Nikkei falls as BOJ comments awaited

By Ayai Tomisawa

TOKYO (Reuters) - Japan's Nikkei share average edged down on Wednesday morning as a stronger yen soured sentiment, and construction equipment makers underperformed after Caterpillar reported lower demand in heavy machines.

Investors are watching out for comments by the Bank of Japan after it ends its two-day policy setting meeting on Wednesday.

The BOJ is set to keep monetary policy steady, and Governor Haruhiko Kuroda is also expected to reiterate his optimism that Japan is on course to meet the bank's 2 percent inflation target about a year from now.

The Nikkei dropped 0.3 percent to 14,031.66 in mid-morning trade, after rising 0.5 percent to 14,075.25 on Tuesday.

"The market is already jittery about the falling U.S. bond yields leading to a weak dollar-yen. Kuroda's comment dismissing the possibility of further easing again won't do any good to the mood," said Hiromichi Tamura, chief strategist at Nomura Securities.

Komatsu Ltd tumbled 3.3 percent, and Hitachi Construction Machinery Co shed 2.4 percent after Caterpillar said retail statistics for the three-month rolling period ending in April were down 13 percent.

Exporters also lost ground as the dollar dipped 0.1 percent to 101.25 yen on falling U.S. yields, within striking distance of 101.10 hit on Monday, its lowest since Feb. 5.

Toyota Motor Corp dropped 0.9 percent, Sony Corp shed 1.2 percent and Tokyo Electron Ltd fell 1.6 percent.

The broader Topix dropped 0.3 percent to 1,149.96, while the new JPX-Nikkei Index 400 fell 0.3 percent to 10,492.22.

(Editing by Shri Navaratnam)