MarketWatch
Asian stocks rallied Friday, with Japan's Nikkei 225 Average climbing after the Bank of Japan's influential tankan survey showed businesses became more confident in the past three months.

Asian indexes were also bolstered by gains on Wall Street, where the Dow Jones Industrial Average closed at a fresh record.

Japan's Nikkei 225 Stock Index rose 0.5% to end at 16914.31. The broader Topix index was up 0.3% to 1657.40.

The December tankan survey of business sentiment showed both large and small business became more optimistic about business conditions for the three months to December. The sentiment index for large manufacturers rose to 25, up one point from the September tankan> and in line with expectations. The sentiment for big nonmanufacturers came in at 22, a gain of two points from the Sept. report. (See related article.)

Shares of Japan Tobacco gained 3.1% after announcing it has agreed in principle to buy British cigarette maker Gallaher Group in a deal valued at $14.8 billion. (See related article.)

In currency trading, the dollar bought ¥117.84, down from ¥117.86 late Thursday in New York. The euro fell to $1.3140 from $1.3152. Against the yuan, the dollar bought 7.8275 yuan, up from 7.8185 yuan, as a high-ranking U.S. delegation headed by U.S. Treasury Secretary Henry Paulson concluded a second day of talks with Chinese government officials in Beijing. (See related article.)

Massive gains in new listings and Wall Street's rise bolstered Hong Kong shares. The Hang Seng Index gained 1% to 19110.65. Initial public offerings led the advance. Neo Neon rose 30% and China Communication Construction soared 38%.

Mainland China oil producers rose on higher oil prices after the Organization of Petroleum Exporting Countries said it plans to cut production. (See related article.) PetroChina advanced 1% and Sinopec rose 2%.

In South Korea, shares closed slightly higher led by Posco and Kookmin Bank, and helped by the Dow Jones industrials. The Korea Composite Stock Price Index, or Kospi, rose 0.25% to 1421.87.

Kookmin Bank, South Korea's largest lender by assets, rose 2% on foreign buying. Posco gained 2.1% after hitting a new high during the session on hopes of higher dividends and positive earnings for next year. Analysts said Posco is undervalued compared with other steel makers and ongoing acquisition moves in the global steel industry is also likely to support the stock.

Elsewhere around the region, Australia's S&P/ASX 200 increased 0.1% to 5557.00. Singapore's Straits Times Index added 0.5% to 2931.29 and Taiwan's Weighted Price Index rose 0.8% to 7538.82.