TOKYO, May 7 (Reuters) - Japan's Nikkei average jumped 4 percent on Thursday to a six-month high, boosted by financial shares such as Mitsubishi UFJ Financial Group (8306.T) on investor relief over growing clarity about the health of the U.S. financial system.
About half of the 19 largest U.S. banks are expected to need more capital once the results of government "stress tests" of their ability to weather a deep recession are released on Thursday at 5 p.m. EDT (2100 GMT). [ID:nL6943131]
While capital shortfalls reported so far are much larger than analysts expected, U.S. bank shares soared as investors got more insight about how the industry will cope with perhaps the most severe recession since World War Two.
"It's become highly unlikely there will be more failures like Lehman Brothers. Investors seem to have decided that capital injections wouldn't be so bad if they could help solve the problems," said Fumiyuki Nakanishi, manager at SMBC Friend Securities.
"The market now holds the view that the worst may be over, at least for America. A very strong bull market appears to have begun."
Among other notable stocks, Orix Corp (8591.T) shot up more than 8 percent after a newspaper said it is seeking an additional 100 billion yen ($1 billion) or so in emergency government loans to supplement its fundraising efforts.
Orix, Japan's biggest leasing firm, said it has not approached the Development Bank of Japan (DBJ) for an additional loan and has no funding problems. [ID:nTFD003284] [ID:nBNG366446]
The benchmark Nikkei .N225 climbed 4.1 percent or 370.86 points to 9,348.23. It earlier rose as high as 9,366.79, its highest point since early November.
The broader Topix .TOPX climbed 4.1 percent to 881.52.
On Wednesday the Dow Jones industrial average .DJI rose 1.2 percent.
Adding to an upbeat note, the number of U.S. private-sector job losses in April touched the lowest level since November, according to a report by ADP Employer Services, the latest data suggesting the worst of the recession may have passed.
Japan's banking subindex .IBNKS.T powered 7.9 percent higher.
Mitsubishi UFJ Financial Group (8306.T) soared 10.7 percent to 590 yen, even after Japan's biggest bank warned on Friday that it now expects to have slid to its first annual net loss since it was formed in 2005, hit by losses on its stockholdings. [ID:nT8737]
Sumitomo Mitsui Financial Group (8316.T) jumped 10 percent to 3,840 yen.
The third-ranked bank said it will buy Citigroup's (C.N) Japanese broker and key investment banking units for $5.9 billion and look to form a financial services powerhouse through an alliance with Daiwa Securities Group (8601.T). [ID:nBNG446757]
Mizuho Financial Group (8411.T) advanced 10.1 percent to 228 yen, while Nomura Holdings Inc (8604.T), Japan's biggest brokerage, gained 7.3 percent to 646 yen.
Shares of Orix jumped 8.5 percent to 5,000 yen.
Exporters gained, receiving additional help from a weaker yen, which boosts their profits when repatriated. In early trade the dollar rose 0.4 percent to 98.74 yen JPY= from late U.S. trade on Wednesday. [FRX/]
Toyota Motor Corp (7203.T) rose 3.6 percent to 4,040 yen and Canon Inc (7751.T) jumped 7.4 percent to 3,360 yen.
Among stocks that fell, Tokyo Electron Ltd (8035.T) shed 2.1 percent to 4,580 yen after the Nikkei business daily said the chipmaking equipment maker is expected to incur a group operating loss of about 65 billion yen ($662 million) for 2009/10, a sharp reversal from the 14.7 billion yen profit estimated for 2008/09. [ID:nBNG485778] (Reporting by Aiko Hayashi; Editing by Michael Watson)