Japanese stocks rose more than 1 per cent to hit two-year highs on Tuesday, tracking Wall Street's rally after new data pointed to underlying strength in the US economy, while a weaker yen also helped overall sentiment.
The Nikkei rose 1.1 per cent to 20,614.07, the highest closing level since mid August 2015. The broader Topix gained 0.7 per cent to 1,684.46, also the highest closing level since mid August 2015.
Market participants said investors turned to positive factors in the market such as strength in the US economy, while geopolitical tensions between the US and North Korea, which roiled the market last month, have receded for now.
“Since there are no serious moves (from both sides) now, major concerns that worried the market recently have been fading for now,” said Hikaru Sato, a senior technical analyst at Daiwa Securities. “The market takes heart from a weakening yen, and is focused on more developments and headlines related to Japan's election.”
Snap election
Japanese Prime Minister Shinzo Abe had last week dissolved the parliament's lower house and called a snap election for October 22.
Abe called the general election hoping to keep his conservative Liberal Democratic Party-led coalition's majority in the lower house. However, his bet now looks increasingly shaky, given growing support for a new party formed by the popular governor of Tokyo, which is drawing candidates from other opposition parties.
The dollar rose 0.4 per cent to 113.15 yen, underpinning overall sentiment, with 32 of Topix's 33 subsectors in positive territory.
Both defensive stocks and exporters gained ground, with realtor Mitsui Fudosan Co soaring 3.9 per cent, Mitsubishi Estate Co rising 2.5 per cent, drugmaker Eisai Co adding 2.6 per cent, Honda Motor Co advancing 1.1 per cent and Fanuc Ltd surging 1.8 per cent.
Meanwhile, advertising agency Asatsu-DK Inc jumped 20 per cent after Bain Capital disclosed plans to buy it for 152 billion yen ($1.35 billion).