Japan's Nikkei average rose on Monday on bargain hunting after a sell-off last week, with investors piling into resource shares and exporters as the mood brightened on hopes for robust earnings news this week. The Nikkei booked its biggest daily fall in two months on Friday as energy-related stocks fell on profit-taking triggered by chances of more monetary tightening by China.
Exporters including Canon Inc and Kyocera Corp as well as Japan's biggest personal computer firm NEC Corp are due to report on Thursday.
Fuji Heavy Industries Ltd rose 1.3 percent to 690 yen after the Nikkei business daily said the maker of Subaru-brand vehicles will likely post a group operating profit tripling the previous year's tally and beating earlier estimates.
"We've seen pretty big falls in stocks that are indicative for the Nikkei, and which had been expected to outperform, like Fanuc or Komatsu," said Yumi Nishimura, a senior market analyst at Daiwa Securities Capital Markets.
The Nikkei gained for the first time in three days, ending the session up 0.7 percent or 70.59 points at 10,345.11.
The broader Topix index also added 0.7 percent to 917.18. Volume thinned with many investors on the sidelines ahead of the October-December earnings, with 1.9 billion shares changing hands on the Tokyo Stock Exchange's main board, down from last week's average of 2.15 billion.
Honda Motor Co led the advance on the Nikkei, adding 3.8 percent to 3,400 yen in heavy trade after the Argentine government said on Friday Japan's second-largest car maker will start producing its City model at a new plant in Argentina in March.
Nomura Securities also hiked Japan's second-largest automaker's rating to "buy" from "neutral" on stronger-than-expected US sales. Among falling shares, construction machinery maker Komatsu Ltd fell 1.3 percent to 2,383 yen, while Hitachi Construction Machinery Co was 1 percent lower at 1,949 yen, as markets cautiously watched further tightening in China.
Other exporters, however, recouped last week's losses after the euro hit a two month high against the yen, with Sony Corp adding 0.9 percent to 2,853 yen and Toyota Motor Co gaining 1.3 percent to 3,415 yen.
On technical charts the Nikkei was still hovering below its 25-day moving average, a gauge often used by Japanese traders, which now stands at 10,397, showing that any improvement in sentiment is still fragile.
The Federal Reserve's Federal Open Market Committee will hold a two-day meeting on Tuesday and Wednesday and is expected to paint a cautious view of the world's biggest economy.
The Bank of Japan also has a two-day policy meeting this week, ending on Tuesday. It is expected to slightly tweak its growth forecasts while keeping monetary policy on hold and sticking to its view that firm demand in Asia will pull the economy out of stagnation in few months' time.
Bargain hunters chased resource stocks after they tumbled on Friday, with Japan's biggest gas and oil developer Inpex Corp climbing 2.3 percent to 509,000 yen and the country's biggest commodities trader, Mitsubishi Corp, gaining 1.9 percent to 2,317 yen. Advancing issues outpaced declining ones by 1,145 to 376.