By Sam Byford

TOKYO, Sept 21 (Reuters) - Japanese stocks fell on Wednesday, in line with Wall Street and broader Asian peers, as investors adjusted positions ahead of key policy meetings this week from the U.S. Federal Reserve and the Bank of Japan.

The Nikkei share average was down 1.37% at 27,308.66, as of midday break. The index hit a two-week low of 27,297.5 earlier in the day.

The broader Topix fell 1.28% to trade at its lowest level since Sept. 7.

Markets have priced in a rate hike of at least 75 basis points, with an 18% possibility seen of a full percentage point, as the U.S. central bank is expected to reinforce its hawkish approach to tackle inflation.

"If the Fed implements a 75-basis-point rate hike, as most people expect, the market should avoid upheaval," said Yasushi Yokoyama of Aizawa Securities, adding that investors are already looking towards the next hike.

The Bank of Japan, however, is considered unlikely to stray from its dovish path as the only major central bank not to hike interest rates this year, even as the country reported a fifth successive month of inflation above the bank's 2% target.

"The upward price pressures are heavily biased toward food so far, and we thus believe that this August acceleration will not prompt a BoJ policy change," JP Morgan economist Yuka Mera wrote in a research note.

"For monetary policy adjustment, the BoJ will need to see a broadening of price pressures, especially in services and wage inflation."

Japanese government bond yields rose ahead of the central bank meetings, with the 5-year note adding 1.5 basis point to reach 0.065%, its highest since June.

The BOJ made unscheduled offers to buy various JGBs in the morning, but the response was muted and the benchmark 10-year note remained untraded with the yield last at 0.25%, the BOJ's implicit policy cap.

The yen was trading flat at about 143.7 to the U.S. dollar, still in the range of a 24-year historical low.

The Nikkei index saw 181 of its 225 constituents drop in the morning session, while 42 gained and two traded flat.

Air conditioner manufacturer Daikin Industries Ltd weighed on the index the most with a 3.88% slump.

Japan Steel Works Ltd was the best performer, rising 6.08% despite the company lowering its profit forecast for the current fiscal year.

Energy and financials were the only sectors to gain overall.

(Reporting by Sam Byford and Tokyo markets team; Editing by Sherry Jacob-Phillips)