Japan's Nikkei average climbed 2.7 percent to its highest close in two weeks as optimism grew about a recovery in the U.S. economy, reviving investor appetite for riskier assets and lifting blue-chip exporters such as Canon Inc. Mitsubishi Corp and other trading houses advanced on rising metals prices and firm oil.
The Nikkei started the day with strong tone, following a rise on Wall Street the previous day, as it moved to play catch-up after a holiday here on Monday. The Nikkei then was lifted by large bids in stock futures in late trade.
U.S. stocks jumped on Monday, with the S&P 500 hitting an eight-month closing high, after CIT Group Inc, a lender to nearly a million small and mid-sized U.S. companies, reached a deal with bondholders for $3 billion in emergency financing.
"The situation with CIT has eased market worries about financial instability and increased hopes of economic recovery, leading to a revival of risk appetite," said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.
The benchmark Nikkei added 256.70 points to 9,652.02, its highest finish since July 6. The broader Topix gained 2.7 percent to 901.55.
Japanese Prime Minister Taro Aso dissolved parliament's lower house on Tuesday for an election on Aug. 30 and vowed to restore voters' faith in his fractious ruling party, which polls show is in danger of a historic defeat.
But market analysts said political developments were not a strong trading factor for the day.
Exporters rose broadly on optimism about the U.S. economy, with Canon up 3.6 percent at 3,200 yen, Panasonic Corp soaring 5.7 percent to 1,276 yen and Sony Corp advancing 2.2 percent to 2,315 yen. Toyota Motor Corp, the world's biggest automaker, was up 3.1 percent at 3,620 yen.
Toyota North America is reworking its U.S. manufacturing strategy to account for idle capacity and shifting corporate priorities, the president of the unit told reporters on Monday.
Shares of Japanese construction machinery makers climbed after Bank of America-Merrill Lynch said the second quarter could mark a bottom for the construction sector, lifting its rating on rival Caterpillar Inc to a "buy"..
Hitachi Construction Machinery surged 9.5 percent to 1,596 yen, Komatsu rose 5.2 percent to 1,482 yen and Kubota Corp gained 6.5 percent to 800 yen.
Strong metals prices sent trading houses climbing, with Mitsubishi Corp gaining 5.5 percent to 1,793 yen.
Trade picked up, with 2.1 billion shares changing hands on the Tokyo exchange's first section, roughly in line with last week's daily average.
Advancing shares outnumbered declining ones by more than 9 to 1.
