TOKYO: Japan's Nikkei index reversed course to close higher on Monday, as investors scooped up cheap stocks after US equity futures rose, although gains were capped by caution ahead of the US Federal Reserve's policy meeting this week.

The Nikkei edged up 0.24% to 27,588.37. Earlier in the day, it fell 1.2% after the S&P 500 and Nasdaq posted their biggest weekly drop since March 2020 last week. The broader Topix inched up 0.14% to 1,929.87.

In a sign that the US sell-off may have been overdone, Nasdaq futures gained more than 0.8% during Asian trading hours.

"There was demand as long as stocks were cheap because the economic outlook remains positive," said Jun Morita, general manager of the research department at Chibagin Asset Management. "Also the gains in US futures supported investor sentiment."

Chip-making equipment maker Tokyo Electron and Uniqlo clothing store owner Fast Retailing led the Nikkei's gains, rising 1.62% and 1.17%, respectively.

Camera maker Canon rose 2.02% after a report that its annual net profit would jump 20%. Peer Nikon rose 2.8%.

Oil explorers gained amid rising oil prices, with Inpex jumping 4.57%.

Shipping companies also rallied, with Kawasaki Kisen gaining 6.24% to become the top gainer on the Nikkei.

There were 148 advancers on the Nikkei index against 74 decliners

The volume of shares traded on the exchange's main board was 1.08 billion, compared with the average of 1.09 billion in the past 30 days.