LONDON (Dow Jones) - Asian stocks closed higher Wednesday, with Tokyo's Nikkei rallying sharply on hopes for the domestic economy.

Sentiment also was bolstered by gains on Wall Street after the Federal Reserve raised interest rates, in line with expectations.

Japan's Nikkei 225 added 1.7% to end at 12,098 after Japan's economic policy makers said Tuesday that the country's recovery is gaining momentum. The broader Topix index of all first-section issues rose 1.8% to 1,227.85.

Elsewhere in the region, Hong Kong's Hang Seng index closed up about 2% at 15, 346. In Sydney, the All Ordinaries index roses 0.2% to 4,384. Seoul's Kospi index finished up 0.5% to 1,104. Singapore's Straits Times index closed fell 0.4% at 2,338.

In Tokyo, the leaders included export-related stocks benefiting from optimism for the Japanese economy as well as that of the U.S., Japan's largest trade partner.

Shares of Matsushita Electric Industrial Co. (MC) added 0.5%. Mitsubishi Corp. (MTSBF) closed up 1.1%. Nippon Steel Corp. (NISTF) gained1%. Nissan Motor Corp. (NSANY) stock was up 1.1% and shares of Toyota Motor Corp. (TM) closed up 2.6%. Shares of Sony Corp. (SNE) finished 1.9% higher.

In Hong Kong, China Mobile (Hong Kong) Ltd., the listed unit of China's largest mobile network, said first-half net profit rose 28% on continued growth in its subscriber base.

And Lenovo Group Ltd., China's largest personal-computer maker by shipments, said fiscal first-quarter net profit rose 6% from the year-earlier period to HK$ 357 million. Net profit for the three months ended June last year totaled HK$337 million. The company's revenue surged more than threefold to HK$19.61 billion from HK$5.88 billion.

Lenovo's first-quarter results included two months of PC sales made by International Business Machines' (IBM) former PC division, which Lenovo took over late April.

U.S. stocks closed sharply higher Tuesday, after the Federal Reserve put in place a widely expected quarter-percentage-point hike in the federal funds rate and signaled more increases are in store. The Dow Jones Industrial Average (DJI) closed up 78.74 points at 10,615, and the Nasdaq Composite Index (RIXF) ended 9.8 points higher at 2,174. The S & P 500 Index (SPX) wrapped up 8.25 points at 1, 231.

(END) Dow Jones Newswires

08-10-05 0539ET Copyright (c) 2005 Dow Jones & Company, Inc. Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.