HMC Honda Motor Co Ltd

Shares in Asia drifted lower Friday, as investors largely held fire ahead of guidance from U.S. Federal Reserve Chairwoman Janet Yellen.

The S&P/ASX 200 slipped 0.1% and South Korea's Kospi dropped 0.4%, but Hong Kong's Hang Seng Index gained 0.6%. The Shanghai Composite traded higher by 0.1%.

Ms. Yellen is speaking later in the global trading day at the Jackson Hole gathering of central bankers.

In Japan, the Nikkei Stock Average was down 0.9%, with automobile and insurance stocks hurt by expectations that Ms. Yellen would deliver gloomy news about the U.S. economy. That would push down bond yields and weaken the dollar.

Lower yields reduce insurers' returns. A weaker dollar pushes the yen higher, hurting export competitiveness.

Toyota Motor was down 3%, Honda Motor fell 2.5% and Nissan Motor slid 1%.

A December rate increase is more likely, said Hisao Matsuura, Chief Strategist at Nomura Japan's Equity Strategy Team. Chicago Mercantile Exchange data on Fed Fund futures show the market pricing in a 44% probability of a quarter of a percentage point rise in December.

"I hope that August non-farm pay roll [data] would be more important rather than Jackson Hole," Mr. Matsuura said, adding that he expects the Fed to take a call on interest rates depending on economic data.

Japan's Core Consumer Price Index--which excludes fresh food--slid 0.5% from a year earlier in July, following a revised 0.4% drop in June. That was greater than a 0.4% fall forecast by The Wall Street Journal and the Nikkei.

Accommodation and gasoline led price declines, weighing on the index, data showed.

This prompted speculation that the Bank of Japan may have to lurch back into action, to reignite inflation in the world's third-largest economy.

But it is possible to put a positive spin on events--Japanese consumer confidence may be rising as prices fall and wages inch higher. Renewed confidence might eventually be good for Japan's reflation project, say analysts.

"In Abenomics since 2013, price rises preceded wage increases, so households couldn't feel the economic recovery, however finally a rise in real wages should improve their feeling," said Societe Generale economist Takuji Aida.

Eleanor Warnock, Kosaku Narioka and Gregor Stuart Hunter contributed to this article.

Write to Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

August 25, 2016 23:15 ET (03:15 GMT)

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