TOKYO, Sept. 22 (Xinhua) -- Tokyo stocks dropped on Wednesday with market participators' caution prevailing ahead of U.S. Federal Reserve's policy meeting result, yet the fall was regarded limited.

The 225-issue Nikkei Stock Average finished down 200.31 points, or 0.67 percent, from Tuesday at 29,639.40, the lowest closing since Sept. 3.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange ended 21.00 points, or 1.02 percent, lower 2,043.55.

Declining issues were led by wholesale trade, food and machinery issues.

The Nikkei index briefly rose above the previous day's closing level, but stayed in the negative territory for most of the day, as the outcome of the Fed policy meeting is to be announced later in the day, brokers said.

Investors are becoming cautious about the meeting, at which policymakers are forecast to provide a timeline for stimulus tapering and interest rate hikes over the next three years with inflation accelerating, said Koichi Fujishiro, a senior economist at Dai-ichi Life Research Institute.

The U.S. central bank is projected on Wednesday to announce its interest rate prediction for 2024 for the first time. At the meeting in mid-June, the Fed said it would begin to lift interest rates in 2023, earlier than expected.

"Concerns have been growing about a faster pace of tightening," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co. "How many rate hikes will be forecast (by the Fed) for 2023 and 2024 is drawing attention among market participants."

At the same time, foreign exchange and stock markets reacted flatly to the outcomes declared earlier in the day of a two-day Bank of Japan policy-making meeting, which kept its ultra-loose monetary policy unchanged as generally expected.

On the First Section, decliners outnumbered advancers 1,847 to 287, while 53 finished unchanged.

Machinery makers remained weak throughout the day, as Fanuc declined 2.8 percent, Hitachi Construction Machinery fell 3.0 percent.

Mizuho Financial Group slipped 1.21 percent after Japan's financial regulators are reported scheduling to issue a business improvement order for system failures this year to the group and its banking arm Mizuho Bank.

Mitsubishi UFJ Financial Group gained 1.4 percent following its announcement Tuesday that it will sell most of its American banking unit MUFG Union Bank to U.S. Bancorp in a deal worth around 17.6 billion U.S. dollars.

Trading volume on the main section sank to 1,203.59 million shares from Tuesday's 1,319.88 million shares. Enditem

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