks such as Mizuho.

Property developers such as Mitsui Fudosan Co. gained after office vacancies in Tokyo fell to the lowest in 3 1/2 years last month as companies expanded and sought more space.

The Nikkei climbed 165.24, or 1.4 percent, to 12,263.32 at the 3 p.m. close in Tokyo, the highest since Aug. 7, 2001. The Topix index climbed 15.89, or 1.3 percent, to 1243.74. The broad index rose to a four-year high for a second day.

Some 2.24 trillion ($20.3 billion) yen in shares included the Topix traded, the most since March 11 and almost double the full- day average for the past three months.

Banks have jumped 7.5 percent so far this week as a group. Mizuho, Japan's largest bank, advanced 16,000 yen, or 3.1 percent, to 531,000. Mitsubishi Tokyo Financial Group Inc., which will become the world's biggest lender after its merger with UFJ Holdings Inc., gained 34,000 yen, or 3.5 percent, to 1.01 million.

Sumitomo Mitsui Financial Group Inc., Japan's third-largest lender, rose 50,000 yen, or 6.8 percent, to 812,000.

T&D Holdings Inc., Japan's only publicly traded life- insurance company, surged 520 yen, or 9 percent, to 6,310.

Overseas Buying

Overseas investors bought more Japanese stocks as evidence mounted that the pace of economic growth is picking up.

They bought 1.37 trillion yen in Japanese equities in July, on a net basis, the most since March last year, according to a Ministry of Finance release today. Last week, foreign investors bought a net 495 billion yen in Japanese stocks, the most since the week ended March 11.

``Underlying fundamentals have improved tremendously in Japan,'' said Hans Goetti, who helps oversee some $1.5 billion in global assets at Citigroup Private Bank in Singapore. ``Japan's story is one of the most compelling today that you can find globally.'' Goetti said he prefers domestic demand-related stocks including banks, brokerages and property developers.

Brokerages advanced on optimism a pick up in trading will lift earnings. Nomura Holdings Inc., the nation's largest, advanced 39 yen, or 2.7 percent, to 1,460. Nikko Cordial Corp., Japan's No. 3 brokerage, jumped 21 yen, or 4 percent, to 542.

Economic Optimism

An average of 1.58 trillion yen in shares in the Topix have traded each day this month, 64 percent more than the daily average in August last year. Foreigners placed orders to buy 58.3 million shares more than they wanted sold before the market opened today, the most since at least 2000, according to Hiroichi Nishi, a manager at Nikko Cordial Securities Inc. in Tokyo.

Tomorrow, a government report may show that the economy expanded at a 1.9 percent annual pace in the three months to June 30, exceeding the average of the past five years, in a Bloomberg News survey of economists. The report is set for release at 8:50 a.m. tomorrow local time.

The median pace of growth forecast compares with an average 1.3 percent quarterly rate since 2000 and the 4.9 percent in the period through March 31, which was the fastest in a year.

Earlier this week, the government and central bank both said a recovery at home is gathering strength, after suffering four recessions since 1991.

`Boosted Investor Confidence'

``Foreign money is flooding in to buy into the Japan growth story,'' said Toru Ohara, the chief investment officer at Franklin Templeton Investments Japan Ltd., which has $3.8 billion in assets. ``The government's declaration that growth is emerging from a `soft patch' has boosted investor confidence.''

Property developers gained after a report from Miki Shoji Co., an office brokerage company, showed that office vacancies in Tokyo's five main business districts of Chiyoda, Chuo, Minato, Shinjuku and Shibuya fell to 4.76 percent in July, the lowest in 3 1/2 years, from 5.03 percent the previous month.

Mitsui Fudosan, Japan's biggest developer, gained 65 yen, or 4.8 percent, to 1,410. Mitsubishi Estate Co., the nation's second biggest, advanced 61 yen, or 4.7 percent, to 1,365.

Increased support for Japan's Prime Minister Junichiro Koizumi may also bolster optimism he will be able to strengthen his grip on power in an election next month and allow investors to focus to an improving economy. Koizumi's job-approval rating climbed to 47 percent this week, up 4 points from July, according to a Nihon Keizai newspaper survey today.

Focused

``The focus is back on the strength of Japan's economic recovery,'' said Yutaka Miura, an equities manager at Shinko Securities Co. in Tokyo.

Energy shares including Inpex Corp. rose after oil prices surpassed $65 a barrel to a record. Crude oil for September delivery rose 2.9 percent to close at $64.90 a barrel on the New York Mercantile Exchange. The contract rose as much as 0.6 percent to $65.30 a barrel in after-hours electronic trading.

Inpex, Japan's biggest oil explorer, gained 25,000 yen, or 3 percent, to 851,000. In May, Inpex had forecast profit would decline 23 percent this business year on expectations that average Brent oil prices will drop to $39 a barrel. Yesterday, September Brent crude futures reached a record $64.20 per barrel. Inpex is scheduled to report earnings today.

AOC Holdings Inc. advanced 48 yen, or 2.5 percent, to 1,997. On Aug. 1, AOC boosted its first-half profit forecast by 56 percent. The stock has climbed 88 percent this year.

Measures of mining and oil stocks, including Inpex, have jumped 56 percent and 42 percent this year, respectively, the biggest gains among the Topix's 33 industry groups.

``Energy stocks obviously have been big performers,'' said Citigroup Private's Goetti. ``We still see upside in the group. In the long term, the outlook for energy stocks remains intact.''

 AOC Holdings Inc. (5017 JT)
 Inpex Corp. (1604 JT)
 Mitsubishi Estate Co. (8802 JT)
 Mitsubishi Tokyo Financial Group Inc. (8306 JT)
 Mitsui Fudosan Co. (8801 JT)
 Mizuho Financial Group Inc. (8411 JT)
 Nikko Cordial Corp. (8603 JT)
 Nomura Holdings Inc. (8604 JT)
 Sumitomo Mitsui Financial Group Inc. (8316 JT)
 T&D Holdings Inc. (8795 JT)

To contact the reporter for this story: Michael Tsang in Tokyo at mtsang1@bloomberg.net.

Last Updated: August 11, 2005 02:27 EDT