Tokyo stocks close flat after previous day's surge

Tokyo stocks closed flat Thursday, a day after the Nikkei 225 index posted its sharpest rise in two months, while analysts said there were lingering concerns about the impact of this month's sales tax rise in Japan.

The benchmark Nikkei -- which soared 3.01 percent on Wednesday -- edged down 0.15 points to 14,417.53, while the Topix index of all first-section shares also closed flat, inching up 0.04 points to close at 1,166.59.

The Nikkei spent much of the day in the red, despite a rally on Wall Street fuelled by an upbeat report on the US economy, a Federal Reserve pledge to keep interest rates low and positive corporate results.

Investors booked profits after Wednesday's surge, dealers said, as Japan heads into its latest corporate earnings season.

"No big orders are coming in from overseas investors but there is some targeted buying of maritime shippers," said a trading director at a foreign brokerage.

"Earnings expectations from firms expected to report results in coming days have been pretty encouraging," the trader added.

Among them was copier and camera maker Canon, which closed up 1.25 percent at 3,218 yen, and GungHo Online Entertainment, which soared 14.25 percent to close at 609 yen.

The jump came as the leading Nikkei business daily reported that operating profit at GungHo, creator of wildly popular downloadable game Puzzles and Dragons, surged 40 percent in the three months to March from a year ago.

In currency markets, the dollar drifted lower as the upbeat US housing and factory output data and dovish comments from Federal Reserve chair Janet Yellen suggested the central bank would hold steady on the pace of its stimulus tapering.

In Tokyo afternoon trade, the greenback slipped to 102.02 yen from 102.25 yen in New York on Wednesday. A stronger yen is bad for shares of Japanese exporters as it dents their profitability.

In other share trading, Honda fell 2.09 percent to 3,459 yen and chip giant Tokyo Electron dropped 2.98 percent to 5,813 yen, while Sony was down 0.78 percent.

Concerns about the April 1 sales tax rise -- Japan's first levy hike in 17 years -- were still "an anchor around the market's neck", San Francisco-based Forward Management LLC portfolio manager David Ruff told Dow Jones Newswires.

"Traders want to see the impact before moving again. But valuations for Japan shares remain compelling enough to consider picking up at these levels."