Japanese, Brazilian Stocks Lead Foreign Rally

Japan’s benchmark stock index climbed Monday to a seven-month high as the Bank of Japan continued to flood the banking system with money.

The Nikkei-225 index jumped 1.9% to 15,779, its highest close since Aug. 7.

Many other foreign stock markets also rallied further. Latin American markets were particularly strong, with Brazil’s main share index, the Bovespa, soaring 8.8% to 10,413--also the highest close in seven months.

In Japan, optimism was rooted in growing demand for stocks by foreign investors and in the Bank of Japan’s latest efforts to revive the economy.

The yield on Japan’s three-month certificates of deposit, a benchmark money market vehicle, tumbled to a record-low 0.1% as the central bank pumped money into the system. With yields so low commercial banks have more incentive to lend money to needy borrowers than simply invest in other banks’ CDs.

Early today the Japanese stock market continued to rise, with the Nikkei topping 15,870.

In Brazil, Monday’s rally was led by a 150% leap in the common shares of power company Light Participacoes on news that it will hold a stake in a new transmission company being created by its owner, Electrobras.

But traders said the underlying outlook for the economy had improved after Brazil agreed to new fiscal targets with the International Monetary Fund to ensure the steady flow of rescue loans after the devaluation of its currency, the real, in January.

Brazil faces a tough year, with officials predicting the economy will contract 3.5% to 4%. But traders said investors no longer fear a meltdown after road shows in the United States, Europe and Japan by top officials, including Central Bank President Arminio Fraga, a former aide to billionaire speculator George Soros.

Brazil’s gains helped Mexico, where the peso rose to 9.68 to the dollar Monday, its strongest close since Aug. 25. Mexico’s main stock index rose 1.5% to 4,769.