Tokyo stocks slipped 0.29 percent by the break Tuesday as investors await the outcome of a two-day US monetary policy meeting while also keeping an eye on talks aimed at averting the fiscal cliff.
The benchmark Nikkei 225 index was down 27.46 points to 9,506.29 while the broader Topix index of all first-section issues lost 0.50 percent, or 3.96 points, to 784.52.
Analysts say stubbornly high unemployment and the looming fiscal cliff of tax hikes and spending cuts give the US central bank more reasons to expand its stimulus efforts when its meeting starts on Tuesday.
"There is some selling and shorting of exporter shares in anticipation of more US Fed easing pressure, even though the dollar-yen itself is little moved," an equity trading director at a foreign brokerage, told Dow Jones Newswires.
"The consensus seems to be that whatever the Fed does, it will be more aggressive than what we've already seen."
In Tokyo, Honda Motor dipped 1.09 percent to 2,715 yen and Sony fell 1.70 percent to 806 yen.
Chipmaker Renesas Electronics rose 3.57 percent to 319 yen after it said it would raise up to $2.43 billion in a government-backed share sale and capital injection aimed at rescuing its troubled balance sheet.
Power company shares plunged after a panel of experts said that one of the nation's nuclear plants may sit over an active seismic fault, raising fears it would have to be scrapped as atomic fears run high following last year's Fukushima accident.
Kansai Electric Power tumbled 6.44 percent to 726 yen while Chubu Electric Power fell 5.71 percent to 1,023 yen.
Tokyo Electric Power, operator of the crippled Fukushima Daiichi plant that was at the centre of last year's atomic crisis, gave up 2.14 percent to 137 yen.
On currency markets, the euro bought $1.2931 and 106.56 yen, from $1.2939 and 106.53 yen in New York late Monday.
The dollar bought 82.38 yen, against 82.33 yen in US trading.