Japanese bank shares extended gains into a fourth day on today on hopes they will be forced to clean up a mountain of bad loans sooner rather than later.
But analysts say the share price upswing may prove temporary.
Mizuho Holdings, the world's biggest bank by assets, rose 5.05 per cent to 707,000 yen, a 20 per cent rebound from an all-time low of 587,000 yen marked two weeks ago.
Mizuho has risen more than 6.7 per cent in the last three sessions, helped by a pledge from Japan's financial services minister Mr Hakuo Yanagisawa to come up with a scheme by the end of next month to help banks directly write off bad loans.
The urgent need for banks to clean up their balance sheets was underscored by a downgrade of Japan's sovereign debt rating by Standard & Poor's Corp, which cited the high level of non-performing loans as a reason for its action.
Other gainers in the sector included Bank of Tokyo-Mitsubishi, up 3.42 per cent at 1,179 yen, Sanwa Bank up 6.70 per cent at 860 yen and Asahi Bank, which added 5.65 per cent to 355 yen.