Tokyo shares close down on US rate hike caution

Tokyo stocks fell Wednesday, extending losses on Wall Street ahead of a Federal Reserve meeting widely expected to produce a third successive three-quarter-point interest rate hike.

The benchmark Nikkei 225 index fell 1.36 per cent, or 375.29 points, at 27,313.13, while the broader Topix index shed 1.36 per cent, or 26.47 points, to 1,920.80.

The market faced a broad selloff as investors grew more cautious about the risk that the US central bank will reiterate hawkish comments about raising rates to battle inflation.

Fed officials will conclude their two-day policy meeting later Wednesday.

Many investors expect a hike of 75 basis points, but some observers are speculating about a possible one-percentage-point move.

The real interest rate (in the US) continued to climb ahead of (the) policy decision, Daiwa Securities said.

Exporters and foreign cyclical shares were broadly lower. Shares related to inbound tourism and reopening of the economy were also lower, the brokerage said in a commentary.

The Bank of Japan kicked off its two-day policy meeting on Wednesday, with its governor Haruhiko Kuroda slated to address the media on Thursday.

The BoJ is largely expected to maintain its super-easy monetary policy.

Economists and investors are focused on how Kuroda sees the current situation as the gap between the Fed’s rate hikes and the BoJ’s ultra-loose policy spurs the yen’s rapid depreciation against the dollar.

The forex trend has ramped up the cost of imports, such as energy, raw materials and food, for Japanese households and businesses.

The dollar stood at 143.57 yen in Asian trade, against 143.72 in New York late Tuesday.

Among major shares, exporters headed lower.

Sony Group fell 1.79 per cent to 10,170 yen, Toyota shed 2.37 per cent to 2,000 yen and Nintendo gave up earlier gains to end down 1.18 per cent at 61,100 yen.

SoftBank Group fell 1.16 per cent to 5,453 yen, though Fast Retailing, which operates the Uniqlo chain, managed to reverse earlier losses and ended up 0.13 per cent at 82,100 yen.