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Other Asian stock markets were also higher, but news of another fire at the earthquake-damaged Fukushima Daiichi nuclear plant north of Tokyo and fears of more radiation leaks kept investors on edge.

"The market doesn't care about any fundamentals today. All eyes are on the nuclear plant and the Nikkei will move according to the news about the plant," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Asian markets also received a filip from U.S. stocks, which closed down but off lows as a more upbeat view from the Federal Reserve helped limit Japan-related losses. The Fed stuck with its ultra-loose monetary policy but said the economy was gaining traction.

Tokyo's gains were led by short-covering by hedge funds, analysts said, adding that the market was still extremely volatile.

"The rebound is pretty strong as investors realized they may have panicked a bit too much yesterday," said Fujio Ando, senior managing director at Chibagin Asset Management.

"But it's mostly short covering by both domestic and foreign players, and not honest, active buying, because nuclear worries are still strong."

Japan's Nikkei average .N225 surged over 6 percent at one point, clawing back about a third of its losses since a massive earthquake and tsunami hit the country on Friday, but then slipped back below the psychologically important 9,000 point level.

By midday, it was at 8,981 points, up 4.37 percent. However, it was still down 12 percent from Friday's close. Osaka Nikkei futures were up 2.08 percent at 8.820.

Australian shares .AXJO were up around 0.5 percent, led by a relief rally in uranium producers Paladin (PDN.AX) and Energy Resources of Australia (ERA.AX), which had sunk on fears that many countries would scale back or suspend their nuclear power programs in light of Japan's woes.

Stock markets in South Korea .KS11, Taiwan, and Hong Kong .HSI were also up and the MSCI Asia-ex-Japan index .MIAPJ0000PUS was up 0.67 percent.

The yen slid to around 80.8 to the dollar, on fears of intervention by the Bank of Japan after the currency surged toward its 1995 historic high of 79.75. Speculators were betting that the Japanese government and companies would liquidate overseas assets to pay for reconstruction.

The euro was subdued after Moody's downgraded Portugal's ratings by two notches and was last down about 0.2 percent on the dollar for the day.

"Event risk is going to play a huge role in deciding what the yen does this week," UBS currency strategist Gareth Berry told Reuters Insider.

"The key thing to watch really is what happens to the Nikkei index in Japan and if equities rebound from their lows. That will help support risk appetite and that will lead to a slightly weaker yen.