Tokyo stocks closed higher on Tuesday following overnight global rallies fuelled by the announcement of a second promising coronavirus vaccine candidate as major cities face new waves of infections.

The benchmark Nikkei 225 index added 0.42 per cent, or 107.69 points, to 26,014.62, while the broader Topix index gained 0.16 per cent, or 2.85 points, to 1,734.66.

"The Tokyo market took over buying sentiment from overseas," said Yoshihiro Okumura, general manager at Chibagin Asset Management.

"Investors simply reacted to positive news about the vaccine," Okumura said.

On Monday, stock markets climbed worldwide after US biotech firm Moderna announced its experimental vaccine against Covid-19 was almost 95 per cent effective — marking a second major breakthrough in the quest to end the pandemic following a similar announcement by Pfizer last week.

The news brightened investor spirits, putting the Nikkei index around its highest point in nearly three decades.

Technical charts continue to show the strength of the market, but some signs of possible overheating have also been seen following recent rallies, brokers said.

"In the short run, it is conceivable that we could see an adjustment at any time," Okasan Online Securities said in a note.

The dollar stood at 104.50 yen in Asia afternoon trade, edging down from 104.56 yen in New York on Monday.

Among major shares, Japan's leading drugmaker Takeda Pharmaceutical rose 1.12 per cent to 3,605 yen. The company has agreed to distribute 50 million doses of the Moderna vaccine in Japan, if it is approved.

NTT lost 0.58 per cent to 2,468 yen after the telecom giant said it successfully completed its $40-billion takeover of its mobile unit.

Nissan Motor gained 1.32 per cent to 475.2 yen, following a Monday media report that said the firm was reviewing its relationship with partner Mitsubishi Motors. Nissan and Mitsubishi denied the report.

Japan Airlines jumped 3.71 per cent to 2,010 yen, while rival ANA Holdings soared 4.16 per cent to 2,651.5 yen, after a report that Japan's government could cut taxes on jet fuel to help bolster the battered aviation sector.