The Nikkei stock average rose 1.5 per cent to its highest close in over four months today as exporters such as Honda Motor found favour on a softer yen and a rise in US stocks.
Financials such as Japan's biggest lender, Mitsubishi UFJ Financial Group, also rose sharply in the final trading of the month, during which the Nikkei gained 3.5 per cent.
Aderans Holdings Co Ltd surged 9.2 per cent, adding to the previous day's 8.7 per cent rise, after US hedge fund Steel Partners helped oust the president and most of the board of the wig maker, the first time management at a Japanese firm has been ejected under pressure from an activist fund.
"The biggest factor for the rise is the softer yen, while another supporting factor is expectations for gains in US stocks tonight after Dell's earnings," said Yutaka Miura, deputy manager of the equity information department at Shinko Securities.
Dell reported earnings after the closing bell yesterday that beat Wall Street's expectations.
The benchmark Nikkei average ended up 214.07 points at 14,338.54, the highest close since January 10th. The broader Topix index climbed 2 per cent to 1,408.14.
The Nikkei scored a second straight month of gains after jumping 10.6 per cent in April.
"May has been a month when excessive pessimism about Japanese corporate earnings has been alleviated," said Junichi Misawa, executive officer at STB Asset Management.
"In March, there were expectations for a very bleak corporate outlook, including a surging yen. The market has been relieved to see only a 5-6 percent drop in profit (forecast for the current year)."
Japanese companies forecast a 4.8 per cent decline in recurring profit, or pretax profit, in the year ending in March 2009, according to data from Shinko Research Institute covering the outlooks by almost all the companies listed on the Tokyo stock exchange's first section.