Before the end of a Federal Reserve meeting later in the day, worries about higher-for-longer U.S. interest rates intensified, causing losses in Asian markets on Wednesday, spearheaded by those in Japan and Australia.

Due to the Labour Day break, the majority of other marketplaces in the area were closed, which also significantly reduced overall trade volumes.

After significant overnight losses on Wall Street, risk appetite was markedly negative as more indications of sticky U.S. inflation were taken into consideration. In Asian trading, U.S. stock futures declined.

Heavyweight technology firms in Japan's Nikkei 225 and TOPIX index fell 0.7% apiece overnight, matching declines in their American counterparts.

Investors were also cautious about Japanese equities due to yen volatility. On Monday, the currency experienced a significant increase from its 34-year lows, which was probably the result of government intervention. 

The profits of Japanese corporations, the majority of which are reliant on exports, are being undermined by a higher yen.

However, the value of the yen declined on Tuesday, returning to levels seen in April. This made traders nervous about more possible government action.

Data from the purchasing managers index also revealed that, in April, Japanese industrial activity contracted somewhat more than anticipated.

With traders significantly locking in profits after the index soared to record highs in March due to uncertainties around the Japanese economy and the Bank of Japan, the Nikkei was by far the weakest performer in Asia through April.

The ASX 200 index for Australia dropped 1.2% as losses were widespread. Growing wagers that the Reserve Bank of Australia may raise interest rates much further in the face of persistent inflation also weighed on sentiment towards Australian markets.

Rates are likely to remain on hold, at least temporarily, at the RBA's meeting scheduled for next week. However, the bank may go more aggressive in its messaging.

Wider markets were mostly preoccupied with what would happen after the Fed's meeting later on Wednesday, when it is generally anticipated that rates will remain unchanged.

However, Fed Chair Jerome Powell may adopt a more hawkish posture, particularly in light of a recent run of higher-than-expected inflation data.

(Sources: investing.com, reuters.com)