The Nikkei <.N225> ended up 1.7 percent at 16,664.82. It had jumped as much as 2.7 percent to 16,821.43 in early afternoon trade.

Japanese Prime Minister Shinzo Abe said on Wednesday the government would compile a stimulus package of more than $265 billion to reflate the flagging economy, according to media reports, although it unclear how much will be spent to directly boost growth.

The package, which exceeds initial estimates of around 20 trillion yen, will include 13 trillion yen in "fiscal measures," Jiji reported.

The broader Topix <.TOPX> gained 1.1 percent to 1,321.67 and the JPX-Nikkei Index 400 <.JPXNK400> added 1.2 percent to 11,887.23.

(Reporting by Ayai Tomisawa and Lisa Twaronite; Editing by Sam Holmes)