Sept. 12 (Bloomberg) -- Japanese stocks rose, sending key indexes to their highest close in more than four years, after Prime Minister Junichiro Koizumi won a landslide election victory, giving him a mandate to sell state assets.

Banks including Mizuho Financial Group Inc. led gains by companies that earn most of their income in Japan after Koizumi's Liberal Democratic Party captured a single-party majority in the lower house for the first time since the 1990 election.

``I am stunned by the scale of the victory,'' said Scott McGlashan, a London-based fund manager at J O Hambro Capital Management Ltd., which looks after more than $3.5 billion. ``The market will put on another 5 percent in no time.''

The Nikkei 225 Stock Average jumped 204.39, or 1.6 percent, to 12,896.43 at the 3 p.m. close in Tokyo. The average closed at its highest since June 29, 2001, and had its biggest gain since Aug. 10, this year.

The Topix index added 16.45, or 1.3 percent, to 1309.80, the highest since June 8, 2001. Lenders accounted for 24 percent of the gain.

Stocks also climbed after a government report showed Japan's economy grew in the second quarter at three times the pace the government had initially estimated as capital spending increased faster than anticipated. Fanuc Ltd. led gains by machinery stocks.

About 2.1 trillion yen ($19 billion) in shares included in the Topix traded, 48 percent more than the daily average for the past three months. Three shares gained for every one that fell on the Tokyo Stock Exchange's first section.

Landslide Victory

Industry measures tracking banks, property companies, insurers were the three best performers among the 33 industry groups that make up the Topix.

Shares of companies that earn most of their profits at home led the gains on expectations that a bigger mandate for Koizumi will allow him to pursue plans to boost economic growth.

Mizuho, Japan's largest bank by assets, jumped 27,000 yen, or 4.4 percent, to 640,000. Sumitomo Mitsui Financial Group Inc., the third-largest lender in Japan, climbed 35,000 yen, or 3.9 percent, to 992,000.

Mitsui Fudosan Co., Japan's biggest developer, added 54 yen, or 3.5 percent, to 1,598. Millea Holdings Inc., the nation's largest casualty and property insurer, advanced 60,000 yen, or 3.8 percent, to 1.65 million.

The Nikkei and the Topix have advanced more than 9 percent since Aug. 8 when Koizumi dissolved the lower house of the Diet, or parliament, and called elections. The indexes are the best performers among the world's 10 biggest stock markets since then.

Koizumi, 63, called the election after some members of his own party voted with opposition legislators to block his plan to sell Japan Post, which, with 350 trillion yen in assets is the world's largest savings bank.

`Big Plus'

The win gives Koizumi a mandate to accelerate spending cuts, pursue policies to boost investment and sell the post office, which has been used to pay for government spending that's swollen Japan's debt to a record.

``Koizumi will now be able to push his reform agenda with a much freer hand, having to compromise less within his own party, within the ruling coalition and within the Diet itself,'' said Kirby Daley, a strategist at Societe Generale Securities' Fimat unit in Tokyo. ``From the standpoint of foreign investors this is a big plus.''

Overseas investors have been net buyers of Japanese stocks for the past 12 weeks, according the Ministry of Finance, amid evidence of a pickup in growth at home.

Other domestic-demand related shares gained. Secom Co., Japan's largest maker of security systems, surged 440 yen, or 8.3 percent, to 5,740. Fast Retailing Co., Japan's largest casual clothing chain, rose 150 yen, or 1.8 percent, to 8,360.

NTT Data Jumps

NTT Data Corp., which provides computer services to Japan's post office system, surged 33,000 yen, or 8.4 percent, to 424,000 yen on expectations that approval of the postal bill will lead to more business.

``NTT Data will continue to get orders to revamp the postal service's computer system with the privatization,'' said Satoru Kikuchi, an analyst at Nomura Securities Co. who has a ``buy'' rating on the company. ``The projects may require 2,000 staff and may add at least 50 billion yen of sales in fiscal year 2008.''

A government report before the market opened showed the economy grew at a 3.3 percent pace in the second quarter. That compares with an Aug. 12 estimate of a 1.1 percent annualized pace of expansion and the median 1.5 percent forecast by 18 economists surveyed by Bloomberg News.

It is the first time since 1991 that the recovery is being fueled by consumer and capital spending, not exports and government money. When Koizumi became prime minister four years ago, the economy was in its third recession since the so-called asset-price bubble burst in 1991.

`Domestic-Oriented'

``Anything domestic-oriented, we feel, will see some upsurge due to domestic demand, as well as demand from abroad,'' said Martin Schulz, director of international equities at Allegiant International Equity Fund in Cleveland, Ohio.

Allegiant bought Mitsubishi Tokyo Financial Group Inc., Tokyu Land Corp., Yamada Denki Co., Natori Co. after Koizumi's Aug. 8 decision to call elections, Schulz said.

Mitsubishi Tokyo, Japan's second-largest lender, climbed 30,000 yen, or 2.7 percent, to 1.15 million. Yamada Denki, the electronics retail chain operator, surged 680 yen, or 8.7 percent, to 8,530, Natori, a snack maker, added 1 yen, or 0.1 percent, to 814. Tokyu Land, Japan's fourth-largest property developer, advanced 19 yen, or 2.8 percent, to 702.

`Priced In'

Some strategists, such as Shinichi Ichikawa at Credit Suisse First Boston, said the gains may be short-lived because the surge in the Nikkei and the Topix to four-year highs before Sunday's voting already took account of the benefits of Koizumi's victory. Investors will now focus on what measures his government will take to sustain economic growth.

``The market had already priced in the continuation of the Koizumi Administration, and we expect attention to turn now to economic fundamentals,'' Ichikawa, CSFB's Japan equity strategist based in Tokyo, said in a note to clients dated Sept. 12.

Revamping Japan's tax system, including a possible increase in the nation's 5 percent sales tax will be the focus, said Ichikawa. He predicts a tax increase in April 2009.

TIS Inc., which provides computer system construction and data processing services, slid 405 yen to 2,605 after the company slashed its half-year profit forecast and analysts at three brokerages including Deutsche Bank AG cut their rating on the stock. The 13 percent drop was the biggest on the Tokyo Stock Exchange's first section and also the biggest on the Morgan Stanley Capital International World Index.

Nikkei 225 futures for December delivery rose 1.3 percent to 12,830 in Osaka and added 1.4 percent to 12,855 in Singapore.

Fast Retailing Co. (9983 JT)
Millea Holdings Inc. (8766 JT)
Mitsubishi Tokyo Financial Group Inc. (8306 JT)
Mitsui Fudosan Co. (8801 JT)
Mizuho Financial Group Inc. (8411 JT)
Natori Co. (2922 JT)
NTT Data Corp. (9613 JT)
Secom Co. (9735 JT)
Sumitomo Mitsui Financial Group Inc. (8316 JT)
TIS Inc. (2610 JT)
Tokyu Land Corp. (8815 JT)
Yamada Denki Co. (9831 JT)

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

Last Updated: September 12, 2005 02:33 EDT