The Tokyo market's broad TOPIX index neared its highest in more than 15 years today as the Nikkei average rose 0.36 per cent.
The Nikkei was up 64.44 points at 17,940.09, its highest close since May 8th, 2000.
The broader TOPIX gained 0.31 per cent to 1,779.96, its highest close since April 7th, 2006. Earlier in the day the index rose as high as 1,782.58, nearing the peak for 2006 of 1,783.72.
A break above that level would take the TOPIX to its highest since November 1991.
Shares in Sapporo Holdings rose to their highest in nine-and-a-half years as investors bet on white-knight bids for Japan's third-biggest beer maker to counter a $1.3 billion takeover attempt by US hedge fund Steel Partners.
Shares in steel makers such as Nippon Steel also advanced on consolidation talk, making the iron and steel subindex the largest percentage gainer among the 33 industry subindexes of the TOPIX index.
"The market is in a bullish mood, backed by good earnings prospects and hopes for further consolidation," said Takahiko Murai, a general manager of equities at Nozomi Securities.
"Foreign investors have been buying shares in food and drug companies, betting that mergers and acquisitions in those sectors will accelerate," he said.