* All sectors in negative territory
* As long as Brexit worries loom, mood stays sour - analyst
By Ayai Tomisawa
TOKYO, June 16 (Reuters) - Japan’s Nikkei share average dropped on Thursday morning tracking Wall Street after the U.S. Federal Reserve held off raising interest rates, with investors cautious ahead of an outcome from the Bank of Japan’s policy meeting.
The Nikkei fell 1.2 percent to 15,723.06 in midmorning trade, hovering more than two-month lows.
The U.S. Federal Reserve kept interest rates unchanged on Wednesday and signalled it still planned to raise rates twice in 2016, though it said slower economic growth would crimp the pace of monetary policy tightening in future years.
Analysts said that market sentiment is dampened by concerns about the U.S. economy, while investors stayed risk averse amid no expectations for policy decision by the BOJ.
“There are few positive events to look forward to right now, so investors are on the sidelines,” said Masashi Oda, general manager at strategic investment department at Sumitomo Mitsui Trust Asset Management.
The Bank of Japan is expected to keep monetary policy steady on Thursday even as volatile financial markets, sluggish global growth and anaemic inflation keep policymakers under pressure to do more to reflate the economy out of stagnation.
Analysts also said that worries that Britain might vote to leave the European Union will likely keep investors risk-averse from now and through the coming week.
“As long as Brexit concerns loom, our mood stays negative,” said Masaru Hamasaki, head of the market & investment information department at Amundi Japan. “The current market might have priced in the possibility of Brexit at 20-30 percent, so it can get worse depending on developments.”
Major exporters languished, with Toyota Motor Corp shedding 1.6 percent, Honda Motor Co falling 1.2 percent and Nissan Motor Co tumbling 3.3 percent. The yen hit a 20-month high of 105.41 to the dollar before stepping back to steady around 105.66.
Bucking the weakness, Seikagaku Co jumped 10 percent after it said it signed an agreement for an exclusive overseas sale license from Ferring Pharmaceuticals for Ferring’s lumbar disc herniation treatment.
All of 33 Topix’s subsectors were in negative territory.
The broader Topix dropped 1.4 percent to 1,259.32 and the JPX-Nikkei Index 400 declined 1.4 percent to 11,347.57. (Reporting by Ayai Tomisawa; Editing by Eric Meijer)