Japanese shares rose on Thursday following remarks from Bank of Japan (BOJ) board member Naoki Tamura, who said short-term interest rates must reach at least 1% by the second half of fiscal 2025 to tackle inflation risks.

The Nikkei 225 added 0.66%, or 256.99 points, to close at 39,088.47.

Tamura's comments on raising rates to curb inflation pushed the yen higher, with the dollar briefly dipping to a two-month low of 151.81 yen.

The board member warned that maintaining rates below neutral would worsen inflationary pressures, as companies continue to pass on rising wages and material costs.

Japan's two-year government bond yield surged to 0.765%, its highest since 2008.

On the corporate front, Hyundai Motor (KRX:005380) and Toyota Motor (TYO:7203) are exploring EV component collaboration, Pulse News reported.

Toyota executives visited Hyundai's R&D sites, including Hyundai Mobis (KRX:012330), on Jan. 17. Hyundai Mobis and Denso (TYO:6902) may lead efforts in silicon carbide inverters and EV semiconductors.

Mizuho Leasing (TYO:8425) posted a 29.8% rise in nine-month attributable profit to 35.8 billion yen. EPS climbed to 132.88 yen, while revenue fell 8.3% to 460.9 billion yen. It raised its full-year forecast, citing growth in real estate, energy, and overseas businesses.

Yageo Electronics Japan, a unit of Yageo (TPE:2327), will acquire 15.3 million Shibaura Electronics (TYO:6957) shares at 4,300 yen each for up to 65.56 billion yen. The deal, closing in Q3, aims to expand Yageo's sensor business and enhance Shibaura's R&D and manufacturing.