Japanese shares hit a seven-month high on Wednesday, with brokerages leading the gains because of hopes that a cabinet reshuffle by Prime Minister Shinzo Abe will give fresh impetus to his growth-oriented policies.
Exporters' shares also rode high as the yen weakened to an eight-month low and as solid US manufacturing data boosted the prospects for their business, even though US shares ended mixed the previous day.
The Nikkei share average rose 0.8% to 15,788.65, the third consecutive day of gains, which took the market to levels not seen since late January.
"The line-up of Abe's new cabinet and top party posts are positive for Japanese stocks on three fronts, if it is as reported," said Ryota Sakagami, chief strategist at SMBC Nikko Securities.
"You can expect faster reforms. This will lead to unity in the party and strengthen his government, and the number of women in the main posts is the highest ever," he said.
Abe is due to announce his new cabinet later in the day but media have already reported that Yasuhisa Shiozaki, a proponent of an overhaul of Japan's Government Pension Investment Fund (GPIF), will head the ministry of labour, health and welfare, which oversees the GPIF.
Shiozaki has called for the GPIF, which is drawing up plans to boost the weighting of domestic stocks in its portfolio, to buy stocks directly rather than through asset managers.
Hopes that GPIF money could galvanise the share market gave a fillip to brokerage shares, which rose 1.2 percent to extend their gains so far this week to 4.0%, the best showing among the 33 industry sub-indexes on the Tokyo Stock Exchange.
Nomura Holdings rose 1.1% while Daiwa Securities Group went up 1.5%. The yen's fall against the dollar helped exporters. Fuji Heavy Industries rose 2.9% to a record high while Mazda gained 1.7%.
Among the largest companies, Panasonic gained 1.7% and construction equipment maker Komatsu rose 1.4%, setting a 10-month high at one point.
Robot maker Fanuc rose 2.4%. The yen traded at 105.21 yen to the dollar, near a five-year low of 105.45 hit in January. US factory activity was at its strongest level in nearly 3-1/2 years in August, while construction spending rebounded strongly in July, a further boost for exporters.
"I guess US shares did not benefit much from the data because it could mean an earlier rate hike but for Japanese exporters, signs of a strong US economy is positive," said Soichiro Monji, chief strategist at Daiwa SB Investments.
The broader Topix rose 0.6% and the new JPX-Nikkei Index 400 gained the same amount.