The Nikkei jumped 2.54 percent to finish at its highest close since June 5 on Friday as exporters such as Toyota Motor gained on rising hopes that the U.S. interest rate-hike cycle may be nearing an end, easing concern of a slowdown in the world's largest economy.
Nonferrous metals stocks including Sumitomo Metal Mining Co. Ltd. advanced after gains in copper and gold prices, while energy stocks climbed on higher oil prices.
The Fed's move has erased concerns that the U.S. economy could face stagflation. That means earnings at Japanese companies won't be dented by such a risk any more, said Yosuke Shimizu, head of investment information centre at Monex Inc.
The Nikkei rose 384.03 points to 15,505.18, its highest close in nearly four weeks. The TOPIX index surged 2.53 percent to 1,586.96, also the highest finish since June 5.
In a widely expected move, the U.S. central bank raised its benchmark rate by a quarter-percentage point to 5.25 percent on Thursday. But investors interpreted the Fed's policy statement - that moderating economic growth could limit inflation going forward - as a signal the bank may pause after its latest hike.
Tsutomu Yamada, a market analyst at Kabu.com Securities Co., said traders will be keeping a close eye on the BOJ's tankan corporate sentiment survey on Monday and on the bank's policy setting meeting on July 13 and 14.
A growing number of market participants expect the Japanese central bank to lift short-term interest rates, which are now near zero.
It's now a Japan factor to which investors have to pay attention, Yamada said. Once the BOJ ends its zero interest rate policy, investors will be able to take a deep breath. But until then, the market will remain volatile.
AUTO STOCKS ADVANCE
Auto makers, many of which make bulk of their sales outside Japan, benefited from improving U.S. economic outlook.
Toyota Motor Corp., the world's most profitable auto maker, soared 4.2 percent to 5,990 yen, its highest close in more than three weeks. Rival Nissan Motor Co. Ltd. jumped 5 percent to 1,250 yen.
Other technology exporters dependent on U.S. demand gained ground with chip-equipment maker Advantest Corp. adding 2.8 percent to 11,660 yen.
In the nonferrous metals sector, Sumitomo Metal Mining, Japan's top gold producer, soared 6.2 percent to 1,492 yen and top nonferrous metal smelter Mitsubishi Materials Corp. rose 5 percent to 488 yen.
INPEX Holdings Inc. jumped 6.8 percent to 1.01 million yen after U.S. crude futures rose to $73.85 a barrel, their highest since May 11.
Another big gainer was Konica Minolta Holdings Inc., which added 5.2 percent to 1,445 yen after the precision equipment maker said it had developed a lighting device using organic light-emitting diode technology, a potential new driver of earnings growth.