Japan's 225-issue Nikkei average rose to a record close on Tuesday, with chip-related stocks following their U.S. peers higher as investors awaited testimony from Federal Reserve Chair Jerome Powell for clues on the path of interest rates.

The Nikkei closed 1.96% higher at 41,580.17, after rising as much as 2.4% to a record intraday high of 41,769.35.

"The market expects Powell's comments will indicate policy easing, which lifted U.S. chip stocks overnight and the Japanese chip-makers tracked the trend," said Takehiko Masuzawa, trading head of Phillip Securities Japan.

The S&P 500 and Nasdaq notched record closing highs on Monday, with Nvidia rising 2% and Intel rallying more than 6%. The Philadelphia semiconductor index jumped 1.9%.

Powell will deliver two days of testimony before Congress, beginning later in the day with the Senate and followed by the House on Wednesday.

Traders now see a more than 75% chance of an interest rate cut of at least 25 basis points by September, up from last week's 60%, according to CME's FedWatch.

In Japan, chip-making equipment maker Tokyo Electron jumped 3.77% and chip-testing equipment maker Advantest climbed 4.14%.

Uniqlo-brand owner Fast Retailing rose 3.22%.

The Fed rate-cut expectations weighed on Japanese banks, sending the banking index 0.7% lower.

The index for value shares rose 0.52%, while the growth stock index jumped 1.46%.

The broader Topix ended 0.97% higher at 2,895.55, after hitting a record intraday peak of 2,907.21.

Investors were cautious about the possible impact of a sell-off in exchange-traded funds on Wednesday, a move to distribute payouts, which market players estimate to be worth about ¥750 billion ($4.66 billion), said Phillip Securities Japan's Masuzawa.

The Nikkei is overshooting, rising to a level that is not justified by the domestic corporate outlook, said Jun Morita, general manager of the research department at Chibagin Asset Management.