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Japan's Nikkei share average climbed 3% on Thursday, bouncing back from a three-day losing streak, as fears of a US stimulus pullback and a Chinese credit crunch eased.
The benchmark posted its biggest one-day percentage gain in 13 sessions as regional markets firmed.
The Nikkei advanced 379.54 points to close at 13,213.55. It had dropped 3% over the past three days.
Analysts said investors were relieved to see an early rebound in Shanghai shares, which tumbled nearly 10% in less than a week to Wednesday on growing signs of strain in China's banking system.
Chinese money market rates also moderated for a fifth day on Thursday after last week's spike.
"The US market is quite solid and China has settled to some extent, so it all adds up," said Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo.
"It seems there has been a lot of selling by retail investors, possibly the forced kind related to margin calls, in the last few sessions. And I think it's bouncing off such artificial selling by retail traders."
All of Topix's 33 subsectors were in positive territory, while the recently-battered real estate sector was the best sectoral performer, soaring 8.8%.
Sumitomo Realty & Development Co surged 9.9% and Mitsui Fudosan Co jumped 9.6%.
Exporters with high exposure to China, which tumbled early this week, also regained ground. Komatsu Ltd added 4.9% and Hitachi Construction Machinery Co gained 4.1%.
Gains on Wall Street also lifted the mood as weaker-than-expected US first-quarter GDP data reinforced a view that the economy is not strong enough for the Fed to begin scaling back its $85 billion a month bond buying. Such tapering fears have roiled global markets for the last month.
The broader Topix rose 2.8 % to 1,098.83, with 2.69 billion shares changing hands, well below last month's average daily volume of 4.67 billion shares.
Biochemical companies, which had attracted buying recently, dropped on profit-taking.
PeptiDream Inc extended its losses, dropping 19.3% after stumbling 28% on the previous day, while Chiome Bioscience dropped 10.6%.
The benchmark Nikkei has dropped 17% since reaching a 5-1/2-year high on May 23, hurt by slowing growth in China, fears of a pullback in US stimulus and disappointment over the Japanese government's recently announced growth strategy. However, it is still up about 27% this year.
"As long as global money markets are stable, more money will flow into the market," said Naoki Fujiwara, a fund manager at Shinkin Asset Management.
Fujiwara says there was a strong chance that the Nikkei would rise above its 25-day moving average at 13,328.49 as early as Friday.
"Once the index breaks above that level, stocks would be on a solid upward trend again."
