A man looks at his watch as he passes an electronic board displaying a graph of currency rates outside a brokerage in Tokyo.

Tokyo - Tokyo stocks closed 1.08 percent higher on Tuesday, helped by a weaker yen and a central bank survey that indicated Japanese firms plan a healthy increase in capital spending.

The benchmark Nikkei 225 index added 164.10 points to finish at 15,326.20 while the Topix index of all first-section issues was up 1.07 percent, or 13.52 points, to 1,276.08.

The Nikkei slipped soon after the open as the Bank of Japan's Tankan quarterly survey showed business confidence among large manufacturers fell following a sales tax hike in April.

But the index quickly rebounded with investors welcoming details of the report that showed firms' capital spending was picking up.

“The Tankan showed the weakness you'd expect after a sales tax hike and the market said 'so what? I knew that' and popped higher,” said CLSA equity strategist Nicholas Smith.

“The broader picture is encouraging, with global demand recovering and Japanese (capital expenditure) and government spending improving,” he told Dow Jones Newswires.

An equity trading director said the Tankan could have been the trigger behind the shares buying.

“It looks like pension funds may be bidding again, and waited for the market to dip just after the open,” the trader said.

The dollar's rise added an extra buying incentive as the currency had been persistently weak for several days.

A weaker yen is positive for Japanese exporters as it boosts their profitability.

“The buying (of stocks) is broad and deep, and certainly bullish,” said Naoki Fujiwara, fund manager at Shinkin Asset Management.

On currency markets, the dollar rose to 101.46 yen in afternoon Tokyo trade from 101.31 yen in New York Monday.

Mitsubishi Motors shares rose 0.98 percent to 1,129 yen after it announced it would produce sedans jointly with Chrysler in Mexico.

Other automakers also rose.

Toyota added 1.38 percent to close at 6,169 yen and Nissan gained 1.14 percent to 972 yen. - Sapa-AFP