Nikkei rises ahead of BOJ decision: Japan's Nikkei share average soared more than 2 per cent on Monday as investors embraced optimism surrounding the anticipated changes to the Bank of Japan's (BOJ) policy settings, set to be unveiled on Tuesday.

By midday, the Nikkei rose by 2.1 per cent to 39,521.43, while the broader Topix gained 1.51 per cent to reach 2,711.15.

Investors found relief as reports from various media outlets helped clarify uncertainties surrounding the upcoming BOJ policy adjustments, according to Shoichi Arisawa, the general manager of the investment research department at IwaiCosmo Securities.

The Nikkei newspaper's report on Saturday further underscored expectations for the policy shift, especially following major pay raises by major Japanese companies – the largest in 33 years.

These pay hikes have notably raised the likelihood that the BOJ will terminate its eight-year-long negative interest rate policy at the conclusion of its two-day policy meeting on Tuesday.

If conditions permit, the BOJ will establish the overnight call rate as its new target, guiding it within a range of 0-0.1 per cent by offering 0.1 per cent interest on excess reserves held by financial institutions, as reported by Reuters.

Exiting its negative rate policy will also entail the BOJ abandoning its bond yield control and discontinuing purchases of risky assets such as exchange-traded funds.

Leading the surge in the Nikkei were companies like Fast Retailing and Tokyo Electron, signaling positive market sentiment amidst expectations of continued momentum, according to Hitoshi Asaoka, senior strategist at Asset Management One.

While the US Federal Reserve is expected to maintain rates at its upcoming meeting, market focus remains on any potential shifts in the Fed's policy outlook, particularly in response to persistent inflationary pressures.

(With Reuters Inputs)