TOKYO (AP) -- Most Asian markets fell Monday as traders sought direction ahead of a key decision by the U.S. Federal Reserve expected later this week.
A positive report from Japan's central bank showing improved business sentiment, the best in six years for large manufacturers, didn't seem to lift investors' spirits as the Nikkei 225 index slipped 1.6 percent to 15,152.91.
Seoul's Kospi inched down 0.09 percent to close at 1,961.15. Hang Seng dipped 0.56 percent to 23,114.66. Stocks were down almost across the region, including Indonesia, Hong Kong, Taiwan and Singapore.
Global investors are still trying to figure out where things could be headed next. Some are watching for whether the Fed might reduce its economic stimulus, which has worked to boost stock prices recently, when it announces a decision Wednesday.
On Wall Street Friday, the Dow Jones industrial average inched up 0.1 percent to 15,755.36 for its second weekly loss in a row.
A strong U.S. economy is crucial for Japan and the rest of this region, where big exporters make for a large part of the economy.
The Japanese central bank's quarterly "tankan" survey, released Monday, showed that a key index for business confidence among large manufacturers improved to 16 from 12 in the last survey, marking the fourth straight quarter rise.
One factor working as a plus for exporters is the weaker yen, which raises the value of overseas sales when converted into yen.
Hiromichi Tamura, strategist with Nomura Securities Co. in Tokyo, said hopes were high for a recovery in Tokyo stocks as both foreign and local investors tend to buy up Japanese shares toward the end of the year and the early part of the following year.
"Expectations are high for further easing by the Bank of Japan in months ahead, and because that is already expected, speculation is rife that the bank might try to surprise with earlier timing," he said.
Optimism about a U.S. recovery is so widespread that even if the Fed takes no action, the effect in regional stocks could be positive, as that decision could be interpreted to mean that no additional action was deemed needed.
The dollar's fall in Monday trading helped push Tokyo exporters' stocks lower. Toyota Motor Corp. sank nearly 2 percent, and Honda Motor Co. fell almost 3 percent.
But Tamura said he expects the dollar to continue rising to as high as 110 yen by the end of 2014, meaning that positive news for Japan Inc. is likely to continue.
In currencies, the dollar cost 102.92 yen in late trading, down from 103.74 yen late last week. The euro stood at $1.3745 from $1.3753.
Benchmark U.S. crude for January delivery edged 23 cents lower, or 0.2 percent, to $96.37 a barrel at midday in Asia in electronic trading on the New York Mercantile Exchange.
Follow Yuri Kageyama on Twitter at twitter.com/yurikageyama