The Nikkei average rose 0.94 percent on Monday to book a five-month closing high as hopes for strong corporate earnings lifted Shin-Etsu Chemical Co Ltd while leasing firms gained on expectations of further consolidation in the sector.
Sony Corp extended recent gains on a brokerage upgrade. Investors shrugged off news that rival Toshiba Corp is considering seeking damages from Sony after a recall of Sony-made computer batteries.
After the Tokyo market closed, South Korea's Daishin Securities Co Ltd said Japan's brokerage firm Nikko Cordial Corp is buying a 4.92 percent stake in Daishin Securities, with Daishin buying 0.46 percent of Nikko for a capital tie-up. Prior to the announcement, Nikko Cordial ended up 2 percent at 1,424 yen.
"With a softer oil price, hopes are high that US consumer sentiment will improve and Japanese companies can enjoy good sales in the year-end shopping season," said Tsuyoshi Nomaguchi, a strategist in Japanese equity research at Daiwa Securities Co Ltd.
But Naoyuki Torii, general manager and strategist at Fukoku Capital Management Inc, said Japanese stocks are drawing buyers simply because they are laggards compared with those of the United States, Singapore and India, which are all at record-high levels.
"Japanese shares are behind their international counterparts and that's why they are up," he said. "But I can't simply get excited about the gains. The US economy is slowing, and with a time lag Japan should feel that impact."
The Nikkei was 156.22 points higher at 16,692.76, the highest close since May 11. The broad TOPIX index was up 1.11 percent at 1,646.05. Shin-Etsu Chemical, the world's largest silicon wafer maker, which business daily Nihon Keizai said earlier this month would likely beat its annual operating profit, rose 1.6 percent to 7,880 yen.
Shares of Sony advanced 2.5 percent to 4,880 yen, extending their winning streak into a fourth session. Brokerage Morgan Stanley lifted its rating on the electronics firm to "overweight" from "equal weight" on Friday. Toshiba, the most actively traded issue by volume, rose 3.4 percent to 752 yen.
"I think the Toshiba issue has largely been factored into the share price already," said Katsuhiko Kodama, a senior strategist at Toyo Securities. "Investors have had some idea about this already. Rather, I think the Morgan Stanley upgrade last week is a bigger factor at the moment. It seems like foreign institutional investors, who dumped the stock earlier, are starting to return."
Shares of leasing firms rose as a merger between Sumisho Leasing Co and Sumitomo Mitsui Financial Group Inc's SMBC Leasing Co raised prospects of further consolidation in the sector. Sumitomo Mitsui Financial Group and trading house Sumitomo Corp said on Friday they would integrate their leasing businesses to create Japan's biggest leasing firm, toppling Orix Corp from the top spot. Sumisho Leasing rose 6.7 percent to 6,980 yen while Tokyo Leasing Co Ltd jumped 11.4 percent to 1,482 yen and UFJ Central Leasing Co Ltd soared 10.7 percent to 5,780 yen.
Trade was slow, with just 1.54 billion shares changing hands on the Tokyo exchange's first section, compared to the daily average of 1.72 billion shares last month. Advancers beat decliners, by a ratio of nearly eight to one.