Japanese stocks have surged with the Nikkei ending up 3.7 per cent - its biggest one-day percentage gain in more than five years - as bank shares rebounded on a Federal Reserve interest rate cut.
Japanese stocks surged to a two-week closing high, with the Nikkei up 3.7 percent after the US Fed cut interest rates.
Strong oil prices boosted energy stocks and trading companies, which also saw gains from high metal prices, while high-tech firms rose as well.
The Bank of Japan kept its rates unchanged as had been expected, after the Fed slashed its benchmark federal funds rate by 50 basis points - more than expected, and raising hopes the U.S. economy could ride out turmoil in the credit market.
"The Fed decision really cheered the markets, blowing away much of the uncertainty over the U.S. economy and credit that has been weighing things down," said Yumi Nishimura, manager of the investment advisory section at Daiwa Securities SMBC. "But a little uncertainty remains, and the market is watching to see the earnings results for large U.S. brokerages, due out later this week, for still more clues. Currency movements will also bear watching."
A dearth of domestic factors and the fact that international investors - whose activities have largely been driving Tokyo market moves - have yet to invest actively helped keep trade relatively light.
Some market players said they were keenly watching Wall Street trade to see if the rising trend will continue.
"Was Tuesday's rise a fluke, or will it go on? The Fed decision could be taken two ways: as a good sign for the markets, or as a sign that the economic situation was really bad enough to require such a step," said Yusuke Sakai, a manager of equities trading at Mizuho Securities.
The benchmark Nikkei surged to close up 579.74 points to 16,381.54, its highest level for two weeks and its biggest one-day percentage gain since March 2002.
The broader Topix index was up 3.8 per cent at 1,567.58. Trade was moderate, with 1.77 billion shares changing hands on the Tokyo stock exchange's first section. The average daily volume in August was 2.3 billion shares.
Financial firms, which were battered on Tuesday, rebounded, with Mitsubishi UFJ Financial Group rising 6.1 per cent to 1.05 million yen and Sumitomo Mitsui Financial Group powering up 5.8 per cent to 821,000 yen.