Japanese stocks recover after Wall Street surge

The benchmark Nikkei stock 225 index gained 108.40 points, or 0.96 percent, to close at 11,368.26. On Tuesday, it had tumbled 4.1 percent to its lowest level in more than three years on disappointment over lawmakers' rejection of the emergency proposal.

Investors were back snatching up bank shares on Wednesday, cheered by a recovery on Wall Street and prospects that the rescue plan will pass later in the week. The Dow Jones industrial average jumped nearly 500 points, reversing its 777-point plunge on Monday.

Tokyo's gains were stronger in early trading and eventually tapered off.

Analysts warned that new worries were already starting to emerge about possible compromises that might be included during revision of the U.S. bailout plan, raising questions about how effective it may be when implemented.

"The market is already expecting the plan to pass. The question now is what's next," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities Co. in Tokyo.

Japanese stocks plunged Tuesday after the U.S. House of Representatives failed to pass the emergency bailout package, which would have allowed the government to buy bad mortgages and other sour assets held by troubled banks and other financial institutions.

Investors remain worried about declining U.S. housing prices and the overall U.S. economy and consumer spending in the upcoming Christmas shopping season.

Major Japanese companies, including electronics and autos, are counting on solid exports to the U.S. to keep up profits, Fujito said.

The dollar's recent recovery, which tends to be a boost for Japanese shares, also encouraged some buying during Wednesday's Tokyo session. The dollar was trading at 105.97 yen in the afternoon, up from about 104 yen earlier in the week.