Japan's Nikkei Average soared Monday on optimism over prospects for the U.S. economy and on new stock-trading restrictions imposed by the Japanese government. the Japanese stock market made its biggest advance in a year.

Tokyo's Nikkei climbed 5.9 percent Monday to end the session at 11,450. That is its highest finish since August and its biggest percentage gain since March of 2001. The broader Topix climbed 4.7 percent to 1,079.

Investors were encouraged by upbeat U.S. economic data on consumer spending and manufacturing. Figures due in the coming days are expected to show the U.S. job market is growing and that factory orders are rising.

A recent government crackdown on short selling also helped boost stocks. Short selling involves selling borrowed equities in a bet that they can be repurchased later at a lower price. James Fiorillo, a stock analyst with investment bank ING Barings in Tokyo, says that Monday's rally started with institutional investors, such as insurance companies, buying stocks to cover their short positions. "As that happens and the market rises, then you get ordinary investors jumping in and they see the market rising and they are nervous they may be underweight. Then this whole thing goes from a vicious cycle to a virtuous circle," Mr. Fiorillo said.

Japanese technology shares rallied strongly. Sony, a bellwether stock, jumped more than four percent and NEC rose over three percent. The collapse of construction company Sato Kogyo also helped the market, especially bank shares. It filed for bankruptcy Sunday, and many market-watchers say the demise of this and other unprofitable companies will eventually help Japanese banks rid their books of bad debts. Elsewhere in Asia, stocks also ended with strong gains Monday. Taipei's Weighted Index rose three-point-four percent while Seoul shares climbed 1.7 percent. Export stocks, including technology companies, led both markets higher.