Tokyo's Nikkei 225 index closed above the 10,000 level for the first time in more than eight months Wednesday, on the back of a weaker yen following a conservative win in Japan's national elections.
The benchmark Nikkei rose 2.39 percent, or 237.39 points, to 10,160.40 in heavy trading on the Tokyo Stock Exchange, the first time it finished past the 10,000 mark since early April.
The broader Topix index of all first-section shares gained 2.75 percent, or 22.49 points, at 839.34.
The Nikkei has staged a three-day rally, boosted by the under-pressure yen as incoming prime minister Shinzo Abe, head of the Liberal Democratic Party (LDP) which won Sunday's general election, stepped up pressure on the Bank of Japan to take more aggressive monetary easing steps.
Japan's newly-elected conservative government said Wednesday it would launch a huge spending package worth about $118 billion aimed at injecting life into the nation's limp economy.
Investors appeared to largely shrug off data that showed the trade deficit widened by nearly 38 percent in November from a year ago, the latest batch of gloomy figures for the world's third-largest economy.
Earlier figures showed the economy may have slipped into recession in the latest quarter.
"The weaker yen and hopes for a US economic rebound, as well as optimism for the new LDP-led administration and forthcoming stimulus budget should all help the market," said SMBC Nikko Securities general manager of equities Hiroichi Nishi.
Wednesday's gains were also stoked by optimism that Washington was serious about reaching a deal on the fiscal cliff -- a combination of tax hikes and spending cuts set to take effect in January, and which could plunge the US economy into recession.
President Barack Obama and Republican House Speaker John Boehner have stepped up negotiations in recent days in an apparent effort to reach a compromise.
Toyota rose 3.49 percent to 3,850 yen after Japanese reports said the automaker may set a global production target of about 9.9 million vehicles for 2013.
The stock appeared to react little to news that the company will pay a record $17.35 million fine for failing to promptly notify US authorities about a safety defect on 2010 Lexus models.
Investment banking giant Nomura rose 4.73 percent to 420 yen and Mitsubishi UFJ Financial Group added 6.09 percent to 435 yen.
In forex trade, the dollar was quoted at 84.34 yen, from 84.28 yen in New York trade late Tuesday.
The euro firmed to 111.66 yen from 111.47 yen and to $1.3242 from $1.3225.
-- Dow Jones Newswires contributed to this article --