Sept. 15 (Bloomberg) -- Japanese stocks rose, with the Topix index heading for its highest close since May 2001. Energy stocks such as Inpex Corp. led the gains after oil prices rose in after- hours trade, adding to yesterday's 3.1 percent jump.

``The fact that investors are chasing commodity stocks on the back of higher oil prices, instead of selling stocks outright, suggests that market sentiment is quite strong,'' said Hitoshi Yamamoto who oversees about $1 billion as the president at Commerz International Management (Japan) Ltd. in Tokyo.

Sumitomo Metal Industries Ltd. led gains by steelmakers after Nikkei Financial Daily reported Japanese steelmakers, along with machinery and trading companies, have the best industry earnings outlook in Japan.

The Topix index gained 10.26, or 0.8 percent, to 1322.61, at the 11 a.m. lunch break in Tokyo. The index was set for its highest close since May 30, 2001. The Nikkei 225 Stock Average added 115.73, or 0.9 percent, to 12,949.98, heading for its highest since June 29, 2001.

Nikkei 225 futures for December delivery added 0.7 percent to 12,910 in Osaka and rose 0.8 percent to 12,915 in Singapore.

The Nikkei and the Topix have gained more than 9.5 percent since Aug. 8 when Prime Minister Junichiro Koizumi called elections, which he won by a landslide on Sept. 11, giving him a mandate to sell state assets.

Marc Faber, who oversees about $300 million as managing director of Marc Faber Ltd. in Hong Kong, predicts the Nikkei will climb 40 percent in three years as the government pushes ahead with the breakup of the postal service, releasing $3.2 trillion of savings to banks and insurers.

Oil Stocks Gain

Oil prices surged more than 3 percent yesterday, the biggest increase since Aug. 30, after the Energy Department reported a larger-than-expected decline in U.S. inventories. Crude for October delivery jumped $1.98 to close at $65.09 a barrel in New York and recently traded up 0.5 percent at $65.38.

Inpex, the nation's largest oil explorer, rose 16,000 yen, or 2 percent, to 835,000. Showa Shell, the Japanese refiner half owned by Royal Dutch/Shell Group, gained 41 yen, or 3.1 percent, to 1,379.

Trading companies advanced. Mitsubishi Corp. and Mitsui & Co., Japan's two biggest trading companies, are raising crude oil production amid increased demand, the Nihon Keizai newspaper reported, without saying where it got the information.

Mitsubishi climbed 41 yen, or 2.2 percent, to 1,948. Mitsui added 10 yen, or 0.8 percent, to 1,196.

Mitsui spokesman Eiki Okada declined to comment on the report, as did Mitsubishi.

Steelmakers Rise

The Topix Iron & Steel Index jumped 2.3 percent, making it the best performer among the 33 industry groups that make up the Topix. Sumitomo Metal, the world's largest maker of high-grade steel pipes used in oil production, jumped 11 yen, or 3.9 percent, to 294. Nippon Steel Corp., Japan's biggest steelmaker, advanced 10 yen, or 3 percent, to 346.

Some investors, including Commerz International's Yamamoto, said expectations of increased demand for raw materials to rebuild New Orleans after Hurricane Katrina also helped drive commodity stocks higher.

``When a catastrophic event happens, such as the Hurricane Katrina, there is always rebuilding demand after the disaster and that tends to be reflected in stock prices,'' said Yamamoto.

Mitsubishi Gas Chemical Co., the world's third-largest methanol maker, jumped 27 yen, or 3.9 percent, to 726, after the Nihon Keizai newspaper said the company may report record operating profit that beats its own forecast for this business year on increasing sales of chemicals and electronic materials.

Nidec Corp., the world's biggest maker of motors for hard- disk drives, fell 340 yen, or 2.7 percent, to 12,130, on concern demand for its components will weaken as Apple Computer Inc. and other makers introduce music players that use flash memory chips, Harushige Kobayashi at Maruwa Securities Co. in Tokyo said.

About 1.07 trillion yen ($9.7 billion) in shares included in the Topix traded, 25 percent less than the daily average for the past three months. Two stocks gained for every one that fell on the Tokyo Stock Exchange's first section.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net.

Last Updated: September 15, 2005 00:06 EDT