The Japanese stock market was trading lower on Thursday, following the recent surge of the benchmark Nikkei 225 Index to psychologically important 8,500 level. Trading was also impacted as Wednesday was the last day on which investors could buy many Japanese stocks and still receive dividends for the financial year ending on March 31.

In early trades, the Nikkei 225 Index was losing 49.05 points or 0.58% to 8,430.94 and the broader Topix Index of all First Section Issues was down 6.2 points or 0.76% to 812.29.

Overnight, U.S. stocks closed higher in a volatile session as traders digested better-than-expected economic data on new home sales and durable goods orders, combined with weak demand for a Treasury Department's auction of $34 billion worth of five-year notes that raised concerns about demand for U.S. government debt.

Oil prices slipped below $53 on Wednesday as traders mulled Energy Information Administration data that showed another build in weekly inventories. The drop took prices away from the four-month closing high from the day before. Crude oil for May delivery dropped to $52.77 a barrel on the New York Mercantile Exchange, down $1.21 on the session.

The Japanese market closed mixed on Wednesday. The Nikkei 225 Index declined 8.31 points or 0.10% to 8,479.99, while the Topix index managed a gain of 5.77 points or 0.7% to 818.49, its eighth straight higher close.

On the economic front, the Bank of Japan said Thursday that corporate service prices in Japan were down 2.6% on year in February, posting an index score of 92.1. Forecasts called for a 2.5% fall on year after the 2.2% annual decline in January. On a monthly basis, corporate service process inched higher by 0.2%. The domestic corporate goods price index was down 1.1% on year, the data showed, showing an index score of 105.0. On month, CGPI was off 0.4%.

Meanwhile, the Finance Ministry reported that foreign residents sold 624.1 billion yen more in Japan stocks than they purchased for the week ending March 21. However, foreigners purchased a net 511.9 billion yen in Japan bonds and notes. Meanwhile, residents of Japan were purchasers of a net 6.1 billion yen or foreign stocks for the week. They also bought more foreign bonds and notes than they sold in the week, having purchased a net 247.2 billion yen worth.

In the currency market, the U.S. dollar was trading in the upper 97 yen-range on Thursday. In early morning trades, the dollar was quoted in a range of 97.85-97.88 yen, up 0.14 yen from Wednesday's close of 94.71-97.74 yen in Tokyo.

Banking stocks are trading mostly higher. Mitsubishi UFJ, Japan's biggest bank, is gaining 1.50%. Sumitomo Mitsui is gaining 2.32% and Resona Holdings is adding 0.46%. Brokerage Nomura Holdings is advancing 1.86%.

Shares of Mizuho Financial are down 0.43%. The Nikkei business daily reported that Mizuho Corporate Bank, an affiliate of Mizuho Financial Group, has sold about 1 billion yen of its shareholdings to the Bank of Japan after the central bank resumed its initiative to buy bank-held shares late last month.

Exporters are trading higher on the back of a weaker yen. Canon is adding 1.57%, Sharp is advancing 1.46% and Sony is rising 3.61%. Among automakers, Toyota is easing 0.31% and Honda is adding 0.43%.

Chipmaker Elpida Memory is gaining 15.80%. The company said Wednesday that it will issue a total of 45.8 billion yen in new shares to three Japanese and two foreign partners in a bid to bolster its financial position. The new shares will be issued on Friday by two wholly owned subsidiaries, EBS Inc. and ECM Inc., which were both established by Elpida on March 2. The company is bracing for a net loss of around 150 billion yen for the current year ending this month.

Oil-related stocks are trading lower following the decline in crude oil price overnight. Inpex is edging down 0.14% and Nippon Oil is losing 1.13%, while Showa Shell is adding 0.75%. Meanwhile, trading house Mitsubishi Corp. is down 0.79%, Sumitomo Corp. is losing 0.72% and Itochu is declining 0.38%.

Fuji Electric Holdings and TDK Corp. plan to merge their uninterruptible power supply operations in October 2009, forming a new firm that would surpass current market leader Mitsubishi Electric Corp, the Nikkei business daily reported. Shares of Fuji Electric are up 2.56%, while shares of TDK are down 0.25%.

The Nikkei reported that J. Front Retailing's group operating profit likely plunged 39% to about 26 billion yen in the year ended February 28, coming in roughly 1 billion yen above its forecast due to cost-cutting efforts. The company's stock is down 1.02%.

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