Japan's Nikkei share average rose on Wednesday, clinging near a six-year peak hit the previous day, supported by optimism towards the global economy and hopes for fresh buying by Japanese retail investors due to upcoming tax changes.
The Nikkei .N225 was up 0.2 percent at 15,922.33 in morning trade, near the six-year intraday high of 16,029.65 hit on Tuesday, after stronger-than-expected U.S. manufacturing data helped Wall Street shares finish at record highs.
U.S. durable goods orders for November surged on rising demand for goods across a spectrum of industries, pointing to strength in the economy.
"Trading volume is below average because of winter holidays but we don't really have negative factors at the moment. The market could rally in the final days of year," said Soichiro Monji, chief strategist at Daiwa SB Investments.
The market was also supported by hopes that Japanese retail investors who have sold stocks before a rise in the capital gains tax may soon be buying back shares.
Japan will double the capital gains tax to 20 percent on January 1 but Wednesday is the effective deadline to benefit from the lower tax rate, because transactions on Thursday will be settled next year.
Even if investors do not start buying back immediately, any tax-related selling will subside from Thursday, potentially giving a boost to the market, market players said.
Traders are also pinning hopes on buying from new tax-free investment accounts, dubbed NISA, for the Nippon Individual Savings Account, which launch on January 1. The government has introduced the scheme to lure more Japanese savings to shares to bolster the economy.
Japanese stocks have enjoyed a record-breaking rally this year, backed by Tokyo's aggressive fiscal and monetary stimulus aimed at sparking sustainable growth in the world's third-largest economy.
The benchmark Nikkei is up 53 percent this year, on track for its best annual rise since 1972.
But buying appeared to be led by speculative accounts on Wednesday, traders said, as they concentrated on a small number of index heavyweights such as Fast Retailing (9983.T), which rose 2.8 percent.
The broader Topix .TOPX index was down 0.3 percent at 1,254.17, with volume at less than 40 percent of the full daily average for the past 90 trading days as of midmorning.
Food maker Nippon Meat Packers (2282.T) jumped 3.7 percent after a rating upgrade by Goldman Sachs.
Softbank (9984.T) fell 1.1 percent following a media report that it is in the final stages of talks with T-Mobile (TMUS.N) parent company Deutsche Telekom (DTEGn.DE) about acquiring the U.S.-based wireless carrier.