The Nikkei share average booked its highest finish in five years on Thursday, putting it on track for its biggest yearly gain since the 1980s asset bubble, as electronics firms such as Sony Corp gained on expectations of stronger earnings in the new year.
The tech-sensitive benchmark climbed 0.92 percent, putting its year-to-date rise at 42.3 percent, its best performance since 1986.
Overall trade was relatively thin before the year-end holidays, so individual investors provided much of the market's force, helping to snarl trade at the Jasdaq Securities Exchange for start-ups.
"Everyone's bonuses were a little bit better this year, and they've seen the value of their assets increase, so if you go to an electronics store now there are a lot more people," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Securities.
Shares in electronics firms were also attractive to investors, after lagging behind the Tokyo market's top gainers all year, he added.
"Since their performance wasn't good this year, there are expectations that they will improve next year," he said.
The Nikkei finished up 149.59 points at 16,344.20, its highest close since September 2000.
The broader TOPIX index gained 0.59 percent to 1,663.75.
Electronics and entertainment conglomerate Sony surged 2.3 percent to 4,880 yen after earlier hitting its highest level since January 2003.
Advantest Corp, the world's largest supplier of chip-testing tools, added 2.4 percent to 11,880 yen. Tokyo Electron Ltd, the world's second-largest producer of chip-making equipment, added 0.5 percent to 7,410 yen.
The predominance of individual investors helped to boost well-known tech firms, said Hajime Yagi, general manager of Japanese equity investment at Meiji Dresdner Asset Management.
Softbank Corp, a long-time favourite of Japan's individual investors, surged 11.4 percent to 4,880 yen. Shares in the Internet and communications conglomerate dipped 0.3 percent in the previous session, following a 3-for-1 share split.
Tech stocks and other exporters were also boosted by the weaker yen which struck a two-week low against the dollar.
Toyota Motor Corp rose 2 percent to 6,110 yen after hitting a lifetime high of 6,160 yen in early afternoon. The world's second-largest auto maker made nearly 70 percent of its sales outside Japan last year.
The auto maker will invest 100 billion yen ($850 million) to boost its sales network in Japan, business daily Nihon Keizai said on Thursday.
Elsewhere, Japan's top gold producer, Sumitomo Metal Mining Co Ltd, gained 0.9 percent to 1,452 yen and its peer Mitsubishi Materials Corp rose 1.5 percent to 610 yen. Those gains came after February-delivery gold hit a two-week high on Wednesday.
Sanyo Electric Co Ltd lost 5 percent to 323 yen after the struggling consumer electronics maker said it would recall the heat exchange unit in 12,511 hot water supply systems co-developed with Tokyo Gas Co Ltd because of some glitches.
Tokyo Gas gained 1.9 percent to 528 yen. Volume remained below recent highs, with 1.90 billion shares changing hands on the first section. Advancers beat out decliners 921 to 644.
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