 "Nikkei hits 4-1/2 year high, exporters rise on BOJ easing hopes")
The Nikkei rose 1.2% to 12,618.01 at the midday break.
In early trade, it rose as high as 1.4% to 12,650.26, its highest level since early September 2008, which is also a resistance level for the Nikkei. The level is the 50% retracement of its slide from late February 2007 to late October 2008, when the global economy suffered its worst recession since the Great Depression of the 1930s.
On Wednesday, Haruhiko Kuroda, an advocate of aggressive easing, took the central bank's helm along with deputies Kikuo Iwata and Hiroshi Nakaso.
"The market expects easing at its first meeting (on April 3-4) under the new leadership, so until then, the market should stay strong," said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities.
The Nikkei has gained 21% this year on widely-expected aggressive policy easing after Prime Minister Shinzo Abe's campaign to pull the country out of persistent deflation and bolster growth.
The yen has weakened 11% during the same period, boosting hopes that exporters' overseas earnings will be lifted when repatriated.
The Topix gained 1.2% to 1,058.07.
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On Thursday, Sony Corp gained 4.0% and was the most-traded stock on the board by turnover, while Canon Inc added 2.2% and Hitachi Ltd rose 3.3%.
Among other gainers, Yahoo Japan Corp jumped 3.2% after the company raised its forecast range for dividend payments for the fiscal year ending March 31 to between 385 and 390 yen from an earlier forecast of 382 to 387 yen.
Analysts noted investors were relieved after the Fed said it will retain its $85 billion a month bond-buying programme to support the economy, pushing the dollar to 96.13 yen, within striking distance of a 3-1/2 year high of 96.71 reached last week.
The yen last traded at 96.03 yen against the dollar.
While many analysts are bullish about the Nikkei's outlook, they said the Japanese market is still vulnerable to a rise in the yen.
"Excessive worries about a bailout on Cyprus have receded, but we still need to stay alert on currency moves as we were caught off-guard by the yen's rise the other day (when the controversial Cyprus bailout plan rattled markets)," SMBC Friend's Matsuno said.
"We were reminded that the yen could be bought when investors want to avoid risk."
Cypriot leaders held crisis talks on Wednesday to avoid a financial meltdown a day after the country's Parliament rejected a levy on bank deposits, which had been proposed over the weekend by European Union officials.
Foreign buying continues
Amid strength in the Japanese market, Japan equity weighting by global institutional investors was 15% overweight for March, up for the third month while investors have confidence in Japan's corporate earnings outlook, according to a survey conducted by Bank Of America Merrill Lynch.
"In sector allocations, Japan investors' overweight position on banks increased again to stand at a very high level, though they are even more heavily-weighted toward autos, which continues to be the most popular sector," equity strategist Naoki Kamiyama wrote in the report.
The banking sector has outperformed the overall market by rising 30% this year, while the transport equipment sector has gained 25%.
On Thursday, foreigners placed net buy orders for Japanese stocks for the 11th straight day before the market opened.
But some analysts say that those who pour in money in to the market before the cautiously awaited BOJ's policy meeting on April 3-4 are mostly short-term investors.
"Short-term buyers like hedge funds are chasing both futures and cash markets higher on hopes for monetary easing while they plan to sell after the news is out," said Shun Maruyama, chief equity strategist at BNP Paribas. "Long-term investors would not buy at this timing."