The Nikkei share average rose 1.13% to 29,720.62, reaching its highest level in two weeks. The broader Topix added 0.57% to 1,968.76.
“We are entering a phase where the stock market rallies even as interest rates rise because of strong earnings growth. This stage will eventually lead to an overheated market but we are not there yet,” said Masayuki Kubota, chief strategist at Rakuten Securities.
Nippon Electric Glass rose 3.9% after the manufacturer of glass products used for cars and flat panel displays revised up its earnings outlook, citing stronger shipments.
Semi-conductor related shares continued to lead the market as the industry looks set to boost manufacturing amid a global shortage of chips.
Advantest gained 3.4%, while Tokyo Electron rose 2.8% and Screen Holdings added 2.7%.
The bullish sentiment was also fuelled by U.S. President Joe Biden’s $2 trillion spending plan that included a call to spend $50 billion in chip manufacturing and other technology research, said Fumio Matsumoto, chief strategist at Okasan Securities.
The broader electronic machinery sector also gained, with Sony Group rising 4.3%, while strength in global tech shares supported Softbank Group, which rose 3.6%.
Automakers were another bright spot, drawing additional help from the yen’s decline in recent weeks.