Japan's Nikkei slips as investors await Fed decision

Nikkei share average: The Nikkei share average of Japan saw a decline in the morning session on Wednesday, with investors maintaining a cautious stance as they awaited the US Federal Reserve's monetary policy decision, marking the first day of the month.

The Nikkei dropped by 0.56 per cent to 38,189.54 during the morning break, while the broader Topix experienced a decline of 0.64 per cent to 2725.70.

The Federal Reserve Open Market Committee (FOMC) is widely anticipated to maintain interest rates at their current level at the conclusion of its two-day meeting on Wednesday, amidst persisting US inflation concerns.

Overnight, US stocks closed lower as markets deliberated over economic data indicating escalating labor costs and declining consumer confidence.

While expectations for a Fed rate cut this year have been scaled back by the markets, investor caution persists regarding the tone Federal Reserve Chair Jerome Powell might adopt during his press conference.

The substantial policy rate differential between Japan and the US continues to exert pressure on the yen, prompting queries about the potential adverse effects of excessive currency depreciation on the domestic economy and the Bank of Japan's rate outlook.

Concerns regarding currency intervention, along with suspicions that Tokyo may have already intervened, are also keeping investors on alert.

"In that regard, I don't anticipate significant stock purchases while the yen remains weak," stated Hiroshi Namioka, chief strategist at T&D Asset Management.

Of the Nikkei's 225 constituents, only 44 registered gains compared to 181 decliners.

Individual stock movements were influenced by earnings reports and company-specific developments.

Shares of chip-related equipment maker Lasertec surged by 16.1 per cent following the publication of earnings that surpassed estimates post-market hours on Tuesday.

West Japan Railway Co witnessed a 7.7 per cent increase on Wednesday subsequent to announcing a buyback of 4.1 per cent of its own shares.

Conversely, JGC Holdings Corp experienced the most significant decline, dropping by 11.2 per cent due to a disappointing revenue forecast.

(With Reuters inputs.)