Trade tensions flared up between Japan and China, and Beijing placed additional restrictions on goods shipments to Japan with a potential military use.
Defense, financial services providers, and technology stocks dominated trading in Tokyo for the second consecutive session this week, as investors shrugged off rising tensions between Japan and China and in South America.
Technology and mining stocks led the broader market advance for the second consecutive session in China and Hong Kong, driven by renewed buying from foreign investors.
Japan's benchmark soared on the first day of trading as investors caught up with geopolitical events over the weekend and last week's tech rebound in New York.
Japan's jobless rate held steady, retail sales advanced for the third consecutive month, and industrial output fell in November. Benchmark indexes extended weekly gains on Friday.
The yield on 10-year Japanese government bonds hovered above 2%, and the yen remained under pressure amid growing concerns over the government's expansionary fiscal policies.
Japan's bond yields hovered near a three-decade high, and the yen retained a downward bias ahead of the sharp increase in government spending in the upcoming fiscal year.
Stock market indexes advanced in mainland China and Hong Kong as investors held out for a year-end rally. Four companies listed their shares on the Hong Kong Stock Exchange.
The Bank of Japan increased its key short-term interest rate as widely expected and signaled its readiness to deliver future rate hikes if consumer prices and wages increase at its estimated pace.
