Japan's Nikkei share average hit its highest closing level in nearly three months on Tuesday on expectations that a Greek debt swap deal will still be reached even after European finance ministers rejected an offer by Greece's private creditors.
Struggling Elpida Memory Inc surged 4.6% after a media report that the Japanese chipmaker is in the final stage of merger talks with US rival Micron Technology and Taiwan's Nanya Technology.
Elpida, which is grappling with tumbling memory chip prices and tough competition from Asian rivals, declined to comment on the report.
The Nikkei average closed 0.2% higher at 8,785.33, unscathed by news that euro zone finance ministers took issue with the average coupon on new bonds offered by private Greek bondholders, effectively raising the stakes of the negotiations and the risk of a messy Greek default.
"Despite the fact that they haven't come to a deal yet, comments out of Europe suggested that there are many points of agreement between the parties and the euro rose above 100 yen, which was positive for Japan's markets," said Yumi Nishimura, senior technical analyst at Daiwa Securities.
Highlighting the risk posed by the euro zone debt crisis, the Bank of Japan on Tuesday cut its economic forecasts for the year ending in March and the following year.
"There's resistance for the Nikkei around the 8,800 level in the short-term ... The Nikkei's gains right now are part of a board reversal and for it to climb higher it needs some more positive factors out of Greece and strong earnings from the US," Nishimura said.
Of the 77 S&P 500 firms that have reported quarterly results so far, 61% of them either beat or met market expectations, according to Thomson Reuters StarMine data. That was down from some 70% in the previous quarter.
Recent improvements in US economic data lifted the gloom, however.
The Nikkei is up 3.9% so far in January. If this month were to finish with the current gains, it would be the best January performance since 1999.
The broader Topix added 0.1% to 757.40 on Tuesday.
Trading volume on the main board moderated, with 1.84 billion shares changing hands, down from 2.01 billion shares on Monday and 2.6 billion on Friday.
Toyota, Shippers bounce
Toyota Motor Corp advanced 2.7% to hit its highest level in nearly five months and was the heaviest traded stock by turnover on the main board as improvements in the US market have made investors become less bearish on the auto sector.
The sector was hit hard last year by supply disruptions following a massive earthquake in Japan and floods in Thailand.
"Toyota's valuation has gone down ... But meanwhile, the US market has begun to improve," a sales trader at a foreign brokerage said.
Toyota shares are up 8.9% so far this month after losing more than 20% last year. However, technical indicators showed the shares were trading in "overbought" territory, with the 14-day relative strength index at 71.3.
Rival Nissan Motor Co gained 0.6% on Tuesday.
In terms of valuations, Toyota carried a 12-month forward price-to-book ratio of 1.07, much lower than Nissan's 2.37, data from Thomson Reuters Datastream showed.
The shipping sector also rebounded, up 2.3% to become the best-performing sector on the main board, with market participants citing a recovery in freight rates on the export route from West Asia to Japan.
Mitsui OSK. Lines Ltd advanced 0.7%, Nippon Yusen KK added 2.1% and Kawasaki Kisen Kaisha Ltd surged 3.7%.
Despite Tuesday's rise, the Topix shippers subindex is still down 1.5% this month after shedding 47% last year.