5:00 AM New York, 7:00 PM Tokyo – Stocks in Japan surged after Canon reported a surge in earnings forecasted improved earnings outlook. Expectations of higher earnings at Sony, Honda and Nippon Electric Glass lifted stocks. Toyota declined nearly 4% as the automaker expanded recall program and halted sales in the U.S. and Canada.

Japan stock indexes gained 1.6% as Canon reported better-than-forecasted fourth quarter results.

The camera maker said net profit rose five-fold in the December quarter to 61.56 billion yen from 11.62 billion yen in the same period a year earlier.

Canon projects that its net profit to increase 52% to 200 billion on an 8% sales increase to 3.45 trillion yen.

Optimism arising from Barack Obama’s State of the Union address also helped the market sentiment.

In Tokyo trading Nikkei 225 Stock Average increased 1.6% or 162.21 to 10,414.29, and the broader Topix Index edged up 0.7% to 914.332.

In the first section of the Tokyo Stock Exchange 9.7 billion shares worth 842 billion yen were traded and in the second section 111 million shares valued at 1 billion yen changed hands.

Of the Nikkei 225 index stocks, 168 increased, 48 fell, and 9 were unchanged. Yahoo Japan Corp. led gainers in the index shares with a rise of 7.8% followed by Pioneer Corp. advancing 6.5%.

Japan Diet to Approve Supplementary Budget

Nikkei News reported the House of Councillors will approve a supplementary budget with stimulus measures worth 7.2 trillion yen to prop up the economy.

The upper house is also scheduled to pass measures on Thursday to revise the unemployment insurance law and the Local Allocation Tax Law in connection with the supplementary budget.

Stimulus measures are meant to “relax conditions on helping firms pay their employees allowances during their absence from work and a new, housing version of the ''''eco-point'''' purchase incentive program to build energy-efficient homes and add energy-efficient features to existing homes.”

Crude Steel Output to Rise to 100 million tons

Japan Iron and Steel Federation chairman Shoji Muneoka reported yesterday crude steel output will rise to 100 million tons on growing demand from other Asian countries.

Crude steel production fell to 87.53 million tons in 2009.

Toyota Recalls 1 million Vehicles

Detroit Free Press reported Toyota Motor Corp. broadened its recall to another one million vehicles to replace floor mats that could trap accelerator pedals.

The recall includes the 2008 though 2010 Highlander, along with the 2009 and 2010 model year Corolla, Venza, Matrix and Pontiac Vibe.

Toyota recalled 2.3 million vehicles affected by the accelerator assembly problem last week, in addition to an earlier recall of 4.2 million vehicles to fix the floor mat issue.

Nikkei Movers