Japan's 225-issue Nikkei Stock Average closed at a seven-week high on Wednesday as buy orders in banking shares lifted the market following reports that global banking regulations have agreed to delay strict capital adequacy rules, alleviating the immediate need for equity financing, a factor that has weighed on the market recently.

Japan's key benchmark Nikkei gained 93.93 points or 0.93 percent from Tuesday, to 10,177.41, its highest close since Oct. 27.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 13.66 points, or 1.5 percent, to 898.29.

Diversified and commercial bank issues soared Wednesday on a report in the Nikkei Business Daily newspaper that global banking regulators have agreed to effectively delay the enforcement of tougher capital adequacy rules, by opting to create a transition period of at least 10 years and possibly as many as 20 years, according to sources close to the matter.

The expected implementation, confirmed by a number of other sources, of stricter rules was the catalyst for megabank Mitsubishi UFJ Financial Group's recent decision to issue 1 trillion yen's worth of new shares to raise capital. The market feared other banks would follow the equity-financing trend, which would lead to per-share devaluation, brokers said.

Once Japan's Financial Services Agency corroborates the reports, the pressure will be off banks being forced to flood the market with new common shares to boost capital spending. Meanwhile, Japanese property shares also responded positively Wednesday, as a reduction in Japanese bank's lending capacity had previously turned investors away from this sector.

Diversified banking issues such as Mizuho Financial Group inc. soared 15.82 percent to 183 yen and Sumitomo Mitsui Financial Group Inc. jumped 14.34 percent to 3,030 yen. Fukuoka Financial Group Inc. rose 6.85 percent to 343 yen. Meanwhile, top bank Mitsubishi UFJ Financial Group Inc., who have already launched their fundraising initiatives, gained 4.91 percent to 470 yen.

Commercial banks were also on the advance Wednesday with Shinsei bank Ltd. surging 13.46 percent to 118 yen, whilst Mizuho Trust and Banking Co. Ltd. jumped 8.54 percent to 89 yen. The Bank of Yokohama Ltd. also ended trade up, adding 2.85 percent to close at 433 yen.

"If the Nikkei report were true, short-covering in banks would likely continue for a while. Japanese banks' capital ratios are lower than those of, say, European and U.S. peers and worries about equity financing had particularly hurt their shares," said Soichiro Monji, chief strategist at Daiwa SB Investments.

Property issues embraced the news of a possible broad scale increase in bank financing and Mitsubishi Estate Co. Ltd. added 4.36 percent to 1,533 yen. Sumitomo Realty and Development Co. Ltd gained 3.10 percent to 1,764 yen, whilst Mitsui Fudosan Co. Ltd. rose 2.44 percent to 1,597 yen.

Heiwa Real Estate Co. Ltd. climbed 2.90 percent to 284 yen and commercial developer Sekisui House Ltd. advanced 1.88 percent to 812 yen at the 3 p.m. bell on Wednesday.

Gains were increased in Japan's air transport sector as news emerged that the majority of Japan Airlines' retirees were willing to accept the proposed pension cuts, which was a state prerequisite to the ailing carrier being underwritten by the government.

Shares in Japan Airlines Corp. climbed 3.00 percent to 103 yen, whilst rival All Nippon Airways Co. Ltd. also gained on Wednesday, ascending 1.17 percent to 260 yen.

Resource and commodity-related issues were a drag on the Nikkei Wednesday, with Nippon Oil Corp. shedding 0.27 percent to 370 yen and NSK Ltd, a metal processing and fabricating firm, loosing 2.92percent to 663. Pacific Metals Co. Ltd. dropped 0.68 percent to 584 yen, whilst Show Denko KK. relinquished 0.56 percent to close down 0.56 percent at 176 yen. Nippon Paper Group Inc. lost 0.44 percent to 2,280 yen at the close of trade.

With the U.S. dollar strengthening into the mid-89 yen level, up from the upper 88 yen range in Tokyo on Tuesday, Japanese tech-shares and exporter issues were on the rise Wednesday, with Toyota Motor Corp. rising 1.62 percent to 3,760 yen.

Honda Motor Co. Ltd. added 0.66 percent to 3,050 yen, whilst Kyocera Corp. gained 0.95 percent to 959 yen. Sony Corp closed up 0.19 percent at 2,595, whilst rival Sharp Corp. also ended trade on Wednesday in positive territory, adding 0.81 percent to close at 1,119 yen.

Trade was active on the Tokyo exchange's First section with some 2.7 billion shares changed hands, above last week's daily average of 2.2 billion.

Advancing issues outnumbered declining ones by 3 to 1.

(Xinhua News Agency December 16, 2009)