Dec 19 (Reuters) - Foreign investors divested Japanese

stocks significantly in the week through Dec. 14, exercising

caution ahead of policy meetings by the U.S. Federal Reserve and

the Bank of Japan, and taking profits after a rally in the local

market.

According to data from Japan's Ministry of Finance,

cross-border investors withdrew a net 587.6 billion yen ($3.79

billion) from Japanese stocks during the week after about 482.9

billion yen worth of net purchases in the previous week.

The Federal Reserve cut rates as expected on Wednesday but

signaled a slower pace for future reductions, prompting a global

equity sell-off on Thursday, including Japanese stocks,

following Fed Chair Jerome Powell's cautious remarks.

The Nikkei index has dropped about 1.93% this week,

contrasting with its rise to a two-month high of 40,091.55

earlier in December.

In the second half of the year, foreigners sold

approximately 4.24 trillion yen worth of Japanese shares,

marking a significant shift from the 6 trillion yen in net

purchases recorded in the first half.

Last week, foreigners continued their interest in Japanese

long-term bonds, purchasing a net total of 382.6 billion yen for

the third consecutive week. Conversely, they offloaded 1.71

trillion yen worth of short-term securities, halting a two-week

streak of net purchases.

In parallel, Japanese investors bought a marginal 33.7

billion yen worth of Japanese stocks during the week following

three successive weeks of net sales.

Meanwhile, they snapped up a net 706.1 billion yen worth of

foreign long-term bonds, posting a second weekly inflow in five

weeks.

($1 = 155.2200 yen)