Nintendo became Japan’s second-biggest company by market capitalisation behind Toyota on Tuesday, underlining how the success of the Wii games console has transformed the fortunes of the Kyoto-based company.

Shares in Nintendo closed up 3.1 per cent to Y59,200 bringing its market value to Y8,390bn ($73.2bn), surpassing Canon’s market cap of Y8,120bn. But the gap between Nintendo and Toyota remains substantial. Toyota’s market capitalisation is Y24,000bn.

The Japanese games maker’s shares have more than quadrupled over the past two years as the Wii console has trounced Sony’s PlayStation 3 and Microsoft’s Xbox 360 to become the best-selling next-generation games machine in the world.

The surge in Ninteno’s market cap comes as Microsoft eagerly awaits the results of the launch of Halo 3, the latest version of its blockbuster video game. The game, which is expected to boost sales of the Xbox 360 console, went on sale yesterday.

Microsoft last month cut the price of its most popular Xbox 360 model by $50, following a similar move by Sony, which had cut the price of its PS3 console in the US to boost sales.

“Compared with two to three years ago, Nintendo is a completely different animal,” said Hiroshi Kamide, analyst at KBC securities.

“It has kept beating market expectations with its results and new products like the Wii Balance Board will keep the console fresh as it heads into the holiday season.”

Many analysts feel Nintendo is still not overvalued, in spite of its high share price. The company is known to be conservative in its profit forecasts, and foreign exchange rates in the US and Europe are expected to give its bottom line a boost.

Nintendo is back at the top of the console market, a position it last held 17 years ago with the Nintendo and Super Nintendo consoles. Observers attribute Nintendo’s success to Satoru Iwata, the company’s president, who joined the games maker in 2002.

Mr Iwata is credited with forcing Nintendo to revamp its strategy by not trying to compete directly with Sony or Microsoft.

Instead, the games maker has created a market in gaming by trying to woo adults as well as children.

Nintendo’s reclaimed supremacy was underlined in July when it leapfrogged Sony, the consumer electronics group, in terms of market capitalisation for the first time.

Sony disappointed gamers last week when it said the launch of Home, its virtual reality world, would be delayed until the spring.

The Wii costs $249 compared with $300-$400 for the Xbox 360 and $599 for the PS3. Anlaysts say prices of all three consoles are expected to drop by the crucial holiday shopping season.