Nikkei drops after Fed rate comments; chip-related shares buck weakness

* Tokyo Electron, Advantest soar after Micron resumes some
shipments to Huawei
* Lixil jumps after former CEO reinstates

By Ayai Tomisawa
TOKYO, June 26 (Reuters) - Japan's Nikkei fell on Wednesday
after the U.S. Federal Reserve chairman pushed back on pressure
from President Donald Trump to cut interest rates, but
chip-related stocks gained.
The Nikkei share average .N225 dropped 0.5% to 21,086.00
points by midmorning.
Federal Reserve Chairman Jerome Powell on Tuesday said the
U.S. central bank is "insulated from short-term political
pressures," as policymakers faced new calls by Trump to cut
interest rates. Separately, St. Louis Fed President James Bullard in an
interview with Bloomberg said he does not think the Fed needs to
cut rates by a half-percentage point at its next policy meeting
in late July. "The Fed and the Bloomberg report chilled investor sentiment
towards U.S. monetary policy a bit, but I don't think that
fundamental hopes for rate cut have changed," said Takuya
Takahashi, a strategist at Daiwa Securities.
Investors are also awaiting the outcome of the G20 summit
this week, where Trump will talk with Chinese President Xi
Jinping on trade. Expectations for that meeting so far appear to be low. The
best-case scenario would be a resumption of official talks,
which could ease fears in financial markets that the already
long trade dispute might continue indefinitely. The escalating
tensions have pummeled markets and hurt trade-reliant economies
such as Japan's.
"The outcome should give some kind of direction to the
market," Takahashi said.
Chip equipment makers bucked the weakness and gained after
Micron Technology Inc MU.O said on Tuesday it had resumed some
microchip shipments to Huawei Technologies Co Ltd HWT.UL and
still expects demand for its chips to recover later this year.
Tokyo Electron 8035.T surged 2.1% and Advantest Corp
6857.T jumped 3.9%.
Other exporters lost ground, with Honda Motor Co 7267.T
falling 1.3%, Daikin Industries 6367.T declining 0.7% and
Canon Inc 7751.T shedding 2.3%.
Toilet maker Lixil Group Corp 5938.T jumped 19% to 1,760
yen, the highest since October. Its former chief executive was
reinstated on Tuesday after shareholders backed him at an annual
general meeting, likely marking a high-profile victory for
corporate governance in Japan. The broader Topix .TOPX shed 0.4% to 1,537.39.

(Editing by Kim Coghill)