Infrastructure stocks extended the previous day's rally. Taiheiyo Cement rose 6 percent while construction firms Taisei and Kajima increased 11 and 7 percent, respectively.
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"While this decision is certainly another boost for the image of the Abe government, it is unlikely to make a material difference to the economic outlook. Even the most generous estimates suggest that the Games would add barely 0.1 percentage points to average GDP growth over next seven years," wrote analysts at Capital Economics in a report.
Also helping sentiment were minutes from the latest Bank of Japan meeting, which showed that members expected the consumption outlook to improve thanks to rising income and employment.
Sydney adds 0.5%
Australia's benchmark index crossed the 5,200 mark to hit a one-week high, buoyed by solid gains in mining stocks as investors cheered an economic revival in China, the nation's top trading partner.
Lynas closed up 5 percent, Atlas Iron rose over 4 percent and Rio Tinto and Fortescue Metals jumped over 1 percent each.
"With questions still arising about the composition of the Australian Senate, the local market is returning to 'business as usual' conditions despite the government-elect's law-passing dilemmas," wrote Evan Lucas, market strategist at IG in a note.
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Meanwhile, the Australian dollar hit a new six-week high against the greenback at $0.9267 after the National Australia Bank business confidence survey rose to a 27-month peak in August.
Seoul rises 1%
South Korea's benchmark index crossed the 1,980 mark to hit its highest levels since June 5, just one day after closing at a three-month high, due to renewed foreign interest in local stocks.
China-sensitive sectors outperformed on increased confidence over the mainland's recovery. Steelmakers Hyundai Hysco and Hyundai Steel rose nearly 3 percent each.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC