In Tokyo, shares fell 0.8 per cent as investors locked in profits from recent rises following Friday's announcement of a huge bank merger. They "now feel safe" whatever the outcome of the Fed meeting, said Kazunori Jinnai of Daiwa Securities Co.

Hong Kong, restricted to half-day trading by a lingering storm, rose 0.4 per cent in cautious trade before the FOMC meeting. Singapore and Sydney both dropped slightly on profit-taking before any announcement of a rise in US interest rates.

Share prices fell 0.8 percent as investors took profits after strong rises sparked by hopes of a recovery in Japan's banking sector, brokers said.``A cautious mood emerged after the recent fast-paced rises,'' said Kazunori JinnaI, broker at Daiwa Securities Co. Ltd's equity department.

Investors "locked in profits and nowfeel safe" no matter what emerges from Tuesday's meeting of the US Federal Reserve's policy-making Open Market Committee on interest rates, he said.

The Nikkei 225 index on the Tokyo Stock Exchange lost 138.14 points to end at 18,095.41. Trading was active with 933 million shares changing hands against Monday's 965.6 million shares. Daiwa's Jinnai said it was only natural that the advance in the Nikkei index slowed and overall sentiment "was not bad."

Profit-taking eroded gains in bank issues after surges on Friday's announcement that three top Japanese banks will form an alliance to create the world's biggest banking group.

In Hong Kong, share prices rose 0.4 per cent in cautious trade before an expected US interest rate rise, dealers said. The Hang Seng index gained 60.21 points to close at 13,633.87 on turnover of 4.349 billion Hong Kong dollars (560 million US). Trade was suspended in the morning due to a rainstorm. ``The gains are of course boosted by overnight gains on Wall Street,'' saidRickyTam, research head at Delta Asia Securities. ``Sell and buy are in balance because investors are cautious ahead of the US Federal Reserve Board's meeting later today.''