Japanese shares ended the morning session sharply higher on Wednesday after Wall Street rallied overnight, with sentiment supported by a tumble in the price of oil, the interest rate decision by the Federal Reserve, and a weaker yen.
The softer yen bolstered interest in major exporters such as Sony (Munich: 853687 - news) and Canon (Berlin: CNN1.BE - news) .
The dollar was last trading at 108.35 yen, up from the 107.81-82 yen levels late Tuesday.
Traders bought back stocks after the benchmark Nikkei (news) fell more than 460 points in the last three sessions.
The market found some comfort from continued declines in oil prices, closing down $2.24 at $119.17 in New York trading, after falling earlier to $118.
Wall Street also extended its advance on Tuesday after the Federal Reserve left interest rates unchanged and assuaged some of the market's fears about the economy. The Dow Jones industrial average shot up more than 330 points, and all the major indices had gains approaching 3 percent.
'Investors felt relieved as expectations of an early Fed interest rate hike are receding, after the central bank maintained it key interest rate at the current level,' said Yumi Nishimura, deputy general manager at Daiwa Securities SMBC.
The decision was made following a series of 'hawkish' comments from Fed officials that had caused investors to worry about a possible rate hike and its impact on the U.S. economy, Nishimura said.
The Fed announced on Tuesday it was keeping its target for the federal funds rate, the interest that banks charge each other on overnight loans, at 2 percent after a 10-1 vote.
In its after-session statement, the central bank said that 'economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports,' while dropping the June assertion that the downside growth risk has 'diminished somewhat.'
The Nikkei 225 Stock Average finished the session up 287.24 points or 2.2 percent at 13,201.90, off a high of 13,217.05.
The broader Topix climbed 22.22 points or 1.8 percent to 1,269.93.
Gainers outnumbered decliners 1,392 to 229, with 94 issues unchanged.
Volume of trade fell to 974 million shares, from 1.01 billion shares on Tuesday morning (NASDAQ: TUES - news) .
On Wall Street overnight, the Dow industrials soared 331.62 points or 2.9 percent to 11,615.77, registering one of the biggest gains this year.
Sony Corp rallied 5.4 percent to 4,280 yen after it signed a deal with Bertelsmann AG (Stuttgart: 522990 - news) to buy out the German firm's equity interest in music producer Sony BMG, making the joint venture a wholly-owned unit.
Other high-tech issues gained, with Canon rising 5 percent to 5,090 yen, semiconductor manufacturing equipment maker Tokyo Electron (Stuttgart: 865510 - news) climbing 3.4 percent to 6,310 yen and Chip tester maker Advantest (Berlin: VAN.BE - news) advancing 5.6 percent to 2,355 yen.
Export-oriented auto issues were firmer. Toyota Motor (Frankfurt: 853510 - news) gained 2.4 percent to 4,610 yen, Honda Motor (Paris: JP3854600008 - news) was up 4.2 percent at 3,450 yen and Nissan Motor was higher by 3.9 percent at 834 yen.
Shares of Mitsubishi UFJ Financial Group Inc lost 3.1 percent to 887 yen after the nation's largest banking group booked a 66 percent decline in first-quarter net profit, with total bad debt clean-up costs surging to 143.1 billion yen from 59.1 billion yen. The company had to downgrade its internal credit ratings for its borrowers and set aside more loan provisions in the quarter.
($1 = 108.35 yen)
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