The Nikkei average rose 1.39 per cent on Monday, hitting its highest levels in more than three months, as investors looked to manufacturers such as Canon Inc, after a US jobs report eased worries about Japan's major export market.
Stroller-maker Combi Corp and other baby-goods firms lured buyers as Japan awaited a royal birth while a business survey showing healthy growth in corporate spending and earnings in Japan also supported the market.
"Those who have been cautious were rushing to buy stocks after the jobs data, trying not to miss the boat," said Kenichi Azuma, equity strategist at Cosmo Securities Co Ltd.
The Nikkei added 223.82 points to 16,358.07, its highest close since May 15. It hit a three-month peak of 16,414.94 earlier in the day.
The broader TOPIX index gained 0.98 per cent to 1,649.32, also its highest close since May.
Sumitomo Metal Mining Co rose 2.4 per cent to 1,707 yen on a news report about the company beating its first-half profit forecast, and similar news on higher corporate profits would continue to bolster the market, said Kenji Kobata, managing director of research at Ace Securities Co. Ltd.
"With the yen being cheap against the dollar and the euro, there are expectations that corporate earnings will be good," he said. "Investors looked trying to get ahead of themselves before actual earnings announcements are made and that is helping the market."
Ministry of Finance figures issued on Monday showed business spending on plant and equipment in the last quarter rose 16.6 per cent from a year earlier, the 13th straight increase and stronger than economists had expected. Recurring profits rose 10.1 per cent in the same period.
Beneficiaries from higher capital spending include industrial robot maker Fanuc Ltd, whose shares rose 3.6 per cent to 9,760 yen.
Shares of copier and camera maker Canon, which makes about a three-quarters of its sales outside Japan, rose 2.4 per cent to 5,970 yen, a record closing high after adjustments for past share splits. Rival Nikon Corp rose 2.3 per cent to 2,215 yen.
In the technology sector, Elpida Memory Inc, the world's fifth-largest maker of DRAM chips, advanced 2.9 per cent to 5,320 yen after Mizuho Securities in a report on Monday upgraded the stock to "1" from "3" and set a target price of 7,500 yen.
Asahi Tec Corp, a Japanese auto parts maker, surged 25.6 per cent to 393 yen, adding to a 21.8 per cent rise on Friday to make it the best performer on the Tokyo Stock Exchange's first section. The company said last week it would buy a much bigger rival, unlisted US firm Metaldyne Corp, in a $1.2 billion deal.
Shares of firms making baby-care goods grabbed the spotlight as Princess Kiko, pregnant with a possible heir to Japan's Chrysanthemum throne, prepares to give birth.
Combi jumped by its daily limit of 100 yen, or 11.7 per cent, to 955 yen and those of Pigeon Corp, which makes baby food, rose 3.7 per cent to 2,095 yen.
A downgrade by Goldman Sach hit Sumitomo Mitsui Financial Group inc, Japan's third-biggest banking group, which fell 3 per cent to 1.31 million yen. Goldman cut its rating on the stock to "neutral" from "buy", saying the stock's value was over-stretched.
Trading volume edged up, with 1.66 billion shares changing hands on the Tokyo exchange's first section, the highest total since Aug 18. Gainers outnumbered decliners by nine to two.