The currency weakened after the Bank of Japan lifted interest rates but said future increases would come gradually.

Share indexes in South Korea and Australia ended at records, while benchmarks in Singapore and Malaysia touched intraday records before easing back ahead of the market close.

The Nikkei 225 Index ended 1.1% higher, rising 195.58 points to 18,108.79, closing above the 18,000 level for the first times since May 8, 2000.

The broader Topix index was up 0.6% to 1,797.80, its highest close since Nov. 15, 1991.

On Wednesday the Bank of Japan lifted interest rates a quarter percentage point, bringing its benchmark rate to 0.5%. The move marked the first change in monetary policy by the Japanese central bank since it ended its zero-interest-rate stance with a quarter-point rate hike in July.

Speaking before parliament Thursday, BOJ Governor Toshihiko Fukui said year-on-year changes in the consumer-price index could be near zero or turn negative in coming months because of lower crude-oil prices. He also reiterated his view that the CPI would continue to show steady gains in the long term.

Most analysts expect the BOJ to raise rates two more times before Fukui's term expires in March 2008, with the earliest coming after parliamentary elections in July, according to a poll by the Nikkei newspaper.

"The raising of rates in Japan is proof the Japanese economy is recovering," said Hirokazu Yuihama, head of regional strategy at Daiwa Institute of Research in Hong Kong. "The market is also relieved there appear to be no more rate hikes in the near term."

---------------------