Japanese shares rose on Wednesday, buoyed by President Donald Trump's easing of tensions over Federal Reserve Chair Jerome Powell and optimism around potential US-China trade negotiations.

The Nikkei 225 gained 1.89%, or 648.03 points, closing at 34,868.63.

Trump, backing away from his earlier threats to oust Powell, said Tuesday he had no intention of dismissing the Fed chair, instead calling for more aggressive rate cuts.

He also voiced hope for a US-China trade deal, suggesting that tariffs could be "substantially" reduced, which boosted investor sentiment.

In local economic news, Japan's private sector showed signs of growth in April, driven by stronger services and a stabilizing manufacturing sector.

Flash PMI data revealed the Composite Output Index rose to 51.1 from 48.9, signaling expansion. Services posted the strongest growth in three months, while manufacturing remained subdued but steady.

Meanwhile, the International Monetary Fund lowered its Japan GDP growth forecast for 2025 and 2026 to 0.6%, citing concerns over US tariffs.

On the corporate front, Toyota Motor (TYO:7203) and Daimler Truck are nearing a deal to merge their commercial vehicle subsidiaries, combining Toyota's Hino Motors with Daimler's Mitsubishi Fuso.

The merger, which focuses on hydrogen fuel innovation, comes after two years of talks despite hurdles like antitrust issues and a scandal at Hino. Shares of Toyota jumped 5%.

Elsewhere, Quick Co. (TYO:4318) climbed over 1% after the company raised its fiscal 2025 outlook, now expecting net sales of 32.5 billion yen, up from 31.7 billion yen, and a 2.1% rise in attributable profit to 3.58 billion yen.

Meanwhile, Tokyu Construction (TYO:1720) jumped 4.5% after it boosted its fiscal 2025 profit forecast by 32% to 6.6 billion yen, despite a slight dip in net sales. The company maintained its dividend forecast at 38 yen per share.