Jan. 30 (Bloomberg) -- Japanese stocks advanced after a report showed rising demand at home and abroad boosted factory production for a fifth month. Exporters such as Toyota Motor Corp. and trading companies including Mitsubishi Corp. paced the gains.

``All the economic indicators, including industrial production, are pointing to improvement,'' said Takashi Kamiya, who oversees $16 billion as chief strategist at T&D Asset Management Co. in Tokyo. ``That will help bolster investors' confidence in the equity market.''

Steelmakers including Nippon Steel Corp. rose on speculation an attempted takeover by Mittal Steel Co., the world's largest producer of the alloy, for Arcelor SA, the second biggest, may spark more acquisitions in the industry.

The Nikkei 225 Stock Average gained 90.55, or 0.6 percent, to 16,551.23 at the 3 p.m. close in Tokyo. The Nikkei rose for a fifth day, the longest winning streak since an eight-day period ended Nov. 28. The broader Topix index rose 13.96, or 0.8 percent, to 1704.28, the highest since April 12, 2000.

Japan's biggest companies advanced on signs that growth in the world's second-largest economy is gathering strength.

Production rose by a seasonally adjusted 1.4 percent from November, marking the longest expansion in industrial output since 1999, a government report showed today. The last time production rose for more than four months was the period between July and November 1999, according to data compiled by Bloomberg.

Factory production also rose to the highest ever. Toyota, the world's largest automaker by value, gained 70 yen, or 1.2 percent, to 6,020. Nissan Motor Co., Japan's second-largest automaker, advanced 22 yen, or 1.7 percent, to 1,321.

Economic Optimism

Mitsubishi, Japan's biggest trading company, climbed 160 yen, or 6.2 percent, to 2,760. Sumitomo Mitsui Financial Group Inc., Japan's third-largest lender, gained 20,000 yen, or 1.5 percent, to 1.32 million.

Last week, a government report showed that consumer prices rose for a second month last month, suggesting rising spending is helping Japan emerge from more than seven years of deflation.

Expectations that an end to deflation will lead to higher property prices spurred gains by warehouse stocks. A measure tracking warehouse companies today had the biggest percentage advance of the Topix's 33 industry groups.

Mitsubishi Logistics Corp., Japan's biggest warehousing company, climbed 85 yen, or 4.5 percent, to 1,993. Mitsui-Soko Co., the country's third largest warehouse company, rose 30 yen, or 4.2 percent, to 740.

Mitsubishi Logistics owns assets in populated areas such as Minami Aoyama, central Tokyo, and Nagoya in Aichi prefecture central Japan. Land prices in Minami Aoyama rose 8.7 percent in the year to July 1, according to the Ministry of Land, Infrastructure and Transport. Land prices in central Nagoya surged 31 percent in the period.

Mittal's Takeover Offer

``Land prices have been recovering and expectations for rising asset values are still high,'' said Masaaki Endo who helps oversee about $10 billion at Norinchukin Zenkyoren Asset Management Co. in Tokyo. ``On top of that, warehouse companies are benefiting from the expansion of the domestic economy.''

Nippon Steel, the world's third-largest maker of the alloy, gained 2 yen, or 0.5 percent, to 431. JFE Holdings Inc., the fourth biggest, jumped 270 yen, or 6.7 percent, to 4,300.

The American depositary receipts of Posco that trade in Tokyo jumped 260 yen, or 4.1 percent to 6,630. The South Korean company is the world's fifth-largest maker of steel.

Rotterdam-based Mittal Steel made an unsolicited takeover offer for Arcelor in a bid valued at $22.5 billion. Arcelor said its board unanimously rejected Mittal's bid.

Mittal's bid for Arcelor ``may be the catalyst for a reorganization of the industry on a global scale, boosting shares of Asian steelmakers in the process, whether or not the acquisitions actually take place,'' said Soichiro Monji, who helps look after about $28 billion globally as senior strategist at Daiwa SB Investments Ltd. in Tokyo.

Currency Gains

Nippon Steel said on Jan. 27 that it will take action to try and prevent the company from becoming an acquisition target.

``We are contemplating the situation and will take action to ensure the company survives,'' Akio Mimura, president of Nippon Steel, told reporters, without elaborating.

A gain in the dollar against the yen also boosted the value of overseas sales at exporters. The dollar advanced to as high as 117.43 yen in Tokyo from 116.44 in New York on Jan. 27. The U.S. currency gained 1.8 percent against the yen last week. A weaker local currency boosts the value of Japanese exporters' dollar- denominated sales.

Fanuc Ltd., the world's largest maker of industrial robots, gained 160 yen, or 1.6 percent, to 10,200. The company gets more than two-thirds of its revenue from overseas.

Commodity Prices

Canon Inc., the world's largest seller of digital cameras, advanced 30 yen, or 0.4 percent, to 7,190. The company generated almost 75 percent of its sales from overseas last year. After the market closed Canon said fourth-quarter profit rose 34 percent to 108.2 billion yen ($922 million) on sales of new models and a weaker yen.

Commodity-related stocks jumped as copper, gold and crude oil prices gained.

Mitsui Mining & Smelting Co., Japan's largest maker of non- ferrous metals, surged 55 yen, or 6.5 percent, to 905. Inpex Corp., Japan's biggest oil explorer, climbed 70,000 yen, or 6.3 percent, to 1.18 million. Sumitomo Corp., the country's third-largest trading company, gained 66 yen, or 4.4 percent, to 1,579.

Sumitomo today said third-quarter profit rose 31 percent after metals and energy prices increased and the yen weakened.

Unexpected Price Declines

Among companies that have reported earnings, Seiko Epson Corp., the world's second-biggest printer maker, tumbled 315 yen, or 9.7 percent, to 2,945. The company on Jan. 27 lowered its earnings forecast for the third time in the year for this business year on restructuring costs and worse-than-expected price declines.

Seiko Epson forecast a 14 billion yen full-year loss, after predicting a profit of 22 billion yen on Oct. 26. The company also slashed its operating profit goal by 46 percent.

Consumer lenders fell for a second day., led by Aiful Corp., Japan's largest consumer finance company. Aiful plunged by the exchange-imposed daily limit of 1,000 yen, or 12 percent, to 7,410 after brokerages including JPMorgan Chase & Co. cut ratings on the stock.

Takefuji Corp. fell 280 yen, or 3.8 percent, to 7,040. Japan's No. 4 consumer lender by value recorded a decrease in third-quarter profit as lending and profit margins continued to shrink. UBS AG cut its share-price estimates for the nation's four largest consumer lenders by value in a note to clients.

Aiful Corp. (8515 JT)
Canon Inc. (7751 JT)
Fanuc Ltd. (6954 JT)
Inpex Corp. (1604 JT)
JFE Holdings Inc. (5411 JT)
Mitsubishi Corp. (8058 JT)
Mitsubishi Logistics Corp. (9301 JT)
Mitsui Mining & Smelting Co. (5706 JT)
Mitsui-Soko Co. (9302 JT)
Nippon Steel Corp. (5401 JT)
Nissan Motor Co. (7201 JT)
Posco-ADR (5412 JT)
Seiko Epson Corp. (6724 JT)
Sumitomo Corp. (8053 JT)

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

Last Updated: January 30, 2006 01:43 EST