Japanese shares turned positive on Tuesday after damage from an earthquake appeared moderate, while most other Asian markets rallied as the dollar retreated.
The benchmark closed up 56.92 points, or 0.31 percent, at 18,162.94, extending Monday's gains. The Topix index gained 4.57 points, or 0.32 percent, to 1,447.50.
Shares also benefited from a weaker yen, which traded at 111.03 at 2:55 p.m. HK/SIN, after previously strengthening to a session high of 110.23 against the dollar following the news of the earthquake.
In Tuesday's early hours, a magnitude 6.9 quake struck off the coast of Fukushima prefecture, and Japan's public broadcaster NHK reported a 60 cm (2 foot) tsunami had been observed at Fukushima's Onahama Port and a 90 cm (3 foot) tsunami was seen at Soma soon after the quake. A tsunami warning for waves of up to 3 meters (10 feet) was issued after Tuesday's quake, but was later lifted.
Investors were also concerned after President-elect Donald Trump's latest statement that he would withdraw the U.S. from the Trans Pacific Partnership (TPP) agreement on the first day of his term. Reuters said Japan's Prime Minister Shinzo Abe told reporters in Buenos Aires, Argentina, the trade deal would be meaningless without U.S. involvement.
Analysts said the expected damage from quake was unlikely to be severe and would not have a big impact on markets.
Takuji Okubo, principal and chief economist at Japan Macro Advisors, told CNBC's "The Rundown" on Tuesday "I don't think we should be much worried about that. But then these events do reinforce the idea that there are issues with having nuclear power in Japan. So there could be another rise in the sentiment against nuclear power."
Abe pushed for the restart of nuclear plants in the country, following their shutdown in the wake of the 2011 disaster, but anti-nuclear sentiment remains strong.
Automaker Nissan earlier said it would suspend work at its engine factory in Fukushima at least until a tsunami warning was lifted, according to Reuters. Toyota, on the other hand, said its factories in northeastern Japan were operating as usual, said Reuters.
Shares of Nissan closed down 1.39 percent, while Toyota slipped 1.13 percent. Other Japanese automakers also finished lower, with Mazda slipping 2.18 percent. Isuzu Motors beat the general trend to finish up 0.44 percent.
Meanwhile, Australia's benchmark ASX 200 finished up 61.99 points, or 1.16 percent, at 5,413.33, with all sectors closing higher. The heavily-weighted financial sector climbed 0.33 percent, while the materials sector advanced 2.77 percent. The energy sector advanced 2.58 percent, buoyed by gains in oil prices during the U.S. session.
Helping to bolster energy shares, oil prices advanced on Tuesday, extending sharp gains in the Monday session amid renewed optimism that major oil producers would agree to limit production when they meet next week. U.S. crude was up 1.04 percent at $48.74 a barrel at 3:01 p.m. HK/SIN, after gaining 4 percent during U.S. hours. Global benchmark Brent added 1.04 percent to $49.41, following an overnight gain of 4.4 percent.
In South Korea, the Kospi climbed 17.42 points, or 0.89 percent, to 1,983.47, while Hong Kong's added 1.36 percent at 3:03 p.m. HK/SIN. Chinese mainland shares also finished higher, with the composite closing up 31.42 points, or 0.98 percent, at 3,249.57, while the Shenzhen composite added 18.93 points, or 0.89 percent, to 2,137.88.
New Zealand's NZX 50 defied the generally positive trend to close down 32.56 points, or 0.48 percent, at 6,816.39, following reports of a 6.3 magnitude earthquake off the North Island on Tuesday, little more than a week after a powerful tremor in the South Island rocked the country. The dollar fell to a session low of $0.7051 as of 3:06 p.m. HK/SIN.
In the currency market, the dollar retreated against major currency pairs. The dollar index, which measures the greenback against a basket of currencies, traded at 100.99 at 3:06 p.m. HK/SIN, down from multi-year highs near 101.5 reached earlier in the week.
This pushed the Australian dollar higher to $0.7377, up from levels near $0.7320 in the previous session. The euro traded at $1.0618, up from levels under $1.0600 on Monday, while the pound climbed to $1.2489 from levels near $1.2300 on Monday.
In China, the on-shore traded at 6.8908 against the dollar, with the Chinese currency strengthening from levels near 6.8990 in the previous session. On Tuesday, the People's Bank of China set the yuan midpoint at 6.8779; China's central bank allows the yuan spot rate to rise or fall a maximum of 2 percent against the fix.
"Broader dollar moves continue to drive the underlying momentum and currently the active regional correlation to dollar/yen remains intact," said Stephen Innes, a senior trader at OANDA, about the movements in the Chinese currency.
"After reaching eight-year lows as capital outflows accelerate in the face of a steeper U.S. yield curve, the yuan will continue to be pressured and will likely see some form of intervention to stem the current tide of capital outflows," he added.
The session in Asia followed positive moves on Monday in the U.S., where stocks closed at record highs on the back of higher oil prices. The closed up 88.76 points, or 0.47 percent, at 18,956.69, surpassing previous closing and intraday records of 18,923.06 and 18,934.05, respectively.
The S&P 500 finished up 16.28 points, or 0.75 percent, to end at 2,198.18, after topping its all-time intraday high of 2,193.81, which was hit on August 15. The rose 47.35 points, or 0.89 percent, to close at 5,368.86.
— Reuters contributed to this report.