The stock market's rise over the year ranks it among the world's best-performing major indexes.
For the day, it closed up 0.3% to 19,033.71, taking the strong lead from Wall Street overnight.
The index's performance over the year was driven by the economic recovery in the US, a weaker yen, along with the Bank of Japan's asset purchases.
Japanese markets will be closed on Thursday for a public holiday.
The rest of Asia also headed mostly higher, following US shares where rising oil prices led to a rebound in the market.
The S&P 500 and the Dow Jones indexes both gained over 1% as oil prices rallied overnight to climb by around 3% after Monday's declines.
Encouraging economic data such as housing and consumer confidence in the US also boosted investor sentiment.
In Australia, the benchmark S&P/ASX 200 index closed up 1% to 5,319.9, hitting a two-month high and leading the gains in the region.
The index also finished higher for the ninth consecutive session - marking its longest winning streak since January.
Chinese shares traded mixed. The Shanghai Composite closed up 0.3% at 3,572.88 points. However, Hong Kong's Hang Seng index ended down 0.5% at 21,882.15 points.
Investors are looking ahead to manufacturing data due on Friday for clues on the extent of the slowdown in the world's second largest economy.
South Korea's Kospi index closed down 0.3% to 1,961.31 on its final day of trading in 2015, but gained 2.4% for the year.
Investors' confidence was dented by data that showed industrial production saw its worst decline in 10 months in November on slumping global demand for exports.
Factory output fell a seasonally adjusted 2.1% from a month earlier, according to Statistics Korea.
Japanese shares ended the year on high note, with the benchmark Nikkei 225 index climbing more than 9% in 2015.