The Nikkei rose 1.77% on its third straight day of gains this week, closing at its highest in nearly 34 years at 35,049.86. The index was also on its way to the largest weekly gain since late March 2020.

The broader Topix rose 1.57% to end at 2482.87.

The strong earthquake that hit western Japan last week and lackluster wage growth data are forcing market participants to "reappraise" when the Bank of Japan (BOJ) will normalize its monetary policy, said Tony Sycamore, a market analyst at IG.

Workers' real wages shrank for a 20th straight month in November, according to data published on Wednesday, confounding officials' wishes to see wage gains before tightening policy.

"That (wage data) gave the Nikkei the excuse to pop up there, towards that 35,000 level," said Sycamore, adding the index "probably can continue to make good gains while we try and work out when the BOJ can look to take its next step."

The yen fell 0.9% on the U.S. dollar overnight in the wake of the data and was hovering around 145.52 during Asian trading hours.

A weaker yen tends to support exporter shares, increasing the value of overseas profits in yen terms when firms repatriate them to Japan.

Japanese stocks also got a boost from upbeat performances on Wall Street as megacaps rallied.

SMC Corp gained 4.69% to top off Thursday's winners, followed by Itochu Corp up at 4.5% and telecommunications company KDDI Corp. closing higher at 4.21%.

Also among the best performers were Sony Group Corp up at 3.54% and Suzuki Motor Corp. gaining 3.86%.

The largest percentage losses in the index were Yamato Holdings Co. Ltd. down 3.85%, followed by Rakuten Group Inc. losing 2.44% and Tokyo Gas Co. Ltd. down by 1.43%.