Weak Yen Helps Nikkei Close at Near 5-Year High

Japan and Australia dominated Asian trade on Tuesday as a weak yen sent Tokyo stocks to their highest level in almost five years while Australian shares closed lower after briefly erasing declines following the Reserve Bank of Australia's (RBA) surprise rate cut.

Japan's benchmark Nikkei index reopened after a long weekend to surge past 14,000 — levels not seen since June 2008 as currency moves and earnings drove momentum. Meanwhile. Sydney's S&P ASX 200 ended down 0.2 percent after rising as high as 5,166.

Elsewhere, Seoul shares finished below the 1,960 mark and the Shanghai Composite posted a third straight day of gains.

The Reserve Bank of Australia (RBA) cut its main cash rate by 25 basis points to a record low of 2.75 percent on Tuesday. Markets had been split on the possibility of a cut, even as the economy faces external headwinds and a high currency.

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Nikkei Rallies 3.5%

Weakness in the yen underpinned stock market gains after Friday's upbeat U.S. payrolls data saw the currency revisit the 99-handle against the dollar. The yen has now lost over 1 percent since Thursday.

Automakers are in focus ahead of reporting earnings this week. Toyota Motor rallied 5 percent while Suzuki Motor surged 7 percent. Analysts will be watching to see if Prime Minister Shinzo Abe's economic policies - dubbed "Abenomics" - can shift the country's auto sector into high gear.

"When you look at the facts, you see the Nikkei rally so far has been supported by upward revisions in earnings expectations. Now, we're going to have to see a premium develop in the Japanese market," said Jesper Koll, head of Japanese equity research at JPMorgan Securities Japan.

(Read More: May Could Be Month Dollar-Yen Finally Breaks 100 )

"The price-to-earnings multiple on forward earnings is about 15 times - we expect that this can expand to 18 times. For the last decade, the average multiple has been 19 times so there is room to believe that a Japan premium is warranted," he continued.

RBA Spurs Gains

Resource stocks reversed earlier losses after the central bank's decision. BHP Billiton, Rio Tinto and Whitehaven Coal rallied over 2 percent each.

"Clearly what this (rate cut) suggests is that they (RBA) see the economy is weakening, and that they needed to provide support as soon as possible. They key point is that the government is certainly going to be contractionary for growth going forward so the monetary policy players are stepping in," said Matthew Circosta, economist at Moody's Analytics.

(Read More: Australian Exports to China Hit Record In March)

The Australian dollar tumbled against the greenback to hit $1.0190 following the news after trading as high as $1.0255 earlier in the session.

China Closes Up 0.2%

The benchmark stock index pared gains after earlier touching a two-week high at 2,240, weighed down by losses in financial stocks. Haitong Securities and Founder Securities shed 2 percent each.

Meanwhile, the yuan strengthened against the dollar following sharp losses on Monday after the State Council said it will unveil a road map later this year for making the yuan fully convertible under the capital accounts. Such a move would allow the free conversion of yuan for investment purposes.

"The broader capital account plan to be specified will lead to deeper and more attractive capital markets [stocks and bonds], and should also prove a major shot in the arm for regional stock markets," said Uwe Parpart, chief strategist and head of research at Reorient Financial Group in a note.

Gains were also capped ahead of inflation data, expected on Tuesday. The report follows a raft of recent sluggish economic reports, including April's weaker-than-expected manufacturing activity.

Seoul Drags

The benchmark Kospi dipped below the 1,960 mark after crossing 1,970 in the previous session to touch a one-month high.

Automakers were lower with Hyundai Motor and Kia Motor down 2 percent each after a weaker yen boosted the competitive advantage of their Japanese rivals.

— By CNBC.Com's Nyshka Chandran; follow her on Twitter @NyshkaCNBC