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Nefaro

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Morale for all armies improves by a set amount on the first day of each month. All Paradox' games do.

So, if your army has been whipped and retreated you only need to keep them somewhere out of combat for a couple months to get most of their morale back. I think three months will usually fill it from empty to full. The general's attributes may have some effect on it.. I think his Diplomacy skill is supposed to effect morale somehow. It may just be a small bonus to the limit, though.
 

feelotraveller

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The morale maximum is 2 by default and increases 0.1 for every point of diplomacy your leader has, after taking into account his wife bonus.

Pretty sure that's it.

Edit: that's your clan leader, not the general, who gives the bonus. Not sure what happens when you are only kokujin or daimyo...