* SoftBank Corp slides on debut after country's biggest IPO
* Retail investors sell SoftBank to buy Mothers shares - analyst
* Mothers index surges 1.2 pct
* Positioning before Fed's policy decision seen dictating moves
By Ayai Tomisawa and Shinichi Saoshiro
TOKYO, Dec 19 (Reuters) - Japan's Nikkei fell to a nine-month low on Wednesday amid caution ahead of the U.S. Federal Reserve's policy decision and a bearish debut for telecom giant SoftBank Group Corp's wireless unit following the country's largest IPO.
The heightened risk aversion was reflected in the volatile Japanese bond market, where JGB futures contract rose 0.42 point at one point, the biggest intraday gain since the central bank introduced its "yield curve control" in 2016.
The Nikkei share average ended 0.6 percent lower at 20,987.92, the weakest closing level since late March.
"The market is caught between two opposing forces due to varying expectations towards the FOMC (Federal Open Market Committee) meeting," said Yutaka Miura, a senior technical analyst with Mizuho Securities.
"Those who expect the yen to strengthen after the FOMC are trimming their long positions, while those who see U.S. shares rising after the meeting are covering shorts."
The Fed is widely expected to raise interest rates for the fourth time this year after its two-day meeting that is due to end later in the day.
Focus is on the central bank's policy outlook for 2019. Many economists see the Fed continuing to tighten its monetary policy next year, although at a slower pace in the face of a possible economic slowdown.
SoftBank Corp, the wireless unit of SoftBank Group , which had made a $23.5 billion initial public offering, closed at 1,282 yen, 14.5 percent lower than IPO price of 1,500 yen.
During the IPO period, SoftBank Group suffered a rare nationwide mobile phone service outage. SoftBank Corp's relationship with Huawei Technologies Co Ltd also came under scrutiny.
"There was a disruption in its network early this month as well as Huawei's issues. There hasn't been good news involving SoftBank recently," said Tetsuro Ii, chief executive officer at Commons Asset Management. "It's such a big listing, so the stock has already been widely distributed. Since a lot of people already have the stock, it would be difficult to expect more demand."
Market analysts also said that retail investors who sold SoftBank picked up other small cap stocks in the Mothers market , and avoided large cyclical shares on worries about a global economic slowdown. The Mothers index rose 1.2 percent.
Big data company FreakOut Holdings jumped 19 percent, building demolition company Tanaken surged 14 percent and personal finance company Money Forward rallied 12 percent.
"Retail investors who bought SoftBank shares sold them knowing that they would lose money and instead bought small cap stocks in the Mothers market," said Chihiro Ohta, general manager of investment research at SMBC Nikko Securities.
Mercari Inc shed 4.4 percent after the Nikkei business daily reported that the company will no longer offer its flea market app in Europe.
The broader Topix fell 0.4 percent at 1,556.15. Declining issues outnumbered advancing ones 1,171 to 883. (Editing by Shri Navaratnam)