Asian shares were pressured on Wednesday with investors searching for fresh catalysts such as the Bank of Japan's policy meeting which ends later in the day, while a sharp boost to asset prices inspired by the US Federal Reserve has given way to worries about Spain's fiscal strains.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1%, with Australian shares down 0.1%, while South Korean shares eased 0.3%.
The Nikkei stock average opened 0.5% higher, with sentiment boosted by expectations for stimulus from the BOJ, which ends its two-day meeting later in the day.
US stocks ended flat to slightly lower while European shares fell on Tuesday as Spain continued to avoid making decisions on whether to seek an European Union bailout which is conditional for the European Central Bank to start buying the country's bonds to tame its borrowing costs.
"All positive catalysts that could have been expected are already out on the table, and the market is again seen holding its current level," said Won Sang-pil, an analyst at Tong Yang Securities.
Views were mixed about whether the BOJ will follow its peers overseas with action, after the Fed launched a third round of bond buying known as quantitative easing (QE) last week and the ECB earlier this month outlined its bond-buying scheme to ease fiscal strains for euro zone countries seeking assistance.
Some in the markets speculate the BOJ might announce fresh steps to avoid a plunge in Japanese shares and the yen's appreciation ahead of the September 30 fiscal-half. Trade with China was certain to be hit hard by the violent anti-Japanese protest escalating over a territorial dispute, at a time Chinese power transition is taking place, analysts said.
"Along with the Chinese factor, the Nikkei faces downside risks as global equities look vulnerable to adjustments from the post-Fed rally, and it's possible for the BOJ to pre-emptively step in to bolster sentiment ahead of the fiscal half, where the level of stock prices is crucial for companies," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.
"Many domestic players think the BOJ will stand pat and wait until October, while foreign players see some BOJ move today," Saito said, adding that no action could push the dollar down to 78 yen or briefly below 78 where stop orders were lined up.
Concerns over the territorial conflict and damage to trade with China will limit the downside for the dollar/yen, he said.
The dollar inched down 0.1% to 78.72 yen.
The euro steadied around $1.3047.
US Treasury bond prices rose on Wednesday on bargain hunting from last week's sharp sell-off and renewed bids for safe-haven assets, as concerns grow over global growth slowdown and while Spanish yields stayed under upward pressures on the uncertain outlook for Spain's fiscal woes.
Commodities slumped on Tuesday for a second day as the fragile US economy and economic deteriorations in Europe darkened demand prospects for industrial commodities such as oil and metals, where prices had spiked up on central bank stimulus.
The president of the Chicago Fed, Charles Evans, and New York Fed President William Dudley said on Tuesday the US central bank could still do more in an effort to reduce US unemployment even if efforts result in slightly higher inflation.
Oil futures were mixed early on Wednesday, with US crude up 0.2% at 95.51 a barrel and Brent crude down 0.3% at $111.74.
Sentiment was cautious in Asian credit markets, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 2 basis points, but still near a 14-month low.
