TOKYO (Kyodo) -- Tokyo stocks finished slightly lower Monday as investors grew cautious ahead of a Bank of Japan policy meeting later this week.

The 225-issue Nikkei Stock Average ended down 12.95 points, or 0.03 percent, from Friday at 39,457.49. The broader Topix index finished 8.23 points, or 0.30 percent, lower at 2,738.33.

On the top-tier Prime Market, decliners were led by land transportation, oil and coal product and air transportation issues.

The U.S. dollar held firm in the upper 153 yen range for much of Tokyo's trading day on yen-selling amid speculation that the BOJ will forgo raising interest rates at its two-day meeting starting Wednesday, dealers said.

At 5 p.m., the dollar fetched 153.50-52 yen compared with 153.70-80 yen in New York and 152.79-81 yen in Tokyo at 5 p.m. Friday.

The euro was quoted at $1.0503-0504 and 161.23-27 yen against $1.0498-0508 and 161.28-38 yen in New York and $ 1.0459-0460 and 159.81-85 yen in Tokyo late Friday afternoon.

The yield on the benchmark 10-year Japanese government bond rose 0.030 percentage point from Friday's close to 1.065 percent as the debt was sold on the rise in long-term U.S. Treasury yields.

The benchmark Nikkei was initially supported by gains in technology and machinery issues but fell in the afternoon as investors increasingly adopted a wait-and-see stance before key monetary policy gatherings in the United States and Japan.

The Federal Reserve is widely expected to lower interest rates by another 0.25 percentage point on Wednesday, while the BOJ is now increasingly seen leaving its policy rate unchanged on Thursday following recent news reports signaling it will skip a rate hike.

"The BOJ is seen having difficulty communicating with the market, as the possibility of a rate hike appears to have risen at one point in December, but speculation quickly emerged that it will stand pat," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co.

"A significant yen appreciation could occur if the BOJ raises rates against market expectations, possibly pushing the Nikkei down by around 1,000 points," Ichikawa added.