The Tokyo stock market's broad-based TOPIX index rose 1.75 percent to end at a five-year high on Monday as investors bought Matsushita Electric Industrial Co Ltd and other stocks with strong earnings.
Industrial robot maker Fanuc Ltd jumped 5.8 percent to 9,100 yen on higher profits, while NTT DoCoMo Inc rose 1 percent to 200,000 yen on strong earnings results and a bright outlook, helping the tech-sensitive Nikkei.
Junichi Misawa, a senior fund manager at STB Asset Management, said the market may have gone overboard as some companies left their full-year estimates unchanged, and further evidence on the earnings outlook is needed to test the potential for further rises.
"I feel that half-year earnings results alone are not enough to push the market higher," Misawa said.
"Japanese shares' price-to-earnings ratio is at 20 times, and 10 or 20 percent growth can be expected only when the market starts to factor in the outlook for next fiscal year," he said.
The TOPIX ended up 24.89 points at 1,444.73, its highest close since November 8, 2000.
The Nikkei rose 1.95 percent or 259.96 points to 13,606.50, its highest close since October 5.
Matsushita soared 9 percent to 2,115 yen after it posted a surprise 11 percent jump in quarterly profit on Friday, helped by strong sales of plasma TVs, and stuck to its full-year outlook.
Olympus Corp jumped 6 percent to 2,575 yen after the maker of digital cameras and endoscopes doubled its first-half parent-only net profit estimate on Friday.
In contrast, Hitachi Ltd fell 1.4 percent to 711 yen after Japan's largest electronics conglomerate posted a first-half loss and cut its full-year estimates.
Chances of a recovery in Japan's asset prices also pushed up property shares.
Japan's largest property developer, Mitsui Fudosan Co, rose 2.4 percent to 1,895 yen ahead of its earnings announcement while No 2 Mitsubishi Estate Co Ltd was up 2.3 percent at 1,713 yen.
After the market closed, Mitsui Fudosan said it swung into the black in the first half and kept its full-year estimate for a 75 percent profit surge.
In the auto sector, Nissan Motor Co Ltd fell 1.2 percent to 1,208 yen after Japan's second-biggest auto maker posted a worse-than-expected 5.5 percent drop in quarterly operating profit on Friday.
Toyota Motor Corp was up 2.1 percent at 5,310 yen after business daily Nihon Keizai said on Sunday the auto maker is likely to book a record group operating profit in the year to next March.
Toyota is to announce its earnings results Friday and Yumi Nishimura, manager of the investment advisory section at Daiwa Securities SMBC Co Ltd, said investors will be particularly watching October sales in the United States.
Steel stocks gave up some of their earlier gains after their earnings announcements.
Nippon Steel Corp, the world's third-biggest steel maker, ended up 0.5 percent at 413 yen after it said its first-half net profit more than doubled and raised its already record-high annual earnings outlook.
Among notable shares, Orix Corp gained 3.1 percent to 21,670 yen after it said it would buy US investment bank Houlihan Lokey Howard & Zukin for 58 billion yen ($501.2 million).
A few losers included Mitsui Trust Holdings Inc, which lost 9.1 percent to 1,394 yen on fears of price dilution after the government said it may sell shares in some banks that received taxpayer-funded bailouts in the late 1990s.
Trade was the busiest since last Thursday, with 2.71 billion shares changing hands on the Tokyo exchange's first section. Advancers beat out decliners 1,312 to 293.