On Tuesday, Japan's Nikkei average index advanced, supported by bargain-hunting activity and positive sentiment from the tech-heavy South Korean market.

The benchmark Nikkei 225 Index gained 0.74% to close at 67,743.50 points, reversing an earlier decline of as much as 1.45%. The broader Topix index rose 0.79% to finish at 4,038.98 points.

Japanese stocks opened lower broadly, influenced by overnight losses on Wall Street, after renewed tensions in the Middle East triggered a sharp spike in oil prices.

The Nikkei turned positive in the afternoon session as South Korea's KOSPI index recovered, reflecting a recent strengthening in the correlation between the two markets. "We are seeing some signs of bargain hunting," said Maki Sawada, a stock strategist at Nomura Securities.

Central bank policy remained in focus, reinforcing signals that major economies will further tighten monetary policy, after the chief economist of New Zealand's central bank warned that rising oil prices could lead to more persistent inflation.

Mitsubishi UFJ Financial Group Inc, Japan's largest banking group, climbed 1.67% to a record high, making it the country's most valuable company by market capitalization.

"With interest rates rising, the market expects net interest margins at banks to improve to some extent, which is driving the banking sector higher," said Sawada of Nomura Securities.

Overall market performance was extremely positive, with 176 stocks rising on the Nikkei, only 47 falling, and two closing unchanged.

The biggest gainers were Shiseido Co Ltd, up 5.11%, followed by Kawasaki Kisen Kaisha Ltd, up 4.73%, and Tokuyama Corp, up 4.17%. The largest decliners were Yaskawa Electric Corp, down 8.98%, followed by Panasonic Holdings Corp, down 5.57%, and Toho Holdings Co Ltd, down 4.64%.

The Japanese government will include a note in its annual economic policy blueprint referencing a legal clause stipulating that central bank independence must be defended when formulating monetary policy.

Reports indicate the final version of the blueprint will call for the Bank of Japan to guide policy appropriately "to achieve price stability," explicitly stating the government has no intention of interfering in monetary policy.

A prior draft of the economic blueprint had led markets to believe the government, led by Sanae Takaichi, would pressure the central bank to delay interest rate hikes, triggering a sell-off in the yen and bonds. Subsequently, an official in charge of the blueprint had to acknowledge the government would adjust the wording to calm market anxieties. The final version of the blueprint, the first compiled under the Takaichi administration, is expected to receive cabinet approval next week.