Japan's Nikkei falls on cautiousness ahead of Fed meeting

Nikkei share average: The Japanese stock market opened May cautiously, with the Nikkei share average closing 0.3 per cent lower at 38,274.05. This decline comes as investors adopted a wait-and-see approach before the highly anticipated Federal Reserve policy decision on Wednesday.

The broader Topix index also dipped, falling 0.5 per cent to settle at 2729.40.

Market participants anticipate the Federal Open Market Committee (FOMC) to maintain current interest rates at the conclusion of their two-day meeting. This decision comes despite stubbornly high inflation in the United States.

While initial expectations of a Fed rate cut in 2024 have diminished,  investor focus remains centered on the potential hawkish stance Fed Chair Jerome Powell might express during his press conference.

The significant interest rate disparity between Japan and the US continues to weaken the yen. This raises concerns about the potential negative impact of an excessively weak currency on the Japanese economy and consumer spending.

Adding to investor anxieties are speculations of potential currency intervention by the Japanese government. Some even suspect intervention may have already occurred.

"With the yen this weak, it's unlikely we'll see a strong appetite for buying stocks," commented Hiroshi Namioka, chief strategist at T&D Asset Management.

Among the Nikkei's 225 constituents, 151 stocks declined, while only 72 experienced gains. Major companies like Softbank Group and Uniqlo's parent firm, Fast Retailing, witnessed losses of 1.6 per cent and nearly 1 per cent, respectively.

Individual stock performance was primarily driven by company earnings reports and specific news related to each share.

Lasertec, a chip-related equipment manufacturer, surged 14.9 per cent after exceeding earning expectations in its post-market report on Tuesday. West Japan Railway enjoyed an 8.6 per cent gain on the back of their decision to repurchase 4.1 per cent of their own shares.

JGC Holdings, however, suffered the steepest decline, dropping 11.4 per cent due to a disappointing revenue forecast.

(With Reuters inputs.)