Japan's Nikkei average rose 0.95 percent to a new four-year closing high on Wednesday as Toyota Motor and other auto stocks gained on a lower yen while steel stocks were bought due to their relatively high dividends.
Sanyo Electric Co fell ahead of a restructuring announcement. The company said it would accelerate planned job cuts and streamline its business to focus on profitable operations.
Analysts said the market should stay strong on growing expectations that industrial output data on Friday and the Bank of Japan's quarterly tankan business sentiment survey on Monday would reinforce positive views on Japan's economic recovery.
"The market is on a roll and the current level appears to be just a passing point," said Tsutomu Yamada, a market analyst at Kabu.com Securities Co.
Yamada said some Japanese institutional investors would likely jump into the market after book closings for the financial first half on September 30. The Nikkei rose 125.87 points to 13,435.91, its highest closing level since May 30, 2001.
The broader TOPIX index closed up 1.80 percent at 1,401.47, after rising 2 percent to a new four-year intraday high of 1,404.33.
Steel shares continued to draw buyers for their relatively high dividend payments, with Nippon Steel Corp advancing 7.9 percent to 423 yen and JFE Holdings adding 4.7 percent to 3,780 yen.
Both have dividend rates of about 1.3 percent, against an average 1 percent for the Nikkei 225 components.
Other big winners included Mitsubishi Tokyo Financial Group, which soared 9.5 percent to 1.38 million yen. Goldman Sachs said in a report dated Wednesday it had added the stock to its buy portfolio as well as its current investment list, and set a 12-month price target share price of 1.72 million yen.
Resona Holdings shot up 12.2 percent to 286,000 yen. Business daily Nihon Keizai reported on Wednesday the bank was considering selling two-thirds of its 15 percent stake in JCB Co, the nation's leading credit card firm, for several billion yen.
Toyota Motor Corp, the world's No 2 auto maker, gained 3.2 percent to 5,120 yen. The stock has zoomed up nearly 6.7 percent this week, adding 1.16 trillion yen to its overall market value.
With a market value of 18.48 trillion yen ($163.2 billion), Toyota is now Asia's most valuable company, overtaking PetroChina Co Ltd, China's largest oil producer.
Meanwhile, Sanyo, Japan's third-largest consumer electronics maker, fell 2 percent to 301 yen. After the market closed, the company said it would complete two-thirds of planned job cuts by January 2006 and exit its DVD player, DVD recorder and VCR businesses. Sanyo also widened its full-year loss forecasts.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co Ltd, said Sanyo and Sony Corp, whose restructuring plans last week disappointed investors, would be left aside in a market where investors tend to chase companies in healthy financial condition and with growth potential.
Trade volume edged down to 3.32 billion shares, compared with 3.46 billion shares on Tuesday. Advancers outnumbered losers 1,102 to 468.