Japan's Nikkei average climbed above the 9,000 mark for the first time in three months on Wednesday, boosted by a stronger-than-expected profit outlook from Toyota Motor Corp (7203.T) and short-covering in index options.

A trader said investors who had been bearish on the Nikkei, were forced to cover their short positions in February call options at 9,000 2JNI090B2.OS as the benchmark advanced to that level, spurring further gains in the Nikkei in the afternoon.

The Nikkei .N225 closed 1.1 percent higher at 9,015.59, not too far from its 200-day moving average near 9,063, and the broader Topix .TOPX gained 1.2 percent to 782.34, shrugging off worries about Greece whose politicians delayed a decision yet again on unpopular terms of a crucial 130 billion euro bailout.

Trading volume on the main board hit a three-week high, with 2.48 billion shares changing hands.

Core bluechips firms are steadily lifting the index higher...Banks are very steady too, so it is a departure from how markets had been acting until recently, said Hideyuki Ishiguro, a strategist at Okasan Securities.

Toyota, Japan's top carmaker, jumped 5 percent to a six-month high in heavy volume after it lifted annual profit guidance by more than a third, citing cost cuts and expected benefits from Japanese government schemes.

We think consensus expectations for F3/13 earnings will move up in reaction to 3Q results, and despite the stock's strong recent performance, we believe it is too soon to take profits, Morgan Stanley analyst Ryosuke Hoshino said in a note and kept his overweight on the company.

Rival automaker Nissan Motor Co (7201.T) was up 2.4 percent ahead of its earnings report.

Chipmakers jumped on news of likely major realignment in the troubled industry, with sources saying Renesas Electronics (6723.T), Fujitsu Ltd (6702.T) and Panasonic Corp (6752.T) were in talks to merge their system chip operations.

Renesas soared 10.1 percent, Fujitsu bounced 2.9 percent and Panasonic was up 3.3 percent, while Elpida Memory (6665.T) surged 9.4 percent on a report that it could be selling its Hiroshima plant as part of the deal.

BANKS GAIN

Other strong performers included Sumitomo Mitsui Financial Group (8316.T), Mitsubishi UFJ Financial Group (8306.T) and Mizuho Financial Group (8411.T), recovering further from last year's battering as the U.S. economic outlook brightens.

The three banks climbed between 1.6 and 2.6 percent.

Technical indictors showed the stocks could be ripe for a correction as they were trading deep in overbought territory, with their 14-day relative strength indexes well above 75, however. Seventy and above is considered overbought.

Short interest ratio -- the number of shares sold short divided by the average daily trading volume -- on the banking sector had also risen to about 25 percent as of Tuesday, up from 17 percent in early February, another trader said.

Social gaming company DeNA (2432.T) jumped 8.4 percent and was the second most actively traded stock by turnover after it lifted its annual operating profit guidance by 9.6 percent to 61.5 billion yen and announced a share buyback.

The Topix 500 .TOPX500 has risen 7.3 percent this year, boosted by improving U.S. economic data.

With the gains, the Topix 500 carries a 12-month forward price-to-book ratio of 0.9, up from 0.84 earlier this year, and the proportion of companies trading below their net asset value has dropped to 55 percent from nearly 60 percent at the start of the year, data from Thomson Reuters Datastream showed.

That still dwarfs the S&P 500 .SPX, with only 13 percent of the companies trading below their 12-month forward P/B ratio of 1.