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Tokyo - Tokyo's Nikkei stock index finished in positive territory on Tuesday although early gains were pared after a political stalemate in Washington sparked the first US government shutdown in 17 years.
The benchmark Nikkei added 0.20%, or 28.92 points, to 14 484.72, while the Topix index of all first-section shares slipped 0.06% or 0.66 points, to 1 193.44 at the close.
The Tokyo market got off to a strong start with the Nikkei up 1.19% by the lunch break after the Bank of Japan's quarterly Tankan business confidence survey came in at its highest level in over five years.
That was followed by Japan's prime minister saying he would press on with a sales tax hike seen as crucial to shrinking a huge national debt, a move welcomed by investors.
But Tokyo's rally evaporated after US legislators failed to end a bitter budget battle, prompting a shutdown of some government services.
"Tokyo stocks could have ended higher given the strong results of the Tankan survey," said Kenji Shiomura, a strategist at Daiwa Securities.
"But the US political mess is going nowhere... That will be weighing on markets globally."
Ten minutes before midnight, the White House budget office issued an order for many government departments to start closing down, triggering 800 000 furloughs of federal workers, and shutting tourists out of monuments like the Statue of Liberty, national parks and museums.
Prospects for a swift resolution of the crisis were unclear. And economists say the struggling US economic recovery could suffer if the shutdown drags on for a matter of weeks.
The shutdown put pressure on the greenback ,with the dollar-yen rate slipping to ¥98.16 in Tokyo from ¥98.21 in New York on Monday afternoon and as high as ¥98.70 in Asian trading earlier Thursday.
A stronger yen hurts the competitiveness of Japanese exporters and tends to drag down the Tokyo market.
