Asian stock markets advanced Wednesday on hopes that the U.S. lawmakers will soon arrive at a consensus to avoid the "fiscal cliff” and the Japanese Central Bank will add to the economic stimulus buoyed sentiment.

Japanese benchmark Nikkei surged 2.39 percent or 237.39 points to 10,160.40, the highest level since April, and Hong Kong's Hang Seng gained 0.80 percent or 178.98 points to 22,673.71, while Chinese Shanghai Composite rose 0.25 percent and India’s BSE Sensex gained 0.54 percent

Stock markets in Asia opened on a firm note, following the gains on Wall Street overnight. U.S stock markets advanced Tuesday with the Dow Jones Industrial Average closing at its highest level in two months on optimism that a deal to avert the ‘fiscal cliff’ will be reached sooner.  

Hopes of an accord rose after the U.S. President Barack Obama proposed to raise the tax threshold to $400K from $250K. However, this offer is far below Republican House Speaker Boehner’s $1million but market participants regard the compromise as a progress in the negotiation.

"What is important, and what is driving the market higher, is that the two parties are now in constructive discussions over specific tax levels and spending programs, and working towards a common middle ground," Cameron Peacock, a strategist at IG Markets in Melbourne, told Reuters.

Sentiment was further supported after ratings agency Standard & Poor’s said Tuesday that it has upgraded Greece's credit rating to B- with a stable outlook, while the well-received Spanish bill auctions also added to the upward movement.

Japanese shares continue to rally on hopes that the Bank of Japan (BOJ) will add to the economic stimulus. The BOJ concludes its monetary policy meeting Thursday and is expected to increase the asset purchase fund by 10 trillion yen. 

Meanwhile, official data released Wednesday showed that Japan’s merchandise trade balance remained in deficit for five straight months. The world’s third largest economy recorded a trade deficit of 953.4 billion yen ($11.4 billion) in November as exports to China continued to slump following a territorial spat between Tokyo and Beijing.

Financial and auto maker shares led the rally in Tokyo. Nomura Holdings Inc. surged 4.74 percent and Daiwa Securities Group Inc. gained 3.50 percent while Honda Motor Co Ltd. and Toyota Motor Corp. gained 6.15 percent and 3.49 percent, respectively.

Property developers and financial majors advanced in Hong Kong.  Wharf Holdings Ltd. advanced 3.46 percent and China Resources Land gained 2.20 percent, while China Construction Bank Corp. rose 1.12 percent.