Tokyo stocks soared 1.62 percent at the open on Monday after Japan's conservative opposition swept to victory in national polls, with promises from its leader to press for more central bank easing.
The benchmark Nikkei 225 index added 158.12 points to 9,895.68 at the start of trade, as the yen plunged in the wake of the business friendly Liberal Democratic Party's landslide win over the ruling Democratic Party of Japan (DPJ).
In earlier Tokyo forex trading, the dollar soared to 84.30 yen, up from 83.52 yen in New York on Friday, and its strongest level against the Japanese currency in more than a year and a half.
The euro also soared to multi-month highs at 111.10 yen from 109.94 yen in US trade.
On Sunday, voters dumped Prime Minister Yoshihiko Noda three years after his DPJ promised a change from more than half a century of almost unbroken rule by the conservative LDP.
"The election results were very much in-line with market expectations. A relief rally is in order, helped by the stronger dollar," SMBC Nikko Securities general manager of equities Hiroichi Nishi told Dow Jones Newswires.
"Next, investors will be eager to see the kinds of concrete policy measures that the new government proposes."
Hawkish LDP head Shinzo Abe pledged to bolster Japan's defences in the face of a territorial spat with China while vowing to pressure the Bank of Japan (BoJ) into more aggressive policy easing measures in a bid to inject new life into the world's third-largest economy.
He also offered to boost spending on infrastructure at a time when much of the tsunami-wrecked northeast remains a shell of its former self.
Abe's central bank pledge has weighed on the yen in recent weeks as traders bet that an LDP victory would hike the likelihood of more easing from the central bank, and see the appointment of a like-minded BoJ governor after current chief Masaaki Shirakawa's term terms ends next year.
A weaker yen tends to lift local stock markets because it helps make exporters' products more competitive overseas.
Speculation over BoJ policy moves jumped again on Friday after the bank's own quarterly Tankan survey showed confidence among Japanese manufacturers hit a near three-year low in the final months of 2012.
Those were the weakest Tankan results since the start of 2010.
Separate figures showed Japan's economy shrank in the July-September period and may have dipped slightly in the previous three months, meaning the country had technically slipped into a recession.
Abe has said he wants the central bank to buy government bonds -- effectively printing money -- to generate inflation, in a bid to drag Japan out of the deflationary spiral that has haunted its economy for years.
While the BoJ in October expanded its asset-buying programme by 11 trillion yen ($135 billion) to 91 trillion yen it decided last month to hold off any new measures despite warning the economy was "expected to remain relatively weak for the time being".
Turmoil in the European market, an unsteady economic recovery in the US and a diplomatic row between Tokyo and Beijing over an East China Sea island chain, which sparked a consumer boycott of Japanese products, all weighed on the economy as it recovered from last year's quake-tsunami disaster.
Japanese exporters have also been suffering from a strong yen, which hit record levels around 75 against the dollar late last year and remains historically strong despite its recent weakening.