Chip shares lift Japan's Nikkei in countdown to Fed decision

By Kevin Buckland

TOKYO, Sept 17 (Reuters) - Japan's Nikkei share average edged higher on Wednesday, with chip-sector shares tracking an overnight rally among U.S. peers, ahead of a crucial Federal Reserve interest rate decision later in the day.

The tech-heavy Nikkei .N225 was up 0.2% at 44,977.44, as of 0140 GMT, inching back towards the previous session's record-high level of 45,055.38.

The broader Topix .TOPX, though, eased 0.4% to 3,155.67, after marking a record high on Tuesday.

Overnight, the closely watched Philadelphia SE semiconductor index .SOX rose 0.3% to an all-time high. The Nasdaq Composite .IXIC and S&P 500 .SPX also renewed record peaks, but closed the day lower.

Stocks have soared globally as traders cemented bets for a series of near-term U.S. rate cuts, beginning with one later on Wednesday. Market-implied odds signal at least two quarter-point cuts by year-end, and 96 basis points of reductions by end-March.

"The arithmetic is simple: the Fed needs to back up the dovishness currently discounted into the rates curve to keep stocks chugging along," said Kyle Rodda, an analyst at Capital.com.

"If the requisite dovishness is absent, that's when things could get spicy in the markets."

Chip-making equipment manufacturer Tokyo Electron 8035.T climbed 6.3% on Wednesday to be the Nikkei's top performer. Shares of smaller peer Disco 6146.T gained 2.8%.

Chip-testing equipment maker Advantest 6857.T recovered from early losses to trade 0.5% higher.

Despite a stronger yen against the U.S. dollar, which tends to weigh on exporters as it erodes the value of overseas revenue, Sony 6758.T gained 1.3% and Toyota Motor 7203.T rose 0.4%.