Tokyo stocks closed higher Thursday after a positive lead from Wall Street overnight, as the US Federal Reserve signaling a possible rate cut to support the US economy lifted investor sentiment.

The 225-issue Nikkei Stock Average added 128.99 points, or 0.60 percent, from Wednesday to close the day at 21,462.86.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, gained 4.63 points, or 0.30 percent, to finish at 1,559.90.

Stocks here gained traction following US shares advancing overnight after the Fed indicated that it stood poised to cut its interest rates to help prop up the economy in the face of economic headwinds, brokers here said.

The Fed said that because "uncertainties" have increased, it would "act as appropriate to sustain the expansion," local market analysts highlighted, adding that the market was relieved that the US central bank would respond to an economic slowdown.

"The market was relieved that the Fed is ready to respond flexibly to a potential economic slowdown," Maki Sawada, vice president of the investment research and investor services department at Nomura Securities Co., was quoted as saying.

Gains were capped, however, by the yen's rise against the US dollar, which impacted exporter issues reliant on a weaker yen to augment profits when repatriated.

The Bank of Japan opting to maintain its ultra-loose monetary policy at the end of its two-day policy meeting Thursday had little bearing on the market, strategists here said.

By the close of play, marine transportation, security houses, and farm and fishery-linked issues comprised those that gained the most, and issues that rose outpaced those that fell by 1,259 to 767 on the First Section, while 118 ended the day unchanged.

On the main section on Thursday, 1,017.96 million shares changed hands, dropping from Wednesday's volume of 1,167.63 million shares.

The turnover on the penultimate trading day of the week came to 1,792.7 billion yen (16.63 billion US dollars).