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Tokyo stocks gained ground on Tuesday following a plunge on the previous day as bargain hunters targeted the dip, pushing up the index. 

Japan's benchmark Nikkei stock index, the 225-issue Nikkei Stock Average, gained 1.93 per cent, or 732.42 points, to close at 38,651.97.

The market was also buoyed by a weakening yen, with the yen trading at around 144 per dollar, as well as gains on Wall Street, reports Xinhua news agency.

Despite the rebound, concerns over the new government's economic policies led to some profit-taking after the initial buying spree.

Shigeru Ishiba, leader of Japan's ruling Liberal Democratic Party (LDP), was officially elected the country's prime minister on Tuesday after winning a majority of votes in both houses of parliament. The market has been closely watching how his economic policies will fold out.

The broader Tokyo Stock Price Index also rose, gaining 44.84 points, or 1.69 per cent, to finish at 2,690.78.

Of the listed stocks on the top-tier Prime Market, 1,272 rose, 331 declined, and 40 remained unchanged.