 "Nikkei gains on BOJ governor hope")
Gains on the index, led by real estate and financial firms, were trimmed by a suspension of futures trading on the Osaka Securities Exchange due to technical problems.
The Nikkei ended at 11,652.29, after reaching as high as 11,767.68, the highest level since September 2008, after nominee Haruhiko Kuroda said he would not set any limits on the amount of cash the Bank of Japan pumps into the economy.
Traders said stocks would have risen even higher had the trade in Nikkei futures, options and some derivative products not been suspended in Osaka.
"Investors who were engaging in arbitrage trades between futures and cash had to stay on the sidelines when futures and options trading was halted," said Hiroyuki Fukunaga, the chief executive of Investrust.
"As soon as trading was suspended, investors started to lock in profits, and the Nikkei was trimming gains. If that incident didn't happen, the index could have moved towards 11,800."
Prime Minister Shinzo Abe's policies, combined with monetary stimulus and fiscal stimulus, have buoyed investors' risk appetites and have lifted the Nikkei by more than 12% this year.
On Monday, Kuroda told lawmakers the BOJ's current policies were not powerful enough to boost inflation to 2%, a target he said the central bank should strive to achieve in two years.
"It's not like Kuroda will ease monetary policy every month, but investors are comfortable with having Japanese stocks in their portfolios as they are convinced that there will be easing for sure," said Shun Maruyama, chief strategist at BNP Paribas.
The real estate sector was the third-best sectoral performer, gaining 3.4%. Sumitomo Realty & Development jumped 3.9% and Mitsubishi Estate climbed 3.6%.
The sector has climbed about 58% since mid-November, outpacing a nearly 35% rally in the Nikkei, after Abe embarked on bold fiscal expansionary policies to fight Japan's chronic deflation.
Financials were stronger as well, with Mitsubishi UFJ Financial Group advancing 1.5% and Sumitomo Mitsui Financial Group climbing 1.7%.
Weaker yen
The broader Topix gained 0.8% to 992.25 while some exporters also got a helping hand from a weaker yen, which lost 1% to 93.685 to the dollar on Friday after upbeat U.S. data.
US manufacturing activity expanded last month at its fastest clip in 20 months, while US consumer sentiment also rose in February as Americans turned more optimistic about the job market.
Such signs of growth would help Japan's export-oriented economy, UBS said, as it upgraded Japanese equities to 'neutral' from 'underweight' in its global portfolio model.
"Whilst we are relatively sceptical on the ability of the administration to generate inflation and economic growth, we see a likely period of continued reflationary rhetoric and supportive news flow ahead of the summer elections for the upper house," UBS strategists said in a note.
"The broader improvement in the US economy and pick up in durables goods orders should help Japan, particularly with the weaker yen, over a longer-term horizon."
Sony Corp added 3.5% while Toshiba Corp rose 1.2%.
Volume on the Tokyo exchange was moderate, with 3.12 billion shares changing hands, compared to last week's average daily volume of 3.32 billion shares.