5:00 AM New York, 7:00 PM Tokyo – Stocks in Japan closed higher led by a rise in domestic banks. Comments from regulators suggested a flexible approach for the capital adequacy at local banks. Government is preparing a supplemental budget of 3 trillion yen. Government plan to rescue JAL is likely to be ready before the end of this week.

The benchmark stock index rose 0.6% after Japan trade surplus rose in September.

Financial Services Minister Shizuka Kamei said that Japan will not punish domestic banks if their capital adequacy ratios fall below acceptable capital ratio of 4% temporarily.

In Tokyo trading Nikkei 225 Index rose 0.6% or 61.74 to 9,870.73, and the broader Topix Index gained 0.2% to 872.44. Local banks rallied after comments from Kamei.

In the first section of the Tokyo Stock Exchange 8.4 billion shares worth 570 billion yen were traded and in the second section 431 million shares valued at 3.6 billion yen changed hands.

Of the Nikkei 225 index stocks, 123 gained, 89 declined, and 13 were unchanged. Taiyo Yuden led gainers in the index shares with a rise of 5.5% followed by Nippon Sheet Glass gaining 5.2%.

The yen fell 0.2% to 89.92 against the dollar.

Supplementary Budget of 3 Trillion Yen

Nikkei News reported today the deputy prime minister Naoto Kan said that government plans to compile a second extra fiscal 2009 budget of 3 trillion yen.

Kan is also the minister of national strategy and economic policy.

“The government will use the amount saved through project suspensions to improve citizens'' household finances and job conditions,” said Kan.

Trade Surplus Rises 0.2%

Ministry of finance reported today that Japan’s current account surplus edged up 0.2% to 1.57 trillion yen from a year earlier in September.

Current account surplus decreased 27.2% from a year ago as the net income earned abroad after paying the interest to foreign investors on their Japanese assets declined to 1.08 trillion yen.

Economists had earlier projected the surplus to narrow to 1.51 trillion yen.

According to the finance ministry, exports eased 32.1% from a year earlier after falling 37.1% in August.

The current account surplus on a seasonally adjusted basis rose to 1.34 trillion yen in September.

Government Finalising JAL Rescue Plan

Nikkei News reported today that government is finalising a rescue package for Japan Airlines Corp. and has reached a position on key pension and bridge loan issues.

Government will not be guaranteeing bridge loans to the airline.