Japan's Nikkei average rose 1.33 percent on Monday, logging its biggest gain in two weeks as steel, shipping and trading firms climbed on views that booming demand and tight supply will boost their profits. A pause in the rise of the yen, which hit a 4-1/2-year high against the dollar on Friday, also supported the market by easing worries about the profit outlook of exporters such as Canon Inc.
"It's probably premature to say the yen's rally is over, but the forex market is calm today and that's helped to ease one big worry hanging over the stock market," said Masatoshi Sato, an equity strategist at Mizuho Investors Securities.
The Nikkei average climbed 144.14 points to 10,977.89 in its biggest daily percentage gain since a 1.88 percent rise on November 15. On Friday it had slipped 0.6 percent to a four-week closing low of 10,833.75.
The broader TOPIX index gained 1.14 percent to 1,103.60.
Trading remained slow with 1.21 billion shares changing hands, in line with last week's daily average. Gainers outnumbered decliners 1,181 to 287.
Among a handful of exporters finding support from a pause in the yen's rally, office equipment giant Canon gained 1.75 percent to 5,240 yen, while electronics device maker TDK Corp rose 3.47 percent to 7,450 yen.
The dollar was trading at around 102.8 yen on Monday, not far off its multi-year low of 102.15 yen hit on Friday.
It was also well below the average rate of around 106 yen assumed by big Japanese manufacturers for October-March in the Bank of Japan's latest "tankan" survey of corporate sentiment.
Despite the stronger yen, which hurts the overseas profits of Japan's big exporters when repatriated, Japanese firms are expected to log record high profits for the second straight year.
They are set to post an aggregate 21 percent rise in recurring profits in the financial year to March, according to a recent report in business daily Nihon Keizai.
Some of the biggest winners are Japanese steel firms and shippers, which have been able to win price rises thanks to ravenous demand from China.
Nippon Steel Corp, Japan's biggest steel maker, put on 1.19 percent to 255 yen, and extended gains to a third straight session after Nissan Motor Co said last week it was short of steel, raising hopes for further price hikes.
Shipping firms also climbed, after dry cargo freight rates hit an all-time high on Monday, helped by China's massive demand for iron ore.
Kawasaki Kisen Kaisha Ltd, Japan's number three shipper, was up 4.17 percent at 699 yen and second-ranked Mitsui O.S.K. Lines Ltd gained 4.32 percent to 652 yen.
Trading house Mitsubishi Corp, which earlier this month posted a 48 percent rise in first-half profit thanks to soaring energy and metal prices, rose 2.78 percent to 1,296 yen.
Banks gained after news that UFJ Holdings, Japan's fourth-biggest banking group, was to ask the nation's largest carmaker, Toyota Motor Corp, to back the restructuring of troubled home builder Misawa Homes Holdings Inc.
"Buyers picked up bank shares as the news on UFJ underlined their optimism over progress on the sector's structural problems," said Hiroaki Kuramochi, managing director at Bear Stearns in Tokyo.
He said investors' preference for non-exporters due to uncertainty over how far the yen would appreciate was another factor bolstering banks and other stocks more reliant on domestic demand.
UFJ gained 0.74 percent to 545,000 yen and Mizuho Financial Group, Japan's biggest bank by assets, climbed 1.57 percent to 452,000 yen.
Misawa Homes jumped 9.92 percent to 277 yen and Toyota rose 0.26 percent to 3,920 yen.