Japan stocks retreat from 33-year peak ahead of Fed policy decision

TOKYO, Set 20 – Japan’s Topix index slipped further on Wednesday from a 33-year peak scaled last week, with investor mood turning cautious ahead of a raft of key central bank policy decisions, including from the Bank of Japan (BOJ) and the U.S. Federal Reserve.

Resource stocks led declines after crude oil prices eased from 10-month peaks, while shippers and other stocks with higher dividends continued to outperform in the run-up to a BOJ meeting that could result in a surprise shift in loose policy.

The Topix slid 1% to 2,406 at close, declining from Friday’s top at 2,438.02, a level last seen in early 1990.

The Nikkei lost 0.66% to 33,023.78. It touched 33,634.31 on Friday for the first time since July 3.

Traders are all but certain the Fed will keep rates on hold as the meeting concludes later in the day, putting the focus on the U.S. central bank’s forward guidance. Futures markets currently price 40% odds of a further quarter-point hike this year, according to the CME FedWatch tool.

The BOJ will announce its policy decision on Friday after the conclusion of a two-day policy meeting.

While the Nikkei is likely to trade in a fairly narrow range ahead of the Fed decision, investors will be keeping a careful eye on the U.S. yields, according to Nomura Securities strategist Kazuo Kamitani.

A rise in yields could weigh on the Nikkei, although the 33,000-line should hold, he said.

In the meantime, investors will continue to favour stocks with high dividends, which are due to be paid at the end of this month, Kamitani added.

Shipping, which has been a top performer among the Tokyo Stock Exchange’s 33 industry groups, declined 0.3% after five days of gains.

Refiners dropped 3.3% and miners tumbled 3.8%.

“A peak in crude oil prices is probably close,” Kamitani said.

Among individual shares, materials maker Teijin and drugmaker Sumitomo Pharma lost 3.8% and 4.2%, respectively, to make it to the bottom of the Nikkei leaderboard.

(Reporting by Kevin Buckland; Editing by Sherry Jacob-Phillips and Janane Venkatraman)