Tokyo shares on Tuesday closed just shy of their level before Britain's vote to leave the EU sent markets into a nosedive, while Nintendo surged almost 13 percent as its new smartphone game wins legions of fans. The benchmark Nikkei 225 closed up 2.46 percent, or 386.83 points, at 16,095.65, adding to a four percent rally Monday but a couple of hundred points shy of its pre-Brexit level.
The broader Topix index of all first-section shares jumped 2.38 percent, or 29.94 points, to 1,285.73.
After his ruling coalition swept weekend parliamentary elections, Japanese Prime Minister Shinzo Abe said the government would draw up new stimulus measures to kickstart growth in the world's number three economy - news that was welcomed by investors.
The package could be worth around 10 trillion yen ($97 billion), Japanese media said, while earlier reports put the possible amount at double that figure.
Speculation that Japan's central bank may move at its meeting later this month weighed on the yen, which is good for exporters.
Earlier Tuesday, Abe met in Tokyo with former US Federal Reserve Chairman Ben Bernanke, saying he wanted to "accelerate" Japan's exit from deflation, according to local media. "Japanese shares are rallying higher on stimulus package hopes and hopes that Abe will push through more Abenomics reforms," Andrew Sullivan, managing director of sales trading with Haitong International Securities Group, told Bloomberg News, referring to Abe's plan to kickstart Japan's economy.
Nintendo once again outperformed, soaring 12.73 percent to 22,840 yen.
The stock is up nearly 60 percent since Thursday with billions added to the videogame giant's market value on the back of huge demand for its new smartphone game Pokemon GO.
The game has been a massive hit with players since it was rolled out in Australia, New Zealand and the United States late last week, with millions of downloads on the Android Google Play app store. It has also topped Apple's app charts.
"It is a truly incredible offering," chief market strategist at IG Chris Weston wrote in a note Tuesday.
The new title comes after the Super Mario maker released Miitomo, its first-ever mobile game, in March, as it moved away from a longstanding - and much criticised - consoles-only policy.
Investors sent the shares surging on hopes the game's success will boost Nintendo's shift into mobile gaming, analysts said.
Exporters rose as the yen sharply weakened. Toyota jumped 2.67 percent to 5,443 yen and Nissan soared 3.46 percent to 1,000.5 yen. Uniqlo-operator Fast Retailing, a market heavyweight, rose 3.55 percent 27,800 yen.
Banking giant Mitsubishi UFJ soared 5.84 percent to 472.6 yen while rival Sumitomo Mitsui Financial Group leapt 5.15 percent to 2,998 yen. The dollar strengthened to 103.33 yen from 102.82 yen in New York, and well up from 101.70 yen in Tokyo earlier Monday.
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