Japanese stocks rose to the highest levels since 1990 on Monday local time, albeit declining later, with analysts predicting a potential rally in the near future.
Benchmark Nikkei 225 index briefly reached a 33-year high earlier in the trading session but later retreated. The average was 33,853.46 at 9:25 AM local time, rising 0.80 percent after a robust earnings season.
However, profit-taking led to a decline, settling at 33,562.41 by the morning session's end, a 0.07 percent dip from Friday's close.
Concerns over the yen's resurgence prompted further losses in the afternoon. The day concluded at 33,388.03, marking a 0.59 percent decrease. Meanwhile, the broader Topix index dipped 0.77 percent to 2,372.6.
Among Nikkei Stock Average constituents, the top performers were Tokio Marine Holdings, rising nearly seven percent; Panasonic Holdings, up by five percent; and Sumitomo Pharma, adding almost four percent.
Chip-related shares were the biggest drag on the Nikkei, with Tokyo Electron and Advantest tumbling 9.29 percent and 0.55 percent, respectively. Automakers also declined, with Toyota Motor and Honda Motor losing 2.7 percent and 2.21 percent, respectively.
Analysts note that robust corporate earnings and a surge in offshore demand fueled the Nikkei index's gain. Financial shares led the rally as investors looked forward to Japan's exit from its negative interest rate policy.
"There are more positive cues for the Nikkei than negative cues, with robust corporate outlook and share buybacks from the latest earnings season and U.S. interest rates seem to have hit their peak," said Takehiko Masuzawa, trading head at Phillip Securities Japan.
In recent months, the Nikkei Stock Average has outperformed the U.S. benchmark index, the S&P 500, with year-to-date gains of around 30 percent and nearly eight percent in the past month. This compares to the S&P 500's gains of 18 percent and seven percent in those periods.
Asian stocks gain
Meanwhile, the MSCI Asia-Pacific ex-Japan index advanced 0.8 percent to reach a two-month high, extending its gains from last week.
In China, the SSE Composite Index was up 0.54 percent at 3,070, while the Shenzhen Component Index gained 0.63 percent to 10,042.
Chinese stocks rose after regulators pledged further support for the struggling property sector. However, the benchmark CSI 300 index edged down 0.2 percent as the central bank kept its loan prime rate unchanged at 3.45 percent.
Hong Kong stocks led the way down in Asia-Pacific on Friday, with Alibaba shares tumbling after the company announced it was canceling the full spinoff of its cloud computing business. The Hang Seng index, however, rebounded on Monday, gaining 1.47 percent.
South Korea's stock market surged on Monday, with the benchmark Kospi index gaining 0.86 percent to close at 2,491.2. The small-cap Kosdaq index outperformed the Kospi, rising 1.75 percent to end at 813.08.
Australia's benchmark ASX 200 index edged up 0.13 percent, supported by gains in commodity stocks. Investors are now tuning into the Reserve Bank of Australia's (RBA) November meeting minutes for further clues on monetary policy.
While most Asian markets started the week with gains, U.S. stock futures retreated, with S&P 500 futures dipping 0.15 percent and Nasdaq futures falling 0.35 percent. Despite the pullback, the S&P 500 remains close to its record high set in July, currently up nearly 18 percent for the year.
Following multiple comments from various Federal Reserve officials, market expectations for further interest rate hikes have diminished significantly. The market now sees no further hikes in December or next year, and instead, there is a 30 percent chance of a rate cut starting in March.