While overall sentiment improved, investors took profits later in some of the stocks which had risen in early trade, as they remained cautious ahead of a U.S. Federal Reserve monetary policy decision later in the day.

The Nikkei share average ended 0.5 percent higher at 20,050.16, rising for the first time in four days.

The Nikkei Jasdaq rose 0.2 percent, climbing for a sixth day, as retail investors continued to buy shares in small to mid-sized companies.

Japanese construction equipment makers attracted buying, with Komatsu Ltd surging 2.7 percent and Hitachi Construction Machinery Co soaring 2.9 percent after Caterpillar Inc, the world's largest construction and mining equipment maker, beat expectations and raised its full-year forecast for the second time, citing global strength and particularly a rebound in China.

Japan Inc has kicked off April-June earnings season, and investors have taken heart from brisk results from frontrunners such as Yaskawa Electric Corp, which gave the market an upbeat surprise last week.

On Wednesday, the world's largest silicon wafer maker Shin-Etsu Chemical soared as much as 3.4 percent to a record high, after it said it expects a 12.3 percent rise in its full-year operating profit for the fiscal year through March.

But investors wasted no time in taking profits on the stock, sending its shares down 1.7 percent.

"We're still in the second quarter, and the company already shows that it's on track to achieve its full-year goal and that is raising expectations for certain sectors as well as the overall mood," said Takuya Takahashi, an equity strategist at Daiwa Securities.

With the market focused on the Fed decision, gains were capped in the afternoon.

The Fed is widely expected to keep interest rates unchanged at its two-day meeting. Investors will be watching for any clues on whether it may raise rates again this year, and when it will begin paring its massive bond portfolio, which could impact the dollar/yen and exporters' profits.

The broader Topix gained 0.2 percent to 1,620.88. (Reporting by Ayai Tomisawa; Editing by Kim Coghill)