Japan's Nikkei average rose 0.9 percent to hit its highest close in seven weeks on Wednesday, with bank shares soaring after a report that global banking regulators are eyeing effectively delaying the implementation of new capital rules.
Real estate stocks such as Mitsui Fudosan gained on hopes banks might lend more following the same report by the Nikkei business daily that the Basel Committee on Banking Supervision has agreed to establish a transition period of at least 10 years for new capital rules.
Three sources later said global regulators will give banks a grace period before forcing them to implement stricter capital rules, but a spokesman for Japan's Financial Services Agency said no such agreement had been reached at this time.
"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.
"But investors are cautious as a whole ahead of the result of the Fed meeting, with speculation about a sooner-than-expected rate hike pushing down U.S. stocks yesterday and weighing down on other Asian stocks."
In active trade, the benchmark Nikkei added 93.93 points to 10,177.41, its highest finish since October 27.
The broader Topix gained 1.5 percent to 898.29.
U.S. stocks slipped on Tuesday as investors trimmed positions ahead of Wednesday's decision on interest rates by the Federal Reserve, reflecting their reluctance to place big bets before getting the central bank's latest assessment of both the economy and monetary policy.
A higher-than-expected increase in the overall U.S. Producer Price Index in November raised concerns the Fed may find it difficult to keep benchmark rates at their current level near zero.
BANKS SOAR
The Basel Committee on Banking Supervision, which is made up of central banking and regulatory officials from nearly 30 countries, is putting together a package of stricter financial regulations to prevent another credit crisis.
The committee is expected to publish a draft of its reforms by the end of January.
Mizuho Financial Group, Japan's second-biggest bank, vaulted 15.2 percent to 182 yen.
No.3 Sumitomo Mitsui Financial Group surged 14.3 percent to 3,030 yen.
The expected implementation of new capital rules was behind Mitsubishi UFJ Financial Group's decision to raise about 1 trillion yen through a new share issue.
Shares in the country's top bank rose 4.9 percent to 470 yen.
Analysts have said Sumitomo Mitsui Financial Group and Mizuho Financial Group, may have to follow Mitsubishi UFJ and raise more funds, and worries about such new issuance have been weighing on the sector and the market.
The news of the potential grace period cheered Japanese property stocks, which were hit as the global economic crisis squeezed financing and drove investors out of the property market.
Mitsui Fudosan added 2.4 percent to 1,597 yen and Sumitomo Realty & Development climbed 3.1 percent to 1,764 yen.
Japan Airlines Corp rose 3 percent to 103 yen after saying on Tuesday that most of its retirees were willing to accept proposed cuts to pension payouts, a key step needed to secure approval for reducing its pension burden, which is a prerequisite for receiving a government bailout.
Shares of Noritz Corp jumped 4.7 percent to 1,156 yen after the maker of gas bath heaters and water heaters raised its sales and profit forecasts for the year ending this month, citing better-than-expected demand.
Some 2.7 billion shares changed hands on the Tokyo exchange's first section, above last week's daily average of 2.2 billion.
Advancing stocks outnumbered declining ones by nearly 3 to 1.
