Japanese stocks rose on Wednesday as solid gains on Wall Street lifted the sentiment, while Caterpillar's brisk earnings whetted investors' appetite for companies such as Komatsu and Hitachi Construction.

Some analysts warned that profit-taking was likely in the afternoon session, as investors remained cautious ahead of a US Federal Reserve monetary policy decision later in the day.

The Nikkei share average was up 0.5 per cent at 20,048.62 at the end of morning trade.

Japan's construction equipment makers attracted buying, with Komatsu Ltd surging 2.8 per cent and Hitachi Construction Machinery Co soaring 3.4 per cent after Caterpillar Inc, the world's largest construction and mining equipment maker, beat expectations and raised its full-year forecast for the second time.

Japan Inc has kicked off April-June earnings season, and investors have taken heart from brisk results from frontrunners such as Yaskawa Electric Corp, which gave the market an upbeat surprise last week.

On Wednesday, the world's largest silicon wafer maker Shin-Etsu Chemical soared as much as 3.4 per cent to a record high, after it said it expects a 12.3 per cent rise in its full-year operating profit for the fiscal year through March. But investors wasted no time in taking profits on the stock, sending its shares down 1.6 per cent by midmorning.

“We're still in the second quarter, and the company already shows that it's on track to achieve its full-year goal and that is raising expectations for certain sectors as well as the overall mood,” said Takuya Takahashi, an equity strategist at Daiwa Securities.

Takahashi also noted that with the market focused on the Fed decision, gains may be capped in the afternoon.

Fed policy decision

The Fed is widely expected to keep interest rates unchanged at its two-day meeting. Investors will be watching for any clues on whether it may raise rates again this year, and when it will begin paring its massive bond portfolio.

Electronic component makers were also among Wednesday's winners after the Nikkei business daily reported that demand for electronic components is recovering.

Combined orders at six major Japanese manufacturers for the April-June quarter expanded about 15 per cent from a year earlier, the Nikkei said, thanks to strong buying of parts for use in smartphones and automobiles, as well as for game consoles for Nintendo Co.

But gains in those shares were also trimmed as investors grew cautious before the Fed's decision, with Murata Manufacturing Co flat after gaining 2.2 per cent.

Nintendo was up 1.6 percent after gaining as much as 2.2 per cent. The broader Topix gained 0.3 per cent to 1,621.12.

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