* Insurers underperform on expectations for lower rates
* Tsuruha bucks weakness
TOKYO, June 18 (Reuters) - Japan's Nikkei dropped to a 1-1/2-week low in choppy trade on Tuesday but most investors stayed on the sidelines ahead of a U.S. central bank policy decision later in the week.
The Nikkei share average ended 0.7% lower at 20,972.71, the lowest close since June 7. The broader Topix dropped 0.7% to 1,528.67.
Trading was subdued, however, with only 1 billion shares changing hands, against a daily average last month of around 1.4 billion.
Expectations that the Federal Reserve will start cutting interest rates has helped global markets recover from heavy selling sparked by intensifying global trade disputes.
While the Fed is unlikely to cut rates at its two-day meeting, ending on Thursday, its concluding statement will be analyzed for clues on possible near-term moves to ease, analysts said.
"The market has nearly priced in hopes for a U.S. rate cut eventually since the Fed chairman made remarks on June 4 suggesting a lower rate," said Takuya Takahashi, a strategist at Daiwa Securities, adding that the Nikkei will likely trade around 21,500 in relief if the decision is in line with market hopes.
Insurers underperformed on expectations for lower rates. Japan Post Insurance declined 1.2% and T&D Holdings skidded 1.1%.
Outperforming the broader market, Tsuruha Holdings , a drugstore operator, jumped 4% after it said it expects its net profit to grow 5.1% to 26.1 billion yen for the year ending May 2020.
Exporters were mixed, with Nintendo Co rising 0.7%, Sony Corp shedding 0.2% and Tokyo Electron dropping 1%.
Tateru Inc, whose employees were involved in hundreds of cases of tampering with customer loan documents last year, tumbled 18.6% after the Nikkei business daily reported that the land ministry decided to suspend operations. (Editing by Simon Cameron-Moore)