The benchmark Nikkei index at the Tokyo Stock Exchange gained 84.35 points to 8,823.25, the highest finish since September 16.

The Topix index of all first-section issues rose 5.39 points or 0.72 percent to 758.83.

Exporters gained from the yen's drop against the euro amid rising hopes that officials would formulate a plan to shore up the eurozone's banking system, brokers said.

European Commission president Jose Manuel Barroso said Wednesday that European banks "urgently" needed to recapitalise to weather the sovereign debt storm.

"There was concern that Europe may deliver 'too little, too late' -- but investors are relieved with the stringent take on the banks," said Masayoshi Yano, a senior market analyst at Meiwa Securities.

Kazuhiro Takahashi, general manager of investment strategy and research at Daiwa Securities, said focus had shifted to a steadier global economic outlook amid growing expectations for European policy measures.

Another encouragement was employment data in Australia, which showed an unexpected drop to 5.2 percent in September, Takahashi said.

The euro was at $1.3801 and 106.41 yen in Tokyo afternoon trade, sharply up from $1.3518 and 104.46 yen a day earlier.

Sentiment was lifted by news that Slovakia's political parties had agreed to hold a new vote this week that could see the expansion of the eurozone emergency fund approved by Friday.

Lawmakers in the Eastern European nation on Tuesday blocked its passage, holding up EU leaders' plans to revamp the European Financial Stability Facility (EFSF), a tool created last year to shore up debt-laden economies.

Slovakia is the last of the 17 eurozone members to ratify the deal.

In Tokyo, investors shifted to major Japanese exporters and away from domestic demand-related shares.

Sony jumped 2.96 percent to 1,562 yen while Japan Tobacco fell 1.10 percent to 358,000.

Fast Retailing, the operator of the cheap-chic clothing chain Uniqlo, fell 1.43 percent to 13,080 yen, after saying Wednesday that it suffered its first profit fall in four years due to rising costs and weak domestic sales.