Nikkei ends down ahead of Fed decision

TOKYO, May 10 (Reuters) The Nikkei share average fell 1.39 percent on Wednesday as investors locked in profits in property stocks and other recent advancers ahead of a Federal Reserve policy-setting meeting later in the day.

Japan Airlines Corp. (JAL) fell after reporting a loss for last business year, while Toyota Motor Corp. ended down ahead of its earnings announcement.

Kyocera Corp. and other technology stocks lost ground due to the yen's strength. The dollar fell to 110.87 yen its weakest since September last year, amid expectations that the Fed will signal an end to a two-year run of rising interest rates.

Junichi Misawa, senior fund manager at STB Asset Management, said many Japanese companies have used a dollar/yen rate of around 110 yen in producing their outlooks, and if the dollar falls below that level it could affect their earnings.

''The exchange rate is now at a sensible level,'' he said. ''I'm sure companies are taking many uncertain factors such as currencies, oil prices and interest rates into account, but the strong yen will remove a buffer.'' The Nikkei fell 238.98 points to 16,951.93. The TOPIX index was down 1.28 percent at 1,725.06.

Speculation that the Bank of Japan could start raising overnight rates as soon as June sparked a sell-off in Japanese government bonds and a jump in the yen, although the stock market in general remained unfazed by such speculation.

In the property sector, Japan's largest developer Mitsui Fudosan Co. Ltd. lost 3 percent to 2,635 yen, after adding about nearly 9 percent in the last three sessions. Second-ranked Mitsubishi Estate Co. Ltd. fell 2 percent to 2,520 yen, snapping a three-session winning streak.

Technology stocks declined following falls in their U.S.

peers. Electronics parts maker Kyocera fell 2.6 percent to 10,110 yen, while chip equipment maker Advantest Corp. also dropped 1.2 percent to 12,800 yen.

JAL, Asia's fourth-largest airline by market value, was down 1.9 percent to 305 yen after reporting a full-year operating loss on Wednesday. Toyota Motor ended down 0.7 percent at 6,680 yen.

After the market closed, Toyota Motor posted a 53.2 percent rise in quarterly operating profit and forecast more growth this year.

Meanwhile, Yamato Holdings Co. Ltd. and Nippon Yusen K.K.

moved in opposite directions. Nippon Yusen, Japan's biggest ocean shipping firm, said on Wednesday it may form a capital tie-up with Yamato, a leading parcel delivery group, to help build a comprehensive air, sea and ground transport network.

Yamato was down 3.2 percent at 2,105 yen and Nippon Yusen was up 0.6 percent at 715 yen.

Tokyo saw its busiest day of stock trading in a month, with 2.07 billion shares changing hands on the exchange's first section. Declining shares outnumbered advancers by a ratio of more than 6 to 1.

REUTERS CS DS1316