Japan's Nikkei share average climbed to an eight-week high after strong Chinese factory data and rising Japanese corporate spending lifted sentiment.
But Dai-ichi Life Insurance Co Ltd tumbled on news that it is in talks to buy a US life insurance company, with investors wondering how the company would fund the acquisition.
The Nikkei was up 1.6 per cent at 14,873.01 in midmorning trade, its highest since April 7.
"Risk appetite has risen mainly on bright economic data from China, but the direction for the month will likely depend on other economic data like US jobs figures this week," said Hikaru Sato, a senior technical analyst at Daiwa Securities.
Whether the benchmark trades above its 26-week moving average of 14,900 is a key for further gains, he added.
"If the Nikkei breaches this resistance level, we can be hopeful that the Nikkei is on a rising trend," Sato said.
Chinese factory activity expanded at its fastest pace in five months in May due to rising new orders, official data showed on Sunday.
Meanwhile, Japanese firms raised spending on factories and equipment in January-March by 7.4 per cent from the same period last year, government data showed on Monday.
Exporters advanced after the yen weakened slightly versus the dollar, with Sony Corp up 2.2 per cent, Toyota Motor Corp adding 0.9 per cent and Tokyo Electron Ltd gaining 1 per cent.
Dai-ichi Life dropped 4.8 per cent and was the fourth most-traded stock by turnover. The company, Japan's second-largest private-sector life insurer by premium revenue, is in advanced talks to buy Alabama-based Protective Life, a source told Reuters.
"The acquisition itself is positive for the company in the long term, but the market is wondering how the company will finance it. Dilution fears from a possible share offering plan hit investors' sentiment," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.
The broader Topix added 1.2 per cent to 1,216.41, while the new JPX-Nikkei Index 400 advanced 1.3 per cent to 11,082.11.
Copyright: Thomson Reuters 2014