The benchmark Nikkei 225 index ended up 148.93 points at 10,801.57 while the broader Topix index of all first-section shares rose 1.09 percent, or 9.67 points, to 898.69.

The dollar rose as high as 89.34 yen in Asian trade, its strongest since June 2010, on hopes of more Bank of Japan easing and after official data showed Japan's trade picture worsening.

The figures showed the November current account falling to a worse-than-expected 222.4 billion yen ($2.5 billion) deficit.

"The stock market cares little about the current account per se, but the weaker yen is fuelling reflexive bullishness," said Toshihiko Matsuno, senior strategist at SMBC Friend Securities.

"Along with the expected buying in exporters, investors are also targeting commodity-tied shares on the theory that they have been underserved over the current broad-market rally," he told Dow Jones Newswires.

Prime Minister Shinzo Abe, who came to power last month partly on a pledge to reverse Japan's fading economic fortunes, said the stimulus was designed to create 600,000 new jobs and drag the country out of chronic deflation.

The new leader repeated a call for Tokyo and the Bank of Japan to "join hands" on driving growth.

Abe has been pressing the central bank to set a two-percent inflation target, and tensions have risen between the new leader and BoJ chief Masaaki Shirakawa over perceived threats to the bank's independence.

In Tokyo stock trading, Honda rose 1.50 percent to 3,380 yen and Nikon jumped 3.34 percent to 2,721 yen.

Sharp shares jumped 12.62 percent to 330 yen after a report in Japan's Mainichi newspaper said the money-losing electronics maker had returned to operating profit in the three months to December.

The dollar bought 89.08 yen in Tokyo afternoon trade against 88.64 yen in New York Thursday afternoon.  

The euro fetched 118.15 yen, rising past 118.00 yen for the first time since May 2011.