Japan's Nikkei average rose on Monday to breach its 25-day moving average in thin trade after upbeat US housing data and a two-month extension of the US payroll tax cut gave temporary relief to market participants.
Trading volume on Tokyo's main board hit a fresh low for the year, with just 904.2 million shares changing hands, while many global markets, including the United States, Europe and Hong Kong, were closed for extended Christmas holidays.
The Tokyo Stock Exchange's machinery subindex advanced 1.2 percent, regaining some losses from the previous session after the machine tools sector was last week downgraded to "bearish" by Bank of America Merrill Lynch.
Industrial robot maker Fanuc rebounded 2.9 percent after losing 3.4 percent on Thursday, while Makita Corp surged 7 . 9 percent after the company said it would buy back 2 million of its own shares worth up to 5.8 billion yen ($74.26 million) between December 26 and January 10.
The Nikkei was up 1 percent at 8,479.34, trading above its 25-day moving average at 8,459. The broader Topix index added 0.5 percent to 726.44. "Market players are not going to be heartened until the Topix also rises above its 25-day moving average around 729, but it's meeting heavy resistance at that level," said Hiroyuki Fukunaga, CEO of Investrust.
"If there was really positive data out of the US this week on consumer sentiment and more signs of improvement in the housing sector, they could, for the time being, push aside worries about Europe," he said.
For now, a sales trader at a foreign bank in Tokyo said investors were continuing to hold cash and would only take small positions as there was little sign that the euro zone sovereign debt crisis was going to be resolved soon. Japan's benchmark is up 0.5 percent this month, compared with an average monthly rise of 1.4 percent for the month of December between 1981 and 2010.
The Nikkei gained an average of 0.8 percent for the month of January in that 30-year period.
Toshiba Corp topped the main board as the heaviest-traded share by turnover, gaining 1.6 percent after the US Nuclear Regulatory Commission approved a new reactor design developed by its US based unit, Westinghouse Electric.
Nomura Holdings Inc, Japan's largest investment bank, fell 2.1 percent to 238 yen and underperformed the broader market. Participants cited continuing market speculation on Nomura's possible involvement in the accounting scandal engulfing Olympus Corp and an Internet post by a commentator suggesting a dire outlook for the brokerage.
Nomura denied the posted outlook through an official twitter account on Sunday and said it was considering legal action. A company spokesman had no further comment on the issue on Monday.
Japan's securities subindex was down 1.4 percent and No. 2 broker Daiwa Securities Group fell 1.2 percent to 241 yen.