Ahead of the Bank of Japan policy meeting on Thursday, the head of the opposition Democratic Party for the People said that the central bank should avoid making big changes in its ultra-loose monetary policy.
The Nikkei average rose 0.77 percent to 38,903.68 to extend Monday's rally amid reports that Prime Minister Shigeru Ishiba's ruling party was reportedly locked in talks to form new alliances.
The broader Topix index settled 0.91 percent higher at 2,682.02. Shares of Nippon Paint Holdings jumped 14.3 percent after the company agreed to buy U.S. chemical firm AOC.
The unemployment rate in Japan came in at a seasonally adjusted 2.4 percent in September, the Ministry of Internal Affairs and Communications said on Tuesday.
The jobs-to-applicant ratio was 1.24 - beating forecasts for 1.23, which again would have been unchanged from the previous month.
The participation rate was 63.5 percent, shy of forecasts for 63.6 percent, which would have been steady from a month prior.
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