Nikkei Outperforms; Asia Nervous Ahead of Fed

Japan's benchmark Nikkei index soared to a one-week high on Wednesday, underpinned by continued weakness in the yen and investor optimism that the U.S Federal Reserve will temper fears about paring back its stimulus program.

The Fed concludes a two-day meeting on Wednesday and the tone in the rest of Asia's equity markets was mixed ahead of the closely-watched policy decision.

The Shanghai Composite pared losses after falling to a fresh 2013 low, Australia's S&P ASX 200 index closed up nearly 1 percent and South Korea's Kospi traded below 1,900 points.

(Read More: Asian Stocks to Lead the Way to Year's End)

Markets on Fed Watch

Chairman Ben Bernanke is expected to hold a press conference shortly afterwards the central bank's policy announcement. Optimism that the Fed will maintain its pace of bond buying sent the Dow soaring nearly 150 points overnight.

(Read More: Markets More Doubtful of Fed Easing Benefits: Survey)

"We are in the September camp when it comes to tapering. That leads us to expect a very slick, highly rehearsed, toeing-the-line testimonial statement from Ben Bernanke. There will be no misinterpretation, no inferred meaning and a very clear picture of how the Fed will handle the next six months," said Evan Lucas, market strategist, IG in a note.

Nikkei Up 1.8%

Japan's trade position improved in May, giving a boost to shipping stocks. Both exports and imports jumped 10 percent annually, a strong rebound from April's dismal figures, highlighting the strength of Japan's domestic demand. Analysts say the strong data is a result of higher government spending and a cheaper yen.

(Watch Now: Why Caution Is Warranted Over Japan Trade Data)

Kawasaki Kisen increased 9.5 percent, Nippon Yusen rose 5 percent and Mitsui OSK Lines added 2 percent.

Shares of Softbank rose over 4 percent after Dish Network said it would not make a new offer to buy Sprint.

Steelmakers also supported the benchmark index. JFE Holdings jumped over 6 percent and Kobe Steel added over 5 percent as investors went bargain hunting.

Shanghai Off Lows

Brokerages led the Shanghai Composite lower on reports that the IPO pipeline is set to start moving again after a nine-month freeze. Hong Yuan Securities led losses by 4.5 percent.

The vice chairman of the China Securities Regulatory Commission reportedly told brokerage executives at a meeting on Tuesday that it is "almost certain" that listings will resume at the end of July. Regulators halted IPOs in late October in a move to clean up corruption in the stock market.

(Read More: Awaiting China PMI: Things Could Get Even Worse)

Earlier in the session, the benchmark index fell below the 2,126 mark to hit a fresh low for this year.

Meanwhile, property developers extended losses after data on Tuesday showed prices grew at the fastest pace in May this year. Increasing prices makes it difficult for policymakers to loosen monetary policy in a bid to boost growth.

China Vanke skidded over 2 percent, Poly Real Estate fell 2 percent and China Merchants Property lost 1.3 percent.

Australia Climbs 1%

A weak Australian dollar underpinned gains in Sydney's benchmark index, helping the index cross the 4,830 mark to trade at its highest levels in two weeks.

The currency fell below the $.095 handle against the greenback, benefiting stocks with overseas exposure like major miners. Mirabela Nickel climbed 8 percent while coal company White Energy surged 22 percent.

(Read More: What Bust? Australia Set for Huge Boom, Report Says)

Whitehaven Coal pared gains to add 4.3 percent following an earlier 8 percent rally after Australian tycoon Nathan Tinkler sold nearly half his stake.

Shares of casino operator Echo Entertainment added 2 percent after Malaysian firm Genting increased its stake in the firm overnight. The move comes weeks after rival casino company Crown sold its stake in Echo.

Kospi Below 1,900

Blue-chip stocks weighed on South Korea's benchmark index. Both Samsung Electronics and LG Electronics both fell over 1 percent to give up the previous day's strong gains.

— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC