Japan's Topix index touches record high in tentative trade before Fed, BOJ

By Rocky Swift

TOKYO, Dec 10 (Reuters) - Japan's broad Topix gauge of shares touched a record high before losing momentum on Wednesday, as investors awaited key central bank decisions at home and abroad.

The Topix .TOPX reached an unprecedented 3,408.99 in early trading before losing steam and closing just 0.1% higher at 3,389.02. The blue-chip Nikkei 225 Index .N225 slid 0.1% to finish at 50,602.80.

U.S. shares were broadly lower overnight on expectations that the Federal Reserve would take a hawkish tone even if it cuts interest rates later on Wednesday.

The Fed is widely expected to make a quarter-percentage-point cut despite inflation still running above the central bank's 2% target.

Meanwhile, the Bank of Japan has been dropping hints that it is preparing to raise its key policy rate next week to tame inflation and declines in the yen.

"The weak yen environment appears to be the main driver of strength for the broad Japanese stock market today," said Nomura Securities strategist Wataru Akiyama.

"Once the market has largely priced in this slowdown in the Fed's rate-cut pace, the yen's depreciation is likely to stabilise," he said. "Consequently, the rise in the Japanese stock market, including the Nikkei, depends on this continuing yen depreciation."

The weaker yen acted as a tailwind for automakers, with Honda Motor 7267.T rising 3.3% and Toyota Motor 7203.T up 1.6%.

There were 147 advancers on the Nikkei against 75 decliners. The largest gainers were DOWA Holdings 5714.T, up 6.3%, followed by toilet maker TOTO 5332.T, which jumped 4.8%.

The largest losers were drugmaker Shionogi 4507.T, down 4.7%, followed by chip industry supplier Lasertec 6920.T, down 4.2%.