Japanese shares rise as softer yen supports; Fed verdict in focus

By Brigid Riley

TOKYO, Sept 18 (Reuters) - Japan's Nikkei share average rebounded on Wednesday, supported by a softer yen and a recovery among chip-related stocks, although moves were subdued ahead of the Federal Reserve's long-awaited monetary policy decision.

The Nikkei was up 0.7% at 36,461.44 by the midday break, after sliding in the previous two sessions on a stronger yen, while the broader Topix rose 0.4% to 2,565.25.

In a boost to export shares, which benefit from a softer domestic currency, the yen hovered around 142.02 per dollar earlier in the session. The currency strengthened to below 140 in a holiday-thinned Asia session on Monday.

Automakers, in particular, stood out after investors picked up big names knocked down by the yen's recent gains, with shares of Toyota Motor (TM) climbing about 3%, Mazda Motor (MZDAF) adding 3.5%, and Honda Motor (HMC) up 2.1%.

Among the Tokyo Stock Exchange's 33 industry groupings, transport equipment, which includes automakers, rose 2.2% to become the top performing sector.

Technology stocks also saw buying on the dip, lifting AI-focused startup investor SoftBank Group and chip-testing equipment maker Advantest (ADTTF) up 0.9% and 1.6%, respectively.

But gains narrowed as the yen recouped some of the early losses during morning trade. Investors are waiting to see whether the U.S. Fed will cut interest rates by 25 or 50 basis points at the conclusion of its meeting later in the day.

Markets have gone from expecting a moderate cut to pricing in a 65% chance the Fed will reduce interest rates by 50 basis points, up from 35% a week earlier, according to the CME's FedWatch Tool.

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

"I think this scenario is likely, but ... the market is currently cautious considering that (the foreign exchange rate) might become a bit turbulent."

Among other heavyweights, shares of Uniqlo parent firm Fast Retailing (FRCOF) were up 2.4% to give the Nikkei its biggest lift.

(Reporting by Brigid Riley; Editing by Sherry Jacob-Phillips)