Markets in Asia bounced back on Wednesday amid hopes that the U.S. Congress will salvage the $700 billion US financial bailout package that was voted down earlier in the week.

Japan's Nikkei 225 index gained 108.40 points, or 0.96 per cent, to close at 11,368.26.

On Tuesday, it plunged 4.1 per cent to its lowest in more than three years after the U.S. House of Representatives rejected the bank rescue package in a narrow vote on Monday.

The U.S. Senate is expected to vote on Wednesday night on a revised bailout plan. The House of Representatives will then look at the revised deal later in the week.

Taiwan's stock market recovered from its drop to close up 0.8 per cent. South Korea's Kospi lost its earlier gains and fell 0.6 percent to 1,439.67.

Australian stocks also rallied, with the benchmark S&P/ASX-200 index jumping 4.2 per cent after sinking 4.3 per cent on Tuesday. Markets in Taiwan and India also gained.

The U.S. dollar's recent recovery, which tends to be a boost for Japanese shares, also encouraged some buying during Wednesday's Tokyo session, according to the Associated Press.

The dollar recovered to 105.97 yen in the afternoon up from about 104 yen earlier in the week.

Investors appeared to be reacting to the rebound on Wall Street where the Dow Jones industrial average surged nearly 500 points on Tuesday, reported the Associated Press.

"The market is already expecting the plan to pass. The question now is what's next," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities Co. in Tokyo.

Investors remain concerned about the declining U.S. housing prices and the overall economy, said Fujito, because the country is a vital export market for Asia.

Major Japanese companies, including makers of electronics and automobiles, are counting on solid exports to the U.S. to keep profits up, especially as they look ahead to the Christmas season, Fujito said.

Japanese banking shares like Mizuho Financial Group and Mitsubishi UFJ Financial Group were among the gainers on Wednesday. Exporters like Sony Corp. and Toyota Motor Corp. also rose.

Markets in Hong Kong, mainland China, Singapore, Indonesia, Malaysia and the Philippines were closed on Wednesday for regional holidays.

Though markets are reacting to the pending vote, investors are still uncertain about the package, said Anthony Huang, spokesman for Taiwan Securities.

Even if the legislation does pass there are still questions about the future of Asian economies, Huang said.

"Taiwan can't be doing well if consumers in U.S. and Europe are not spending enough." Huang said.

Some analysts have warned that possible compromises in the legislation may include a reworked emergency and tax-cut package, raising questions about how effective it may be when implemented.

With files from the Associated Press