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Tokyo stocks ended flat on Thursday as fears of a US debt default hung over the market, but a weakening yen kept losses to a minimum.
The benchmark Nikkei 225 index edged down 13.24 points to 14,157.25 after losing 2.17 percent the previous day.
The Topix index of all first-section issues was down 0.10 percent, or 1.17 points, to 1,173.99.
"The US government deadlock is certainly an immediate sell catalyst, but to a certain extent the whole 'Abenomics trade' in which a weaker yen could formerly be counted on to fuel higher stock prices may be unwinding," said Sumitomo Mitsui Banking Corp. strategist Daisuke Uno.
"In light of the Japanese government's plan to raise the national sales tax, the extra inhibiting effect on consumption could very well take the steam out of any 'second rally' hopes for the Nikkei heading into the calendar year-end," he told Dow Jones Newswires.
Prime Minister Shinzo Abe this week decided to hike sales tax, a move seen as necessary to cut the country's huge national debt but which critics say could strangle a fragile economic recovery.
Talks between US President Barack Obama and top Republicans failed to end a government shutdown sparked by a budget impasse. That means the country will head into a third day of political paralysis, with no end in sight and fears growing that it could lead to the US defaulting on its debt.
But the greenback bounced off its New York lows, buying 97.77 yen against 97.33 yen, giving a boost to shares of some Japanese exporters.
Investors will now turn their focus to the Bank Japan's two-day policy meeting, which starts Thursday, with dealers looking to see if it will expand its asset-buying programme.
SoftBank rose 4.00 percent to 7,530 yen, vaulting the mobile carrier past banking giant Mitsubishi UFJ as the second most-valuable company on the Tokyo Stock Exchange behind Toyota. The automaker rose 0.64 percent to 6,250 yen.
All Nippon Airways (ANA) added 2.31 percent to 221 yen while rival Japan Airlines (JAL) lost 2.04 percent to 5,760 yen.
On Wednesday, Tokyo awarded 11 new coveted international landing slots to ANA at the capital's Haneda airport, while JAL got just five.
Market heavyweight Fast Retailing, operator of the Uniqlo clothing chain, slipped 0.8 percent to 35,250 yen.