Nikkei hits 1-1/2-month high, Fed nerves cap gains

Japan's Nikkei share average touched a 1-1/2-month high on Wednesday, buoyed by broad Wall Street gains overnight, although caution before a crucial Federal Reserve policy decision later in the day limited the upside.

Domestic earnings results also produced several big winners and losers in the session.

The Nikkei entered the mid-day break up 0.18 per cent at 27,376.22. That was well off the early high of 27,547.67, a level last seen on December 16, before the Bank of Japan shocked investors by tweaking its yield curve controls in a de facto tightening of monetary policy.

The broader Topix was also well back from the morning's high.

All of the big three US stock benchmarks closed more than 1 per cent higher on Tuesday after a deceleration in US labour cost rises added to the case for a slowing of aggressive Fed policy tightening.

Money markets have priced in a quarter-point rate hike later Wednesday, down from half a point previously and 75 basis points prior to that.

"For the moment, the market's focus is on the outlook for monetary policy, and if the US economy will have a soft or hard landing," Maki Sawada, a strategist at Nomura Securities, said in a briefing with journalists.

"The Nikkei is likely to stay in positive territory throughout the day," but with the Fed decision looming, "the topside is going to be heavy," she said.

Of the Nikkei's 225 components, 172 rose versus 49 that fell, with four flat.

Energy was the best-performing sector following a jump in crude as fears of a US recession retreated.

Only healthcare and utilities had marginal losses.

Electronic component maker Alps Alpine was the best performer, gaining 5.97 per cent, followed by chip-related stocks Screen Holdings and Advantest, up 4.28 per cent and 3.71 per cent respectively, all after announcing financial results.

Housing material maker TOTO led losers, dropping 6.47 per cent, followed by office equipment manufacturer Seiko Epson's 4.88 per cent slide, also following earnings announcements.