(Updates with closing prices)

TOKYO, April 1 (Reuters) - Japan's Nikkei share average

ended at a two-week low on Monday, dropping below the key 40,000

mark, as investors sold stocks to book profits on the first day

of the country's financial year.

The Nikkei fell 1.4% to 39,803.09, its lowest close

since March 18, after opening 0.7% higher. The broader Topix

was down 1.71% at 2,721.22.

"Institutional investors typically sell stocks to book

profits on the first day of the financial year," said Shoichi

Arisawa, general manager of the investment research department

at IwaiCosmo Securities.

The Nikkei is up 19% in 2024 and scaled the 40,000 mark to

hit record highs in March, after a steady 54% rise since early

2023.

Chip-related Tokyo Electron ( TOELF ) and Advantest ( ADTTF )

lost 3.21% and 4.96%, respectively, while Toyota Motor ( TM )

slipped 4.03%.

A closely watched Bank of Japan (BOJ) survey showed optimism

in Japan's services sector climbed to a 33-year high in the

first quarter on booming tourism and rising profits from price

hikes.

The survey also showed big firms plan to raise their

capital spending

by 4.0% in the financial year to March 2025, following an

11.5% increase expected for the last fiscal year.

Strategists said the BOJ survey did not become a major cue

for the market as the outcome was within their expectations.

The currency market was steady, offering little cues to

local equities, said Shigetoshi Kamada, general manager at the

research department at Tachibana Securities.

The yen touched a 34-year low against the dollar

of 151.975 on Wednesday and was last at 151.35 per dollar.

Heavy machinery makers fell, with Kawasaki Heavy Industries ( KWHIF )

and Mitsubishi Heavy Industries ( MHVYF ) falling 6.36%

and 4.5%, respectively.

Brokerage Nomura Holdings ( NMR ) fell 5.41%.

Bucking the trend, watchmaker Citizen Watch

rose 5.05% and calculator maker Casio Computer ( CSIOF ) gained

4.94% to become the top performers on the Nikkei.