The broader Topix dropped 1.3 percent to 1,308.69 and the JPX-Nikkei Index 400 declined 1.3 percent to 11,767.95.
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Mobile giant SoftBank bucked the downtrend, jumping 3.62 percent to 5,405 yen after shares of its USA wireless carrier Sprint soared on a report of a big jump in monthly subscribers.
The Nikkei fell 1.3 percent to 16,400.47 in mid-morning trade, after falling to as low as 16,344.34, the lowest level since July 14.
Many central bank policymakers prefer to put off taking action as they expect the anticipated fiscal stimulus package, and a delay in implementing the next sales tax hike, to boost growth and brighten the prospects for hitting their 2 percent inflation target.
Ahead of a BOJ meeting on Friday, which may see further stimulus, the yen dropped Wednesday on speculation that the government may announce a fiscal package.
In the banking space, ANZ Bank is adding 0.3 percent, Westpac is edging up 0.03 percent and National Australia Bank is rising 0.2 percent, while Commonwealth Bank is down 0.08 percent.
Meanwhile, Britain’s central bank is due to make its latest monetary policy announcement on 4th August.
“Moreover, the markets seem unperturbed by the weakness of the Chinese yuan and China’s equity market losses”.
Bank of America-Merrill Lynch added that financial markets will be waiting for “major fireworks from the BoJ, which may or may not materialise”.
The US dollar has taken centre stage ahead of the US Federal Reserve’s two-day policy meeting that ends on Wednesday.
But – as happened in the lead-up to the Fed’s rate rise last December – investors think the shift in the Fed’s thinking is more likely to be reflected in foreign currency markets, rather than in bond markets.
Such a message from the Fed would be likely to support the dollar – already trading close to four-month highs against a basket of currencies – while cooling appetite for stocks and other higher-risk investments.
Against the yen, it was up 1 percent at 105.65 after tanking more than 1 percent overnight.
“It’s good for equities”.
“Weale’s comments were a surprise coming off his suggestion a week ago that there was “no need for rate cut”, said Lawler. “There’s still room for disappointment from the Bank of Japan”.
Toyota shed 1.36 percent to 5,766 yen and factory robot maker Fanuc was off 1.44 percent at 17,360 yen.
In commodities, oil languished near three-month lows as a global glut of crude and refined products weighed on markets.
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Trade group American Petroleum Institute (API) said Tuesday that USA crude stockpiles fell by 827,000 barrels last week, much less than analysts’ expectations for a drawdown of 2.3 million barrels.
