Japan's Nikkei falls as caution sets in before key central bank decisions

"Only a handful of large led overnight gains of two main indexes in the United States. So, market players were not actively buying large varieties of Japanese stocks today," said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

The S&P 500 and registered record closing highs for a second straight session on Tuesday, helped by a more than 7% gain in Apple shares. The Dow Jones Industrial Average, however, inched lower 0.31%.

Market players were awaiting a key U.S. inflation reading and updated interest rate projections due later in the day for further direction.

The Bank of Japan will conclude its two-day policy meeting on Friday, where it is expected to keep steady and consider whether to offer clearer guidance on how it plans to reduce its huge balance sheet.

Uniqlo brand owner Fast Retailing fell 2.45% to drag the Nikkei the most. Staffing agency Recruit Holdings lost 2.95%. Chip-making equipment maker Tokyo Electron slipped 0.17%.

Meanwhile, suppliers of Apple rose. TDK jumped 4.35% to become the biggest support for the Nikkei, while Murata Manufacturing and Taiyo Yuden climbed 2.63% and 1.71%, respectively.

Of the 225 components of the Nikkei, 51 stocks rose and 170 fell, with four flat.