The Nikkei share average rose 0.46 per cent to close at 28,946.14, while the broader Topix gained 0.84 per cent to 1,942.33.
While Japan last week extended its social restriction measures to later this month, investors are looking beyond, with signs of a pickup in vaccination fuelling their bets on economic reopening.
“Daily vaccination counts are now hitting about 500,000, so we can hope that by mid-July, we could reach a level where new infections should fall because enough number of people will have been vaccinated,” said Nobuhiko Kuramochi, market strategist at Mizuho Securities.
Railway companies were among the best performers, with West Japan Railway jumping 7.7 per cent and East Japan Railway soaring 6.0 per cent.
Airliner ANA Holdings gained 3.2 per cent, while rival Japan Airlines climbed 3.5 per cent.
The real estate sector was another strong performer, with Sumitomo Realty & Development adding 4.3 per cent, while Mitsui Fudosan rose 5.2 per cent.
Real estate investments trusts (REITs) were also in demand, with their index – TSE REIT Index – rising 1.5 per cent to reach its highest level since March last year.
Automakers benefit from hopes of global demand recovery and investors rushed to pick up value shares, which they believe have more potential upside compared to expensive growth shares.
Honda Motor rallied 4.6 per cent to hit a three-year high, while Toyota Motor extended its uptrend to scale a record high with gains of 2.2 per cent.
On the other hand, investors also rotated out of shares that had benefited from windfalls following the pandemic.
Furniture store operator Nitori Holdings lost 4.5 per cent to one-year low while medical equipment maker Sysmex shed 3.7 per cent.
Drugmakers also came under pressure, with Daiichi Sankyo dropping 1.6 per cent and Ono Pharmaceutical down 1.0 per cent, both hitting their lowest levels in more than a year.
