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Tokyo stocks sink as investors cautiously await Fed meeting outcome

This file photo shows the Tokyo Stock Exchange. (Mainichi)

TOKYO (Kyodo) -- Tokyo stocks fell Wednesday as caution prevailed before the outcome of the U.S. Federal Reserve's policy meeting, but the decline was limited with temporary relief provided by Chinese property developer Evergrande Group saying it will pay some bond interest.

    The 225-issue Nikkei Stock Average ended down 200.31 points, or 0.67 percent, from Tuesday at 29,639.40, the lowest closing since Sept. 3. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 21.00 points, or 1.02 percent, lower at 2,043.55.

    Decliners were led by wholesale trade, food and machinery issues.

    The U.S. dollar edged up to the mid-109 yen range in Tokyo after the main unit of the Chinese real estate giant said it will make a coupon payment on bonds due Thursday, easing fears to some extent that the firm would soon go into default.

    At 5 p.m., the dollar fetched 109.44-45 yen compared with 109.17-27 yen in New York and 109.63-65 yen in Tokyo at 5 p.m. Tuesday.

    The euro was quoted at $1.1729-1730 and 128.36-40 yen against $1.1720-1730 and 128.03-13 yen in New York and $1.1726-1727 and 128.55-59 yen in Tokyo late Tuesday afternoon.

    The 10-year Japanese government bond yield fell 0.015 percentage point from Friday's close to 0.030 percent. The bellwether Japanese bond was untraded Tuesday and the Japanese financial markets were closed Monday.

    The news surrounding Evergrande briefly lifted the Nikkei index above the previous day's closing level, but the benchmark spent most of the day in negative territory, with the outcome of the Fed policy meeting due later in the day, brokers said.

    "Investors initially reacted positively to the (Evergrande-related) headline, but worries remain about the company," as it is unclear whether Evergrande could continue to make interest payments on other bonds after Thursday, said Koichi Fujishiro, a senior economist at Dai-ichi Life Research Institute.

    "A cautious mood also prevailed as investors focused on the Fed meeting," during which policymakers are expected to provide the timeline for stimulus tapering and interest rate hikes over the next three years as inflation accelerates, Fujishiro added.

    On Wednesday, the U.S. central bank is expected to reveal its interest rate forecast for 2024 for the first time. In its meeting in mid-June, the Fed indicated it would start raising interest rates in 2023, earlier than previously expected.

    "Concerns have been growing about a faster pace of tightening," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co. "How many rate hikes will be forecast (by the Fed) for 2023 and 2024 is drawing attention among market participants."

    Meanwhile, foreign currency and stock markets showed muted reaction to the results earlier in the day of a two-day policy-setting meeting of the Bank of Japan, which kept its ultraeasy monetary policy unchanged as widely expected.

    On the First Section, declining issues outnumbered advancers 1,847 to 287, while 53 ended unchanged.

    Machinery makers were weak throughout the day, with Fanuc sliding 710 yen, or 2.8 percent, to 24,865 yen, and Hitachi Construction Machinery shedding 95 yen, or 3.0 percent, to 3,095 yen,

    Mizuho Financial Group declined 19.50 yen, or 1.21 percent, to 1,582.50 yen following reports that Japan's financial regulators plan to issue a business improvement order to the group and its banking arm Mizuho Bank over a string of system failures this year.

    Mitsubishi UFJ Financial Group rose 9.0 yen, or 1.4 percent, to 641.50 yen after it said Tuesday it will sell most of its American banking unit MUFG Union Bank to U.S. Bancorp in a deal worth around $17.6 billion.

    Trading volume on the main section fell to 1,203.59 million shares from Tuesday's 1,319.88 million shares.

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