The U.S. dollar continued to strengthen against the yen during overnight trading session in Tokyo following than expected US ISM non-manufacturing data.
The US ISM services unexpectedly increased for the month of December to 63.1, up sharply from 61.3 from November. Service sector comprises a large part of US economy and increase in services is another confirming sign that economic recovery is well underway.
The dollar continued to rally against the majors on expectations that the Fed will continue to increase interest rates as the US economy picked up momentum.
The yen was quoted at 104.93-97 against the dollar, 138.38-42 versus euro and 196.38-47 against pound sterling at 12:00GMT.
The Nikkei Stock 225 Average gained 54.74 points, or 0.48 percent, to 11,492.26. The broader Tokyo Stock Price Index of all First Section issues on the Tokyo Stock Exchange rose 4.61 points, or 0.40 percent, to 1,147.97.
Tokyo stocks rebounded from yesterdays loses as bargain hunters stepped into the market and added to their positions after the market sell-off sparked by profit taking.
Gainers included marine transport, steel, energy, automakers and banking with technology, textiles and mining leading the decliners.
Mizuho Financial Group was the most heavily traded issue by value, up 3,000 yen to 511,000 yen, followed by UFJ Holdings, up 4,000 yen to 618.000 yen, with Mitsubishi Tokyo Financial Group, up 20,000 yen to 1,050,000 yen rounding up the list.
The day's volume leader was Sumitomo Metal Industries, up 3 yen to 141 yen.
Winners outnumbered losers 958 to 513, with 123 issues finishing the day unchanged. Volume was heavy with 1,769.44 million shares changing hands up from yesterday's volume of 1,524.49 million shares.
The TSE's Second Section index rose 22.71 points, or 0.74 percent, to 3,076.61 on a volume of 83.53 million shares.
In Osaka, the near-term March Nikkei 225 index futures contract was up 50 points to 11,480.
The 10 Year Japanese Government Bonds remained virtually unchanged after a 1.9 trillion yen auction of government bonds. The auction of 10 Year JGB's drew the worst demand in six months as yields were set at six month low after the major economic data released for the past month showed signs of a slowdown in Japanese economy. The 10 Year JGB futures for March delivery fell 0.05 to 138.68 in Tokyo.