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Japan's Nikkei 225 index surges 7.7 per cent amid broad gains for Asian stock markets

HONG KONG – Japanese stocks posted their biggest gain in nearly seven years Wednesday, leading other regional indexes higher, as Asian officials sought to counter pessimism about prospects for markets and economic growth.

Japan’s Nikkei 225 index vaulted 7.7 per cent to 18,770.51, its biggest one-day rise since October 2008 and its 10th biggest gain since 1949. South Korea’s Kospi added 3 per cent to 1,934.20 and Hong Kong’s Hang Seng climbed 4.5 per cent to 21,211.17.

The strong gains come after three months of weak performance in share markets that was partly sparked by the dramatic sell-off in Chinese shares beginning in early June.

The Shanghai Composite Index in mainland China rose 2.3 per cent to 3,243.09. Australia’s S&P/ASX 200 gained 2.1 per cent to 5,221.10.

The Nikkei, which had earlier hit its lowest level since February, bounced after comments by Prime Minister Shinzo Abe raised expectations of more measures to shore up economic growth under his “Abenomics” stimulus program.

In remarks from Abe read to a Bank of America-Merrill Lynch conference in Tokyo, he pledged to cut corporate tax rates by at least 3.3 percentage points next year. Passage of legislation making it easier to hire temporary workers and reports that Abe plans to keep his current economic team in a cabinet reshuffle next month also appeared to whet investor appetite.

China’s Ministry of Finance helped with a new round of measures to revive growth.

The steps, which include infrastructure spending and reforming taxes for small businesses, follow other recent moves aimed at soothing jittery markets. A rebound in Shanghai shares Tuesday also reinforced faith in Beijing’s interventionist policies to halt sliding prices.

Analysts said short-covering by traders, or buying shares to close out short positions taken on expectations a stock price will drop, was another major factor behind the rally.

“With the temporary calm in global markets investors were obviously seeing a good point to cover shorts or invest in stocks at knocked down valuations, particularly in high growth potential stocks,” said Angus Nicholson of IG in a market commentary.

Gains were spread across sectors in Tokyo: medical technology company Terumo Corp. led with an 11.6 per cent jump, toilet maker Toto Corp. soared 10.5 per cent and Fuji Heavy Industries gained 9.2 per cent.

On Tuesday, U.S. stocks rebounded from last week’s loss to post their second-biggest gains for the year. The Standard & Poor’s 500 gained 2.5 per cent to 1,969.41 while the Dow Jones industrial average rose 2.4 per cent to 16,492.68. The Nasdaq composite climbed 2.7 per cent to 4,811.93 points.

In energy markets, U.S. benchmark oil was down 26 cents to $45.68 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 11 cents to close at $45.94 a barrel in New York on Tuesday. Brent Crude, a benchmark for international oils used by many U.S. refineries, rose 9 cents to $49.59 in London.

The dollar rose to 120.67 yen from 119.99 yen on Tuesday. The euro slipped to $1.1183 from $1.1214.

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AP Business Writer Elaine Kurtenbach in Tokyo contributed.