Tokyo shares were 0.47 percent higher Wednesday morning, shrugging off a North Korean rocket launch, with support coming from progress in US fiscal cliff talks and a surge in German investor sentiment.
The benchmark Nikkei 225 index added 44.76 points to 9,570.08 by the break, while the broader Topix index of all first-section shares was up 0.53 percent, or 4.19 points, at 790.26.
Tokyo investors appeared little concerned about Pyongyang's rocket launch Wednesday morning, despite concerns it would upset regional stability.
"Frankly, it was almost a non-event," Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, told Dow Jones Newswires.
"It appears that none of the pieces fell close to Japanese territory, so the markets were neither affected broadly, nor even much on an individual share basis.
"It would have been a different story had Japan attempted to shoot the missile down, or if pieces of it landed in Japan."
Investor sentiment got boost after data Tuesday showed German investor sentiment hit a seven-month high, raising hopes Europe's top economy will dodge recession.
The widely watched investor confidence index calculated by the ZEW economic institute soared to 6.9 points in December from minus 15.7 points in November.
That was the highest reading since May and also the first time since then the index has been in positive territory, the institute said.
Spain's borrowing costs fell sharply Tuesday in a sale of short-term treasury bills, also buoying eurozone hopes.
In the United States, signs of progress in the fiscal cliff talks also lifted confidence that deep spending cuts and huge tax hikes due to come into effect on January 1 can be avoided. If the package is allowed to come in, the US economy will likely tip into recession.
And the Federal Reserve's policy committee finishes a two-day meeting on Wednesday, with expectations running high that the central bank will launch further stimulus to power the world's biggest economy.
Investors are also looking ahead to national elections in Japan at the weekend, which are expected to see Prime Minister Yoshihiko Noda's government toppled by main opposition leader Shinzo Abe and his Liberal Democratic Party.
The yen has been weakening recently on speculation Abe will follow through on vows to pressure the Bank of Japan into launching more aggressive easing measures to boost the economy.
In currency trading, the dollar was at 82.53 yen from 82.51 yen in New York late Tuesday, with the greenback briefly jumping to 82.63 yen after the rocket launch.
The euro bought $1.3007 from $1.3003, while the single currency fetched 107.37 yen from 107.28 yen