Japan's Nikkei loses ground as investor focus shifts to BOJ, Fed meetings

By Rocky Swift

TOKYO, Dec 5 (Reuters) - Japan's Nikkei share average lost ground on Friday, pausing after a recent rally, as expectations of rising domestic interest rates weighed on sentiment.

The Nikkei 225 Index .N225 slid 1% to close at 50,491.87, trimming its weekly gain to 0.5%. The broader Topix .TOPX fell 1.1%.

An 18-year peak in benchmark Japanese government bond yields dampened equities after a three-day rally, Nomura Securities strategist Maki Sawada said, as investors awaited policy decisions from the Bank of Japan and the U.S. Federal Open Market Committee (FOMC).

"Regarding the rise in the 10-year yield, one factor is growing speculation that the Bank of Japan may raise rates at its December meeting," Sawada said. "With the FOMC looming next week, I think Japan's stock market is likely to face some selling pressure."

The BOJ is likely to raise rates this month with the government expected to tolerate such a decision, Reuters reported on Thursday.

Meanwhile, traders are pricing in around 86% odds of a Fed rate cut next Wednesday, and potentially two-three more reductions next year, according to LSEG-compiled data.

There were 42 advancers on the Nikkei against 181 decliners. The largest losers in the index were Trend Micro 4704.T, down 8.9%, followed by tyre manufacturer Bridgestone 5108.T, which lost 4.7%.

The largest gainers were electronic component maker Ibiden 4062.T, up 6.9%, followed by major artificial intelligence investor SoftBank Group 9984.T, which rose 6%.