Japan's Nikkei share average rose on Thursday, pulling away from the previous session's four-month intraday lows after news of an agreement to extend the US debt limit cheered Wall Street.
The Nikkei was up 0.4 per cent at 19,430.19 at the end of morning trade.
Major US stock indexes had finished higher overnight, with the S&P 500 ending within 15 points of its record closing high, after President Donald Trump forged a surprising deal with Democrats in Congress on Wednesday to extend the US debt limit and provide government funding until December 15.
Investors also pondered news that US Federal Reserve Vice Chair Stanley Fischer will step down from his position in mid-October, potentially accelerating Trump's opportunity to reshape the direction of the central bank.
Trump had also said on Wednesday that he would get into “great detail” over the next two weeks on his US tax reform plan, which has been short on specifics.
He had also warned on Wednesday that the United States would no longer tolerate North Korea's actions after its sixth nuclear test, but said the use of military force against Pyongyang would not be his “first choice''.
“North Korean fears have calmed, and you have some glimmers visible at the end of the tunnel, with Trump talking about tax reform,” said Gavin Parry, managing director of Parry International Trading in Hong Kong.
“Talk of tax reform tends to bring a little bit of 'animal spirit' back to markets,” he said. “This carries over to Japan, where the Bank of Japan's monetary policy is expected to remain easy, with no tapering on the horizon there.”
Data released earlier on Wednesday showed that foreign investors remained net sellers of Japanese stocks for the week ending on September 2. Energy shares gained, with the Tokyo Stock Exchange's oil and coal subindex up 0.8 per cent.
Crude oil prices rose more than 1 per cent on Wednesday as strong global refining margins and the reopening of US Gulf Coast refineries after Hurricane Harvey closures provided a more bullish outlook. Investors remained wary of Hurricane Irma, which could strike Florida over the weekend.
McDonald's Holdings Company Japan rose 1.3 per cent, after the fast food restaurant operator said its August same-store sales rose 14.5 per cent from a year earlier. Construction-related shares gained, with Komatsu Ltd and HitachiConstruction Machinery Co both rising 2.7 per cent.
But small-to-mid cap stocks largely lagged broader gains, with the Mothers market of start-up shares down 0.4 per cent, moving back toward more than four-month lows plumbed on Wednesday.
Toshiba Corp fell 0.9 per cent after Kyodo News reported that Western Digital Corp was in talks to gain voting rights of just under 16 per cent in Toshiba's memory chip unit on the assumption that it will be listed in the future. Toshiba is now aiming to reach a final agreement with the Western Digital-backed consortium by Sept. 13, said sources briefed on the talks.
The broader Topix was 0.6 per cent higher at 1,601.35 and the JPX-Nikkei Index 400 also added 0.6 per cent to 14,193.17.