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Tokyo - Tokyo stocks closed up 0.26% Tuesday, underpinned by hopes of a deal that would end a US government shutdown and raise its borrowing limit to avoid a default.
The Nikkei 225 index gained 36.80 points to 14 441.54 while the Topix index of all first-section issues was up 0.03%, or 0.30 points, to 1 197.47 after profit-taking eroded earlier gains.
There is growing hope that a deal to avert the crisis will be struck soon after a series of talks in Washington with Thursday's deadline on raising the debt ceiling approaching.
"It's not like the US can't afford to pay its bills; it's more like its wife has just hidden its chequebook," said CLSA equity strategist Nicholas Smith.
"Most fund managers appear to be more frightened of being left behind if the market rips than of the apocalyptic scenario of failing to fix the debt ceiling on time," he told Dow Jones Newswires.
US stocks reversed losses and finished higher Monday with the Dow Jones Industrial Average adding 0.42% to 15 301.26.
The dollar eased against the yen on Tuesday as traders focus on the talks in Washington.
The greenback bought ¥98.43 in Tokyo trade against ¥98.67 in New York on Monday afternoon. The euro bought $1.3558 and ¥133.58 compared with $1.3559 and ¥133.79.
Stock prices were unmoved by vows from Prime Minister Shinzo Abe to take action to revive the country's economy as parliament opened a new session Tuesday.
In Tokyo stock trading Nikon fell 2.08% to ¥1 783 after the Nikkei economic daily reported that its April-September profits were down 54% year-on-year.
Fuji Heavy Industries, which makes Subaru cars, was up 0.75% at ¥2 815 after the Nikkei reported that its April-September profits soared 250% to a record.
Sony gained 0.99% to ¥1 938, apparently benefiting from being oversold in the past weeks, traders said. Sony shares had lost nearly 10% between September 27 to October 10 as the dollar fell and investors became more risk-averse, dragging the broader market down.
