The Nikkei index ended Monday at its highest level in around 33 years after U.S. President Joe Biden expressed a positive outlook over negotiations on averting a default on the debt ceiling.
The 225-issue Nikkei Stock Average ended up 278.47 points, or 0.90 percent, from Friday at 31,086.82, its highest level since July 26, 1990 when Japan was experiencing an asset price bubble.
The broader Topix index finished 14.21 points, or 0.66 percent, higher at 2,175.90, its highest close since Aug. 2, 1990.
Gainers were led by insurance, land transportation and air transportation shares.
The U.S. dollar firmed slightly within the upper 137 yen range in Tokyo after Biden expressed optimism over the debt ceiling talks following a telephone call with House Speaker Kevin McCarthy, dealers said. The two are scheduled to meet later Monday.
The Nikkei advanced for the eighth consecutive trading day, and the Topix ended at a 33-year high for the fifth day in a row.
Following minor gains and losses in the morning, the Nikkei gained ground in the afternoon as hopes grew that there will be progress in the debt ceiling talks in the United States, analysts said.
"As market participants focus on the negotiations between Mr Biden and Mr. McCarthy later in the day, Biden's remarks helped lift sentiment," said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Research Institute.
Insurance shares were firm throughout the day as investors welcomed stock buyback plans announced by insurance companies on Friday although their earnings reports were mixed, with some reporting weaker-than-expected results and forecasts, Suzuki said.
Among insurance companies, Tokio Marine Holdings surged 163.5 yen, or 5.7 percent, to 3,024 yen, and MS&AD Insurance Group Holdings climbed 79 yen, or 1.7 percent, to 4,794 yen after announcing share buyback plans.
Tourism-related issues were also among the bright spots on hopes for a strong performance in the long term following a recovery from the coronavirus pandemic, analysts said.
Department store Takashimaya rose 37 yen, or 1.9 percent, to 2,011 yen and West Japan Railway gained 148 yen, or 2.4 percent, to 6,222 yen.
© KYODO