* Market on tenterhooks before Fed meeting result
* Mining and oil stocks outperform
By Ayai Tomisawa
TOKYO, Sept 20 (Reuters) - Japanese stocks were nearly flat on Wednesday after scaling highs not seen in more than two years on Tuesday, while investors stayed cautious before the U.S. Federal Reserve’s policy meeting which ends later in the day.
The Nikkei edged up 0.1 percent to 20,310.46, after moving little throughout the day. On Tuesday, the index soared 2.0 percent to hit the highest level since August 2015 supported by a weaker yen and hopes for a snap election.
Traders said investors stayed on the sidelines as they awaited signals from the Fed on when it will hike rates again and start shrinking its balance sheet.
The U.S. central bank is expected to announce when it will begin paring its bond holdings, and while a September interest rate increase is not expected, investors will closely study Fed Chair Janet Yellen’s views on inflation for clues to whether the Fed will raise rates in December.
“If the Fed hints at a rate hike in December, the Nikkei will likely rise further helped by the dollar’s rise against the yen. Whether the U.S. yields will rise or not is also in focus,” said Masayuki Kubota, chief strategist at Rakuten Securities.
He added that Japanese stocks tended to move in line with U.S. yields. If they rose then Japanese financial companies that invested in high-yielding products such as foreign bonds were also likely to gain.
Traders noted that the Japanese market should be supported by expectations for a snap election that is expected on Oct. 22, but has not been formally called.
Sources said on Tuesday that pledges to spend on education and child care, stay tough on North Korea, and revise the pacifist constitution were likely to be pillars of Prime Minister Shinzo Abe’s campaign if there was a snap election.
Financial stocks and exporters were mixed after sharp rallies the previous day. Mitsubishi UFJ Financial Group shed 0.2 percent, T&D Holdings edged 0.2 percent lower and Dai-ichi Life Holdings advanced 0.8 percent.
Mining and oil stocks outperformed, with Inpex Corp rising 2.3 percent, Japan Petroleum Exploration Co gaining 0.8 percent and Idemitsu Kosan added 2.1 percent.
Sony Corp declined 1.2 percent after Credit Suisse cut its rating to ‘neutral’ from ‘outperform,’ citing expected slow growth in its gaming business over the next few years.
The broader Topix was flat at 1,667.92.
Reporting by Ayai Tomisawa