The Japanese stock market has soared to its highest level in two months ahead of the government's planned announcement of economic reforms on Friday.

The Nikkei index of leading Japanese shares gained 3.4% to close up 300.90 points at 9,176.78 points.

Gains in the US stock market and a stronger dollar, which would boost Japanese firms' overseas earnings, helped fuel the market and lifted shares in technology and car firms.

But key to traders' sentiment were rumours that fresh cash could be made available to help the country's banks sort out their 50 trillion yen ($407bn; �258bn) of bad loans.

Leaked draft

The accuracy of the rumours was hard to pin down, not least since Financial Services Minister Heizo Takenaka insisted that "no final version [of the reform plan] exists yet, we are working on adjustments so we can announce it tomorrow".

But a draft of the plan, obtained by the Reuters news agency, suggested that fresh funds would be injected by financial authorities.

In addition, new accounting rules would make it easier to get an overview of the scale of the banks' bad debt problem, according to the draft.

"Mr Takenaka appears to have recovered lost ground, as the schedule sets the stage for stricter self-inspections and loan asset inspections," a report by Mitsubishi Securities said.

But other analysts were wary because the draft lacked detailed instructions on bank reform, tax and accounting issues, and on how bad loans would be reduced.

Shares in major banks rose mildly following sharp gains on Wednesday.

US shares gained sharply on Wednesday. The Dow Jones index of leading US shares gained 2.9% to close up 255.26 points at 8,931.68 while the technology weighted Nasdaq index rose 3%, or 43.51 points, to close at 1,487.94.