Japan's Nikkei share index has touched the 15,000 mark for the first time in five years, as strong demand for domestic shares continued.
Experts believe the market can rise further
Investors have been inspired by signs of recovery in the economy, and a rally in US tech stocks has also helped.
Recent data shows industrial output up, improving production and household spending, and more people seeking work.
The Nikkei briefly rose as high as 15,013.24, before it slipped back to 14,872 at the end of trading.
Japan's economy has bounced back this year as a pick-up in consumer spending and capital investment has made up for a slowdown in exports, particularly to China.
This week the Paris-based Organization for Economic Cooperation and Development (OECD) upgraded Japan's economic outlook, saying its domestic demand is recovering, along with corporate profits and employment.
Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities, said the market was supported by hopes the Nikkei could rise further on optimism about continued economic recovery.
"The Nikkei took a breather after breaking above 15,000, but it didn't fall as much because there is a strong sense in the market that the Nikkei will rise further," he said. The last time the market was at such a level was in December 2000.
The OECD expects Japan's economy to grow at 2.4% this year and 2% in 2006, up from previous forecasts for 1.5% growth in 2005 and 1.7% next year.
Industrial production rose 0.6% in October from a month earlier. Analysts are optimistic about the outlook for output, after a period in which companies seemed to have been selling off stock rather than boosting production.
And there are signs that foreign demand is picking up after a slowdown, as is the domestic appetite for consumer spending, as wages and job prospects improve.
A separate government report showed that spending in households with a wage-earner rose by 1.3% in October from a year earlier.
Government figures show Japan's economy expanded at a faster-than-expected 0.4% in the third quarter, boosted by strong domestic demand.
Japanese consumer prices failed to fall for the first time in five months in October, fanning optimism that the long period of deflation is set to end.