Asia Closes Up; North Korea Risk Looms

Most of Asia closed higher on Wednesday even as tensions with North Korea escalated, while the Shanghai market was almost flat after China logged a surprise trade deficit.

The Nikkei finished 0.73 percent higher as investors continued to be encouraged by the Bank of Japan's stimulus program, and the Kospi clocked gains of 0.77 percent.

Hong Kong's Hang Seng index ended 0.8 percent higher and the Shanghai Composite edged up 0.2 percent on close as investors digested China's March trade data.

China reported a trade deficit of $884 million, disappointing expectations of a $15.4 billion surplus, Reuters reported. Imports were strong, up 14.1 percent versus expectations of a 5.2 percent rise.

Increasing imports show Chinese domestic demand is improving, strongly benefiting the Australian economy because China is its largest trading partner. The Australian dollar/U.S. dollar currency pair was up 0.25 percent to 1.0507.

However, Australia's stock market had a lackluster trading day, closing 0.16 percent down.

A downgrade by Fitch ratings agency, which cut China's long-term local currency credit rating to A-plus from AA-minus on Tuesday with a stable outlook, weighed on investor sentiment. It cited financial risks from rapid credit expansion alongside the rise of shadow banking activity for the downgrade.

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Japan Climbs Higher

In Japan, the dollar-yen was trading above 99, flirting with the psychologically important level of 100. The largest gainers included Japanese glass manufacturer Nippon Sheet Glass, which surged 12.5 percent and cable and electric wire producer Oki Electric, which gained 18.3 percent.

Australian Stocks Muted

In Australia, shares struggled to surpass the psychologically important 5,000 barrier and were well off the 2013 high of 5,163 seen on March 12, as investors switched out of banks and into miners on the back of rising iron ore prices.

BHP Billiton and Rio Tinto were up 1.7 percent and 2.7 percent respectively, meanwhile all of Australia's big four banks fell with Westpac losing 1.18 percent. Meanwhile, shares of Billabong sank 26.7 percent after the surfwear maker said it was considering a takeover proposal that valued the company at $300 million, 45 percent lower than indicative offers.

North Korea Threat

South Korea has raised its surveillance of North Korea after the reclusive state moved one or more long-range missiles in readiness for a possible launch, Reuters reported, quoting the Yonhap news agency. Pyongyang also intensified threats of an imminent conflict by warning foreigners to evacuate South Korea.

(Read More: North Korea Warns Foreigners to Leave South)

"No nuclear power has used language of this belligerence before...yet it is having not much of an effect because people don't really believe it," Lawrence Freedman, professor of war studies at King's College London, told CNBC.

Construction firm Chinhung International and Biotechnology firm Orient Bio led the gains on the Kospi, both rising around 15 percent.

In Europe, concerns over Slovenia becoming the fifth euro zone country to ask for a bailout escalated after the Organization for Economic Cooperation and Development on Tuesday said Slovenia may exceed its estimate of 1 billion euros needed to boost the banking sector.

(Read More: Slovenia Faces 'Severe Banking Crisis': OECD)

In the U.S., stocks finished off their best levels but the Dow still posted a fresh closing high, up 0.4 percent to close at 14,716. The S&P 500 gained 0.35 percent while the Nasdaq put on 0.5 percent.