Japanese shares ended higher on Tuesday as bank stocks rose after worries over the global financial system eased, following a deal for the assets of failed U.S. lender Silicon Valley Bank by peer First Citizens BancShares.

The Nikkei edged up 0.15% to close at 27,518.25, while the broader Topix ended 0.25% higher at 1,966.67.

"Bank stocks lifted the market today, but investors sold shares that had outperformed in previous sessions, which limited overall gains," said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities.

"Investors still remain concerned about a potential banking crisis and uncertainties about the economy in the U.S. and Europe."

The bank index rose 1.96% to become the top performer in the Tokyo Stock Exchange's 33 industry sub-indexes.

Resona Holdings jumped 4.08% to become the top gainer on the Nikkei.

Mizuho Financial was up 2.47%, Sumitomo Financial Group advanced 2.67% and Mitsubishi UFJ Financial Group gained 1.7%.

Overnight, First Citizens BancShares said it would take on the deposits and loans of Silicon Valley Bank, offering a respite to markets after weeks of turmoil.

Oil explorers rose 1.75%.

Heavyweight chip-related shares weighed on the Nikkei, with Tokyo Electron losing 0.33%, Advantest slipping 0.75% and Shin-Etsu Chemical falling 1.19%.

The railway sector lost 0.43% after gaining 1.8% in the previous session, with the Central Japan Railway, which runs the bullet train between Tokyo and Osaka, losing 1.38%.

(Reporting by Junko Fujita; Editing by Sonia Cheema)