Japanese shares rebound modestly with Fed verdict in focus

Japan's Nikkei share average rebounded on Wednesday, helped by a softer yen and a recovery in chip-related stocks, although moves were subdued ahead of the Federal Reserve's long-awaited policy decision.

The Nikkei closed 0.5 per cent higher at 36,380.17, after a two-session slide on a stronger yen, while the broader Topix rose 0.4 per cent to 2,565.37.

In a boost to exporters, the yen began the session near 142 per dollar after it strengthened to below 140 in a holiday-thinned Asia session on Monday.

A softer yen helps exporters as it increases the value of overseas profits in yen terms when firms repatriate them to Japan.

Automakers, in particular, stood out on Wednesday after investors picked up big names knocked down by the yen's recent gains. Toyota Motor climbed about 3.3 per cent, Mazda Motor rose 3.6 per cent and Honda Motor gained 2.5 per cent.

Among the Tokyo Stock Exchange's 33 industry groupings, transport equipment, which includes automakers, rose 2.4 per cent to become the top performer.

Technology stocks also saw some dip-buying, lifting chip-testing equipment maker Advantest up 1.8 per cent.

The market however cut its gains as the yen recouped part of its overnight drop, while investors waited for the Fed's rate decision due later in the day.

Markets have gone from expecting a moderate quarter-percentage-point cut to pricing in a 63 per cent chance the Fed will reduce rates by 50 basis points, up from 14 per cent a week earlier, according to the CME's FedWatch Tool.

It's expected that the yen might weaken against the dollar if the reduction is smaller than the super-sized cut currently priced in, said Kazuo Kamitani, an equities strategist at Nomura Securities.

"The market is currently cautious considering that (the foreign exchange rate) might become a bit turbulent."

Among other heavyweights, Uniqlo parent firm Fast Retailing gained 2.4 per cent to give the Nikkei its biggest lift. AI-focused startup investor SoftBank Group finished up 0.3 per cent.