Japan stocks advance as stimulus hopes calm global recession fears
The Nikkei share average climbed 0.7 per cent to 20,563.16 points.
However, buyers were somewhat restrained as the US-China trade dispute remained a nagging worry.
The Nikkei share average climbed 0.7 per cent to 20,563.16 points, while the broader Topix added 0.6 per cent to 1,494.33.
"Improving external factors buoyed Japanese stocks today but the trading was quite subdued," said Takashi Hiroki, chief strategist at Monex Securities.
"There is a wait-and-see mood ahead of this week's Jackson Hole symposium as investors are keen to get fresh hints from Federal Reserve Chairman (Jerome) Powell."
Turnover on the Tokyo Stock Exchange's main board was thin at 1.54 trillion yen, its lowest in six weeks, and well below its daily average of 2.33 trillion yen over the past year.
On Friday, Der Spiegel magazine reported that Germany's coalition government was prepared to set aside its balanced budget rule in order to take on new debt and launch stimulus steps to counter a possible recession.
In addition, China's central bank unveiled a key interest rate reform on Saturday, in a move viewed as a guided rate cut, to help steer borrowing costs lower for companies and support a an economy gripped by the bruising trade war with the United States.
Those stimulus hopes helped yields on US Treasuries and Japanese government bonds rise on Monday from multi-year lows.
That boosted rate-sensitive banks, which were battered by the sharp drop in bond yields last week, with Mitsubishi UFJ Financial Group advancing 1.3 per cent and Sumitomo Mitsui Financial Group rising 0.8 per cent.
Another rate-sensitive TSE REIT index remained in demand, up 0.2 per cent to extend its winning streak to a seventh day to a fresh 12-year high.
However, trade fears are still alive and weighing on investor sentiment as US President Donald Trump on Sunday said he did not want the United States to do business with China's Huawei even as the administration weighs whether to extend a grace period for the company.
Other notable movers include FamilyMart Uny Holdings , jumping 8.7 per cent, after the convenience chain operator said it will buy as much as around 16 million additional shares in Pan Pacific International Holdings through August 2021. Pan Pacific, discounter Don Quijote's parent, rose 4.2 per cent.