Asian shares rose on Tuesday, as news of several multi-billion dollar takeover bids overseas boosted confidence in global economic recovery, while the yen dipped after Tokyo refused to rule out currency intervention.
The yen's retreat from an eight-month high hit on Monday helped Japanese exporters such as Honda Motor <7267.T>, lifting the Nikkei average <.N225> by 1 percent.
The yen slid after Finance Minister Hirohisa Fujii said that intervention might be an option if currency moves were irregular, even though he reiterated it was wrong for any country to try to win a competitive edge by devaluing its currency.
If moves are irregular, there is a possibility we might take whatever action deemed necessary for the sake of the country, Fujii told a news conference.
The yen dipped to 90.04 to the dollar after the comments, further pulling back from 88.22 hit on Monday, its highest level since January.
Japanese government bond futures dipped as stocks gained but losses were limited by news that Japanese deflation deepened last month, with consumer prices falling by a record 2.4 percent from a year earlier, further highlighting weak domestic demand.
December 10-year JGB futures were down 0.02 point at 139.29.
TAIWAN TECH SHARES SURGE
Shares across Asia climbed with the MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> up 1.9 percent, following Wall Street's <.DJIA> 1.3 percent gain overnight.
U.S. stocks snapped a three-day losing streak, buoyed by news of increased merger and acquisition activity that suggested companies were optimistic about the economic outlook.
Technology shares in Asia drew buying, notably in Taiwan where they traded on news that Taipei will allow contract chipmakers and flat-panel makers to acquire rivals in China, although analysts said it would be some time before the policy was implemented.
Taiwan's main share index <.TWII> rose nearly 2 percent as Taiwan Semiconductor Manufacturing Co Ltd <2330.TW> and UMC <2303.TW>, the world's two largest contract chip makers, rallied more than 4 percent.
The Australian dollar got a lift after local central bank watcher Terry McCrann said the Reserve Bank of Australia was almost certain to raise interest rates by 25 basis points each in November and December although he did not cite any sources.
That would make Australia one of the first major economies to raise rates since the global financial crisis and would make its high-yielding currency even more attractive for investors seeking better returns as the global economy picks up.
The Australian dollar was trading at $0.8746, not far off its 13-month high of $0.8790 set last week.
The oil price continued to edge higher, topping $67 a barrel at one point, after rising more than 1 percent on Monday, following Wall Street's jump and tensions sparked by Iran's testing of missiles.
Gold hovered at around $990 an ounce but was overshadowed as attention was diverted to currency markets, analysts said.
(Additional reporting by Leika Kihara in Tokyo; editing by Tomasz Janowski)