The yen fell to its lowest level in more than two years on Friday, lifting Japanese stocks to 21-month highs on expectations of drastic monetary easing, while shares in the rest of Asia rose as Washington races to avoid a fiscal crisis.
US President Barack Obama and lawmakers are launching a last round of budget talks before a New Year deadline to reach a deal or watch the economy go off a "fiscal cliff," that economists fear will push the United States back into recession and stamp out fragile signs of recovery elsewhere.
"A big issue is being made of it, but eventually they'll do something to kick the can down the road," said Steven Robinson, senior investment manager at Alleron Investment Management in Sydney.
European shares were seen flat to higher, with financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX would open little changed to as much as 0.3 percent higher. US stock futures suggested a steady Wall Street start.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent, hovering around a near 17-month high. It has gained about 18.7 per cent this year, a sharp turnaround from an 18 percent plunge in 2011.
Australian shares rode iron ore stocks up to finish at a 19-month high, with a recovery in battered mining shares driving the market to its strongest annual gain since 2009. Hong Kong shares hovered near a 17-month high with a 0.1 per cent gain and Shanghai shares jumped 0.8 per cent.
Oil prices rose on hopes the United States would resolve the fiscal cliff, easing concerns about weakening demand.
Brent crude was up 0.4 percent to $111.25 a barrel and on course to post a full-year increase of about 3.6 per cent, which would be its smallest gain in four years. U.S. crude rose 0.5 per cent to $91.30, set for its first yearly loss in four years.
"The US fiscal cliff will continue to direct crude prices until it's resolved," said Natalie Rampono, a commodities analyst at ANZ in Melbourne.
As well as being deadline day for the fiscal cliff, Dec. 31 is the date the federal government is set to reach its $16.4 trillion debt limit. The Treasury will have to take measures to buy time for the government to approve a rise in the debt ceiling.
A similar political stalemate over raising the federal debt limit in the summer of 2011 raised fears over