TOKYO, Jan 26 ― Tokyo stocks fell in morning trade today following a slump on Wall Street as investors await a key decision from the US Federal Reserve.

The benchmark Nikkei 225 opened flat then dropped 0.87 per cent, or 235.67 points, to 26,895 in morning trade, while the broader Topix index lost 0.41 per cent, or 7.87 points, to 1,888.75.

Investors are reluctant to partake in active buying ahead of the US central bank's policy-setting meeting, Okasan Online Securities said.

After spending much of last year playing down the spike in prices, the Fed has in recent months taken a sharp hawkish turn on monetary policy as officials look to bring inflation ― which is at a four-decade high ― under control.

While markets are increasingly jittery over anticipation of its tightening of monetary policy, shares could rebound if the Fed's decision turns out "less hawkish than expected,” Okasan said.

"At any rate, all eyes are on how US shares will respond,” the brokerage added.

Other factors such as geopolitical tensions over the Ukraine-Russia situation and a global chip shortage have contributed to the "elevated” volatility of global markets, Edward Moya, senior market analyst at OANDA said in a note.

"Optimism remains that a massive correction is still unlikely to happen because the US growth story will likely remain intact this year, but Wall Street is not seeing many buyers emerge ahead of the Fed and as the conflict in Ukraine escalates,” Moya said.

The dollar fetched ¥113.81 (RM4.18) in early Asian trade, against ¥113.87 in New York late yesterday.

Among major shares, market heavyweight Softbank Group added 0.59 per cent to ¥5,099 while Toyota fell 0.31 per cent to ¥2,229.5. 

Sony inched up 0.24 per cent to ¥12,510. Uniqlo operator Fast Retailing was down 0.50 per cent to ¥67,660. ― AFP