The Nikkei average rose 0.79 per cent today to end at its highest close in nearly a month after a Bank of Japan survey showed improved business sentiment.
The Nikkei climbed 126.71 points to 16,254.29, its highest close since September 6. The broader TOPIX index was up 0.89 per cent at 1,625.12.
The September Tankan survey showed that the headline diffusion index for large manufacturers jumped to plus 24 from plus 21 in June, its highest level since September 2004, and well ahead of the market consensus estimate of 21
"Last week's data and the Tankan survey confirmed that the Japanese economy is not as bad as we had thought, and that gave investors relief," said Masayoshi Yano, a senior manager of investment information at Tokai Tokyo Securities.
"That makes it easy for investors to chase after shares of companies whose earnings outlooks are solid," he said.
A weaker yen helped exporters such as Honda Motors and Canon but Sony fell for the third straight session as investors worried about the impact of a growing recall of Sony batteries for laptop computers.