Japan's Nikkei posts sharpest fall in 12 weeks after 4-day rally

Japan's Nikkei share average fell in its biggest decline in 12 weeks on Wednesday as investors turned cautious about a rally, while there were sell-offs ahead of the fixing of special quotation prices at the end of the week.

The Nikkei index fell 1.82% to close at 31,913.74, posting its sharpest daily drop since March 14 to snap a four-day winning streak.

The index rose as much as 0.6% in early trade to track Wall Street higher overnight, after hitting its highest since July 1990 in the previous session.

The broader Topix lost 1.34% to 2,206.30.

"Investors turned cautious after Nikkei's gain on Tuesday, which prompted them to sell stocks. That drove more selloffs and sent the index lower," said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities.

Also, ahead of June 9's setting of special quotation prices, investors sold stocks to keep the level lower, added Arisawa.

The closely watched settlement price, known in Japan as special quotation (SQ), is calculated from the opening prices of the 225 shares in the Nikkei share average on the second Friday of the month. They are used to set values on index options and futures.

Overnight, U.S. stocks closed up, helped by some advances in economically sensitive sectors, as investors awaited inflation data and the Federal Reserve's policy meeting next week.

In Japan, chip-related stocks led the declines in the Nikkei, with Tokyo Electron and Advantest falling 4.18% and 3.79%, respectively.

Chipmaker Renesas Electronics Corp lost 3.92%.
Air-conditioner maker Daikin Industries lost 4.40% and Uniqlo brand owner Fast Retailing slipped 2.13%.

Bucking the trend, home appliances maker Sharp Corp jumped 3.20%. Suzuki Motor rose 1.76%.

Of the Nikkei components, 26 stocks rose and 197 fell, while two were flat.