Japan stocks rebounded Tuesday as investors hunted for bargains at the start of Japan's new fiscal year.

The 225-issue Nikkei Stock Average, which dropped almost 300 points the previous day, increased 130.88 points, or 1.04 percent, to 12,656.42. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 17.53 points, or 1.45 percent, to 1,230.49.

The TSE's Second Section index was down 12.00 points, or 0.44 percent, to 2,729.84 on a volume of 20.41 million shares.

Among all the TSE first section issues, 1,145 increased and 490 decreased. The trading volume reached 1,741.56 million stocks or 2,088.5 billion yen. The Japanese currency is being traded in the level of latter half of 99 yen per U.S. dollar.

Brokers said Japan stocks increased due to strong expectations for new money inflows at the start of fiscal 2008 of Japanese companies. Investors hunted for bargains following steep equity falls Monday, according to Nikkei.

Export oriented issues like Canon and Toyota gained partly due to the depreciation of Japanese currency.

According to the results released from the Bank of Japan's Tankan business confidence survey in the morning, the index for business confidence in the three months through of major Japanese manufacturers became 11, down from 19 in the previous survey in December.

The index did not reach the average market forecast of 13. Also investors' fear increased after Swiss Bank UBS announced that it would lose $12 billion in the first quarter.