Nikkei declines as investors take profits ahead of central bank meetings

Japan's Nikkei share average fell on Tuesday as investors took profits following sharp gains in the previous session, with caution prevailing ahead of key central bank meetings in Japan and the United States.

The Nikkei dropped 0.96 per cent to 38,101.24 by the midday break, after rising 2 per cent in the previous session from a three-month low hit last week. The broader Topix index also declined, slipping 0.87 per cent to 2,735.7.

"The Nikkei rose too much yesterday, and the market did not find any reason to justify further gains today," said Jun Morita, general manager of the research department at Chibagin Asset Management. "After all, the index returned to where it was before it started a rally to hit a record high earlier this month."

Market participants are not expecting a rate cut from the US Federal Reserve this week, but a 25 basis-point reduction is fully priced in for September. The Bank of Japan is anticipated to announce quantitative tightening plans at this week's meeting, with market opinions divided on the likelihood of a rate hike.

Uniqlo-owner Fast Retailing fell 2.19 per cent, contributing significantly to the Nikkei's decline. Technology investor SoftBank Group lost 2.06 per cent, and chip-equipment maker Tokyo Electron slipped 1.64 per cent.

Conversely, Fanuc, a robot maker, saw a 3.26 per cent rise, becoming the biggest support for the Nikkei after raising its annual operating profit forecast by 0.8 per cent. Pasona Group surged 13.4 per cent following a regulatory filing that revealed activist investor Oasis Management owns a 5.02 per cent stake in the staffing and outsourcing company.

Out of the 225 components of the Nikkei, 46 stocks rose, 175 fell, and three remained flat.

(With Reuters inputs)