TOKYO: Tokyo stocks closed lower on Wednesday after a session of risk-averse trade ahead of a key decision from the US Federal Reserve.

The benchmark Nikkei 225 fell 0.44 percent, or 120.01 points, to end at 27,011.33, while the broader Topix index slid 0.25 percent, or 4.77 points, to 1,891.85.

The dollar fetched 113.88 yen in Asian trade, nearly unchanged from 113.87 yen in New York late Tuesday.

"Investors were waiting on tenterhooks for the Fed to release the results of its policy meeting" later in the day, Okasan Online Securities said.

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Concern over the tightening of US monetary policy led market players to take a risk-averse stance in Tokyo trade, the brokerage added.

After spending much of last year playing down the spike in prices, the Fed has in recent months taken a sharp hawkish turn on monetary policy as officials look to bring inflation -- which is at a four-decade high -- under control.

Among major shares in Tokyo, market heavyweight Softbank Group added 1.71 percent to 5,156 yen.

The gains came despite reports that US group Nvidia is poised to give up on what would have been the biggest semiconductor deal in history -- purchasing UK chip designer Arm from SoftBank Group -- after failing to make progress on approval.

Toyota fell 0.67 percent to 2,221.5 yen.

The world's top-selling automaker is eyeing a record production target of 11 million cars for fiscal 2022, the Nikkei business daily reported, despite uncertainty over the chip shortage and Covid surges.

Sony climbed 1.12 percent to 12,620 yen. Uniqlo operator Fast Retailing was down 0.55 percent to 67,620 yen.