Tokyo stocks extended gains Tuesday, with the key Nikkei stock index rising 0.41 percent to a fresh nine-month closing high as corporate Japan continued to churn out robust earnings reports and optimism about the U.S. economic recovery remained high.
Brokers said that stocks got a boost from the off thanks to Wall Street's gains overnight and from Japanese companies reporting healthy earnings and outlooks, as earnings season here draws to a close.
And whilst some analysts suggested the market may be showing signs of overheating, investors' appetite for riskier assets helped push indices higher, helped by markets in mainland China being closed for the Lunar New Year period.
The likelihood is however, that profit taking will cap further gains, following Chinese markets reopening, market players said, but in general shares were reacting well to domestic and international cues, such as the surprising fall in unemployment in the U.S.
"Earnings are solid in Japan," and the global economic outlook has been positive, said Naoteru Teraoka, general manager at Tokyo- based Chuo Mitsui Asset Management Co. "Stocks are reacting to positive news," he said.
The 225-issue Nikkei Stock Average gained 43.94 points from Monday to a fresh nine-month high at 10,635.98, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange bagged 3.57 points -- a 0.38 percent increase -- to close at 944.00.
Coupled with increased confidence in Japan's corporate sector after a slew of bellwether firms reported upbeat earnings and profit outlooks, expectations for more mergers and acquisitions remain rife following the merger plans announced Friday between two major steel producers, who as a conglomerate would become the second-largest producer of crude steel in the world.