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Tokyo -Tokyo shares slipped into negative territory on Wednesday morning in thin holiday trade, giving up early gains as the yen strengthened.
The benchmark Nikkei 225 index shed 0.04%, or 6.19 points, to 13,860.81 by the break, while the broader Topix index of all first-section shares rose 0.22%, or 2.52 points, to 1,159.67.
The Nikkei had jumped 0.50% at the open, taking a lead from a rise on Wall Street, but a strengthening yen prompted a pull back.
A stronger yen is seen as a negative for stocks as it makes Japanese exporters less competitive overseas and dents their profitability.
"The early gains were erased as the yen rebounded," said Hiroichi Nishi, general manager of equities at SMBC Nikko Securities.
"But the selling is unlikely to accelerate as Japanese stocks are still in the buying zone."
Nishi cited improved economic data from the US, Europe and China for buoying investor sentiment, and cited a Japanese media report that said Tokyo was mulling corporate tax cuts to help offset the impact of an expected hike in the country's sales tax.
A doubling of Japan's consumption tax to 10% by 2015 is seen as crucial to chopping the country's enormous debt, the worst among industrialised nations at more than twice the size of the economy.
Trading volume, however, was thin with many market players off for Japan's summer Obon holiday.
Sony rose 0.15% to ¥1,970 by the break, Toyota added 0.47% to ¥6,360, while Uniqlo clothing chain operator Fast Retailing slipped 0.91% to ¥32,350.
On currency markets, the dollar changed hands at ¥98.06, slipping from near the ¥98.22 level in New York on Tuesday.
