TOKYO: Japan’s Nikkei share average fell in the morning session on Wednesday, with traders maintaining a cautious stance on the first day of the month ahead of the US Federal Reserve’s monetary policy decision.

The Nikkei was down 0.56% at 38,189.54 by the morning break. The broader Topix declined 0.64% to 2725.70.

The Federal Reserve Open Market Committee (FOMC) is widely expected to leave interest rates unchanged at the end of its two-day meeting on Wednesday, as US inflation proves sticky.

US stocks ended lower overnight as markets weighed economic data showing rising labor costs and deteriorating consumer confidence. While markets have already pared back expectations of a Fed rate cut this year, investors remain wary of how hawkish a message Fed Chair Jerome Powell will send at his press conference.

Large policy rate gap between Japan and the US continues to put pressure on the yen, raising questions on how excessive currency weakness will impact the local economy and the Bank of Japan’s rate outlook.

The risk of currency intervention, and suspicion that Tokyo may already have intervened, was also keeping investors on alert.

“In that sense, I don’t think people are going to be very keen to buy stocks while the yen is this weak,” said Hiroshi Namioka, chief strategist at T&D Asset Management.

Japan’s Nikkei slips from record peak as chip-related shares dip

Of the Nikkei’s 225 constituents, only 44 advanced versus 181 decliners. Among individual stocks, earning results and share-specific news drew out some stark winners and losers.

Shares of chip-related equipment maker Lasertec jumped 16.1% after the company published an estimate-beating earnings post market hours on Tuesday.

West Japan Railway Co gained 7.7% on Wednesday following its decision to buy back 4.1% of its own shares.

JGC Holdings Corp was the largest decliner, falling 11.2% on disappointing revenue forecast.