Japan's Nikkei average ended up one percent at a six-week closing high on Thursday after unexpectedly strong machinery orders data underpinned a rise sparked earlier by futures-driven buying.
Some financial issues gained on prospects of closer ties between banks and consumer finance firms after Promise and Sumitomo Mitsui Financial Group Inc (SMFG), Japan's second-largest bank, said they were in talks on an equity alliance.
An upbeat report also boosted the non-life insurance sector.
After opening lower, the benchmark Nikkei benefited from a sharp rally in the afternoon on buying linked to the settlement on Friday of stock index futures and options.
It closed up 1.10 percent at 11,575.97.
The broader TOPIX index finished 0.81 percent higher at 1,162.06.
Machinery orders, regarded as a leading gauge of capital spending, jumped 11.8 percent in April from March. A Reuters poll of 30 economists had given a consensus forecast of a rise of 1.9 percent.
Some traders said recent gains in the Nikkei above the 11,500 level had made the market cautious about room for further rises, but others were optimistic the data would push Tokyo stocks even higher after Friday's settlement.
Japan's gross domestic product (GDP) for January-March rose a real 1.5 percent from the previous quarter, the government said on Wednesday, revising the figure up from a preliminary 1.4 percent.
Some investors said there was little to complain about in the short term but that there would likely be some correction later in the year.
"The US is doing well and manufacturing activity is high as firms gear up ahead of the Olympics, but there's likely going to some adjustment and that's a little worrying," said Hideo Ueki, chief investment officer at UBS Global Asset Management Japan.
Promise, Japan's fourth-largest consumer finance firm, climbed 2.6 percent to 7,510 yen on a potential capital tie-up with SMFG, which gained 0.52 percent to 774,000 yen.
SMFG is set to take a 17-18 percent stake in Promise for 150 billion yen ($1.36 billion), business daily Nihon Keizai reported.
Consumer finance industry leader Takefuji Corp rose 2.57 percent to 7,990 yen and rival Aiful Corp climbed 2.68 percent to 11,500 on speculation that they too were candidates for alliances.
Non-life insurer Millea Holdings Inc jumped 5.88 percent to 1.62 million yen after Goldman Sachs said there was a great deal of upside potential in the firm's share price.
The brokerage also said Sompo Japan Insurance Inc would benefit significantly should the complete liberalisation of insurance product sales through banks come about. Sompo soared 8.79 percent to 1,089 yen.
Trade volume increased with 1.324 billion shares changing hands on the first section against Wednesday's total of 1.172 billion shares. Advancers outpaced decliners 1,137 to 309.
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