TOKYO, OCT. 2 (TUEDAY) -- The Tokyo stock market skyrocketed 13 percent today, reversing a long downward spiral after the Japanese government announced measures aimed at restoring the market's battered confidence.

The surge was largest daily gain in history for the Nikkei stock market index, which had plunged briefly through the 20,000-point barrier on Monday. The index closed at 22,898.41 today, up 2,676.55 points.

The rally came after Ryutaro Hashimoto, the nation's finance minister, declared on Monday that "the current sharp declines of stock prices are a risk to {Japan's economic} growth if they continue in this way, and we cannot leave the market as it is without doing anything,"

Besides the government measures, the market's surge was also powered by lower oil prices and a sense that the market had been oversold, traders said. The U.S. deficit reduction agreement also played a part but its role in today's rally was relatively modest because it had been disclosed the previous day, the traders said.

In unveiling the measures, which included a liberalization of the rules concerning stock purchased with borrowed money, Hashimoto also urged Japan's inflation-conscious central bank to change course and lower interest rates. Such a move, could contribute to an easing of interest rates in the United States.

Hashimoto's remarks, which came at a press conference, marked an unusually frank official acknowledgment of the seriousness of Japan's stock market slide.

As recently as Friday, Finance Ministry officials were maintaining that no government actions were being contemplated to stem the drop in share prices, even though the Nikkei lost nearly 12 percent of its value last week.

Monday's announcement was particularly striking because the powerful ministry generally prefers to exercise quiet persuasion over major securities firms when the market is declining, rather than engage in overt intervention. Public declarations of concern by top officials, while often helpful, carry the risk of causing investors to become even more spooked than they are already.

But the Finance Ministry evidently decided that the decline had gone too far when the Nikkei dipped below the psychologically crucial 20,000-yen level in early Monday afternoon trading. The barometer recovered some of its losses, closing at 20,221.86, down 3.63 percent for the day, only after word was spread among securities firms that the government actions were in the offing.

The market's long drop had sliced nearly half the value from the Nikkei since the beginning of the year, with much of the slide coming after Iraq's invasion of Kuwait. The development has aroused fears that the global economy could be hurt, because Japanese banks and insurance companies are suffering losses that are forcing them to retrench from their position as the world's premier suppliers of capital for loans and investment.

Japan's huge life insurance companies, for example, have seen their stock holdings decline by about $146 billion since the end of March, according to the Nihon Keizai Shimbun, Japan's national business newspaper. The newspaper, citing industry sources, said the companies would cut back their foreign purchases of stocks and bonds as a result.

Reflecting his concern that economic growth could be stifled, Hashimoto said the Bank of Japan should, in setting its interest-rate policies, pay more attention to the risk of deflation -- in other words, an economic downturn -- rather than inflation. The central bank has been pushing rates higher in recent months in an effort to cool the economy and avert a surge in wages and prices.

The Bush administration, which has been pressing the Federal Reserve and other central banks to worry less about inflation and more about recession, would welcome a decision by the Bank of Japan to bow to Hashimoto's apparent wish for a monetary easing.

The Finance Ministry also took measures on its own, including a move aimed at stopping what analysts have described as a vicious cycle of selling. The cycle develops because when the market falls, investors who have bought stock on margin -- that is, who have borrowed some of the purchase price -- are forced to sell their shares to raise the cash they need to repay their debts. Such "margin calls" lead to more selling, and they have been one of the principal factors behind the market's decline in recent days.