The benchmark Nikkei 225 index soared 4.0 percent or 773,59 points to 20,100.65 in early trade, while the broader Topix index was up 4.11 percent or 58.78 points at 1,490.25.

"Thanks to the sharp rebound in US shares, it is increasingly possible that Japanese stocks will end the year on a bullish note," Okasan Online Securities chief strategist Yoshihiro Ito said in a commentary.

Exporter shares rose strongly as a weaker yen improved their business outlook.

The dollar was trading at 111.17 yen, down from 111.33 yen in New York but up from 110.45 yen when Tokyo closed on Wednesday.

Wall Street stocks roared back to life in post-Christmas trade on Wednesday, shaking off four straight routs following strong retail sales data and White House reassurances that Fed Chair Jerome Powell won't be fired.

The Dow Jones Industrial Average finished up nearly 1,100 points, or about five percent, with the broad-based S&P 500 also surging five percent.

The US gains were the biggest for a single session on Wall Street in nine years, a surge analysts attributed in part to technical factors after days of selling.

"It was possible that risk appetite wouldn't recover until after the new year but thanks to the upturns in Tokyo and New York, we are likely to see the new year in with a somewhat brighter mood," Mizuho Securities said in a note.

Many investors have been unnerved by a variety of factors, including the partial US government shutdown, the US-China trade war and Trump's ongoing criticism of Fed Chair Powell.

But a sense of relief won out for now.

Sentiment also improved after a Bloomberg News report said a US government delegation will travel to Beijing in early January to hold trade talks in the first face-to-face discussion since Trump and Xi Jinping agreed on a 90-day truce.

Sony climbed 3.96 percent to 5,305 yen and Toyota added 3.43 percent to 6,357 yen.

Energy shares were also higher on rises in oil prices, with petroleum explorer Inpex up 5.65 percent at 993.3 yen.