The Nikkei stock average rose to a two-week high on Friday as a merger between two major steelmakersboosted hopes for restructuring in corporate Japan, providing fresh momentum for the benchmark which had been widely seen as due for a correction.
Better-than-expected results or annual guidance from the likes of Sony, Hitachi and Softbank, as well as encouraging U.S. chain-store sales data also bolstered sentiment.
Tokyo's iron and steel subindexsurged 6.3 percent after Nippon Steel and Sumitomo Metal Industries said they would merge next year to create the world's second-largest steelmaker after ArcelorMittal.
"The news will likely raise expectations that more Japanese companies will seriously try to increase their competitive edge in the global market," said Shinichiro Matsushita, a senior market analyst at Daiwa Securities.
The Nikkei has gained about 15 percent on foreign buying since last November and many market participants had expected a correction before more gains. But the merger deal, accompanied by likely strong U.S. economic indicators, will probably lift the Tokyo market earlier than expected, they said.
Among steel makers, Nippon Steel jumped 9.1 percent to 313 yen, while Sumitomo Metal soared 16 percent to 224 yen. Nisshin Steel surged 6.6 percent to 178 yen.
Shares in electronics giant Sony Corp rose 2.2 percent to 2,931 yen after better-than-expected earnings for the October-December period. Its operating profit was 137.5 billion yen ($1.7 billion) in the quarter, compared with analysts' average forecast of 127 billion yen.
Volume was high, with 1.375 billion shares changing hands on the Tokyo stock exchange's first section, with the day's total likely to top last week's daily average volume of 1.92 billion shares.
Australia Shares Rise
Australian shares closed 0.9 percent higher on Friday lifted by an acquisition by the country's biggest insurance group, with resources stocks supported by firmer metal prices.
QBE Insurance shares added nearly 7.5 percent after it said it would buy the portfolio of U.S. insurer Balboa from Bank of America , paying $700 million for the distribution rights and portfolio transfer.
The deal combined with the resources rally helped drag the market higher, but the mood of investors remained cautious ahead of the earnings season which kicks off next week, said Steven Robinson, senior investment manager at Alleron Investment Management.
Miners were helped by relief that the damage from Cyclone Yasi was not worse, while base metal prices rallied as copper hit a record high of $10,000 per metric ton on fears of curtailed supply at a time of high demand.
New Zealand's benchmark NZX 50 index rose 0.53 percent to 3,368.5.
Other markets across the region in China, Hong Kong, Singapore and Korea are closed for the Lunar New Year holiday.