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Nikkei leads Asian stocks higher as investors cheer Yellen news

Japan led Asian stocks higher on Wednesday as investors cheered news that President Obama will announce Janet Yellen as the next chair of the Federal Reserve.

Japan's , Australia's , the Shanghai Composite and Indian stocks all erased early losses to enter positive territory. South Korean markets were shut for a public holiday.

Yellen is widely perceived as being more dovish on monetary policy and investors expect her to take a slower path towards a reduction of the Fed's bond-buying program. The announcement is scheduled for 3pm ET on Wednesday.

Dow futures climbed 35 points following the news while the dollar rose to 97 yen, well-off the previous day's two-month low of 96.55.

(Read more: Amid Washington woes, some Yellen cheer for markets)

"The main thing is that Yellen is seen as having policies in line with [current Fed Chairman Ben] Bernanke," said Stan Shamu market strategist at trading firm IG. "The news might temporarily take traders' minds off the budget stalemate and debt ceiling - certainly it does look like it will give markets a kicker today."

Asia-Pacific Market Indexes Chart

US ends day 8 of shutdown

Still, sentiment in Asia was weak following Wall Street's overnight sell-off amid rising concerns over a U.S. credit default with only nine days left for Congress to raise the debt limit. At a press conference on Tuesday, President Obama repeated that negotiations on spending could only begin once Republicans raise the debt limit with no conditions.

President Obama to nominate Yellen for Fed Chair

Following the comments, the Dow and S&P 500 hit one-month lows while the CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose 5 percent to its highest level in seven weeks.

Meanwhile, U.S third-quarter earnings season kicked off overnight with former Dow component Alcoa posting a slim profit while KFC parent company Yum Brands's profit tumbled fell 68 percent.

Minutes of the Federal Reserve's September meeting will be released later in the session, which will likely provide some distraction for investors from Washington's budget stalemate.

Nikkei up 1%

Japan's benchmark index staged a dramatic turnaround to climb above 14,000 points following a 1 percent decline at the open. Gains were underpinned by a weaker yen and after the latest minutes from the Bank of Japan's (BOJ) policy meeting confirmed the economy was on track.

Blue-chip exporters erased losses to lead the recovery.Toyota Motor rallied 3 percent while robotics maker Fanuc jumped over 2 percent. But index heavyweight Softbank skidded over 5 percent.

The nation's second-largest lender Mizuho Financial closed down 1 percent after top officials admitted knowledge to organized crime loans.

IMF: Advanced economies are on the mend

Shanghai adds 0.6%

China's benchmark index widened gains in afternoon trade on speculation that the city of Tianjin will follow Shanghai in obtaining approval for a free-trade zone.

Tianjin Marine Shipping and Tianjin Port rallied by the maximum trading limit of 10 percent each, extending the previous day's strong gains.

Airlines rose on news that the number of passengers flying during the holidays exceeded the 7.2 million estimate by China's aviation regulator. China Eastern Air led gains by nearly 3 percent.

But sentiment was hurt after the International Monetary Fund lowered the mainland's growth forecast to 7.6 percent this year from July's 7.8 percent estimate.

Sydney above flatline

Australia's share market reversed losses after hitting a second consecutive one-month low at 5,118 points earlier in the session.

A rally amid junior miners propped up the index. Atlas Iron surged 9 percent while Mount Gibson rallied nearly 6 percent despite tepid copper and gold prices.

A measure of consumer confidence pulled back from a 33-month peak in October, and that hurt retailers. JB Hi-Fi lost 3 percent while Harvey Norman closed down 1 percent.

India up 1.3%

India's benchmark index crossed the 20,000 mark in afternoon trade, finishing the session at 20,249.26 points.

Speaking to CNBC's TV-18, Reserve Bank of India governor Raghuram Rajan said that India needs to move away from "exceptional liquidity measures."

(Watch: India's Rajan: Rupee and markets are stabilizing)

By's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC