Japan's Nikkei share average eased to a two-week low on Wednesday, crucially holding just above its 25-day moving average, with profit warnings from US firms viewed as a bad omen ahead of Japan's upcoming earning season.
Any break of the key chart level risks opening the way for a test of six-month low hit earlier, although expectations of more stimulus steps from the world's central banks could cushion the blow for investors worried about a global slowdown.
The Nikkei lost 0.1 percent to 8,851.00, marking its fifth straight session of declines, the longest such a spell since early April. The broader Topix index fell 0.2 percent to 757.29.
Still in one positive development, the Nikkei erased some of the earlier losses in the final minutes of trade to end at the session high. It has also managed to stay above the 25-day average at 8,785.
"If the Nikkei snaps (through) that level, it would clearly signify that the rally that began in early June is well and truly over," said Eiji Kinouchi, chief technical analyst at Daiwa Securities. The benchmark index rallied some 10 percent between June 4 and July 4, led by domestic demand oriented shares, such as banks and properties.
But it has since lost almost 3 percent from those gains due to a stream of disappointing global data, including last week's US non-farm payroll figures and Monday's sharp decline in Japanese machinery orders. The BoJ will begin a two-day policy meeting later on Wednesday. Although some market players are hopeful that the central bank may introduce further easing steps, an increasing number see it standing pat after it released an unexpectedly positive economic review last week.
The broader Topix index fell 0.2 percent to 757.29, with volume at 1.36 billion shares, about 30 percent below the average so far this year. Decliners outnumbered advancers by 1,056 to 466.
Chipmakers suffered after weakening demand struck US competitor Applied Materials and Advanced Micro Devices. Advantest Corp shed 3.2 percent, while Dainippon Screen MFG lost 1.1 percent.
Sharp dropped 1.7 percent to a 33-year low of 356 yen, extending Tuesday's loss of 4.2 percent, after JPMorgan lowered its target price and forecast an operating loss of 60 billion yen ($755 million) for the first quarter due to poor demand for LCD screens.
Panasonic fell 4.6 percent while NEC Corp fell 4.5 percent.
Bucking the trend was Nikon Corp, which clawed back 0.6 percent after JPMorgan said in a note that Intel Corp's increased stake in competitor ASML, having caused the stock to drop 7 percent on Tuesday.
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