Mizuho Financial Group rose after Bloomberg reported that the bank is considering a rights offering to boost capital, citing people familiar with the matter.
The market has long expected Mizuho to follow in the footsteps of domestic rivals which have announced huge share offerings but a rights issue, which could be Japan's first, is likely to give the bank more control over the dilutive impact.
The Tokyo Stock Exchange said December it would relax rules on rights issues.
China surprised world markets on Tuesday by raising banks' reserve requirements, with an eye toward reining in surging asset prices.
The Chinese move won't negatively affect its economy and that has lessened its impact on U.S. market and led to broad-based buying. Though investors are keeping an eye on Chinese stocks and falls could limit gains here, said Noritsugu Hirakawa, a strategist at Okasan Securities.
Tech shares are being broadly supported on expectations for strong earnings from Intel later today.
U.S. tech shares led the Dow to a 15-month high ahead of the widely anticipated earnings by bellwether Intel Corp later on Thursday.
The benchmark Nikkei gained 108.99 points to 10,844.02 after a dip on Wednesday that market players said was a natural response to recent sharp gains.
The broader Topix rose 1.1 percent to 954.17 yen.
Volume on the Tokyo exchange's first section hit its highest in seven months on Wednesday, boosted by active trade in Japan Airlines, which crumbled on growing expectations the airline is headed for bankruptcy and a delisting from the bourse.
But analysts noted that volume has been picking up since the start of 2010, attributing it to a combination of factors including the introduction of a new trading system on the Tokyo Stock Exchange as well as increased buying by foreign investors seeking to rebalance their portfolios.
Foreigners had really been underweight Japan over the last few months, so there's a bit of portfolio rebalancing going on, said Takashi Ushio, head of the investment strategy division at Marusan Securities.
Shares of Mizuho Financial Group advanced 5.1 percent to 185 yen, outperforming the banking index, which rose 2.2 percent.
Analysts said that with a large Mizuho fundraising widely anticipated by the market, the chance of a rights issue was reassuring because it eased worries about share dilution.
But part of Mizuho's rise today is also due to gains by banking shares in general after the sector lagged others late last year, said Okasan's Hirakawa.
Japan Airlines was the most actively traded issue on the Tokyo exchange's first section, up 43 percent at 10 yen. It was followed by Mizuho.
(Reporting by Elaine Lies)