Japan's Nikkei average lost 0.36 percent on Thursday to log its lowest close in two weeks, weighed down by Tokyo Electron Ltd. and similar stocks after the company reported weak chip orders data a day earlier.

Shares of Nomura Holdings Inc. tumbled nearly 5 percent after Deutsche Securities lowered its target price on Japan's largest brokerage, citing concern that subprime loan losses could weigh on its earnings.

The market earlier shrugged off news that the Bank of Japan left its key policy rate unchanged at 0.50 percent for a fifth month as expected.

The market rose in the morning following a rise in New York stocks, but later saw a sell-off in futures after the one event passed by amid a lack of factors to trade on, said Zenshiro Mizuno, senior managing director at Marusan Securities.

But I don't think the market is facing a drastic correction as investors seem to have simply sold stocks after buying them, and the fall was limited.

The benchmark Nikkei closed down 65.37 points at 17,984.14, the lowest finish since June 28.

The broader TOPIX index shed 0.26 percent to 1,763.06.

The Tokyo exchange saw its busiest day of trading in three weeks, with 2.2 billion shares changing hands on the first section. Declining shares outnumbered advancers 972 to 609.

The decision by the BOJ's board was by a vote of 8-1, and may set the scene for a possible rate hike next month.

Bank of Japan Governor Toshihiko Fukui told a news conference that he and seven other members of the board saw a need to continue examining more economic data before raising interest rates.

The central bank's decision came in as expected, and I see very little impact on stocks. It now looks like the rate hike could take place in late August, said Katsuhiko Kodama, senior strategist at Toyo Securities.

TOKYO ELECTRON, NOMURA DOWN

Among the day's gainers, shares of Maruzen Co. Ltd. surged 19.3 percent to 223 yen after the book seller said Dai Nippon Printing Co. Ltd. plans to take a 25.5 percent stake in it in terms of voting rights as part of an alliance with the printing company.

But Tokyo Electron shed 2 percent to 8,810 yen after the company said on Wednesday orders for its chip- and display-making equipment fell 35 percent in April-June from the previous quarter's record high to about 140 billion yen on slower demand from dynamic random access memory makers.

Prices of DRAM chips, used in personal computers, fell by more than 40 percent in April-June, and manufacturers have been reining in spending as they deal with excess inventory.

Other chips stocks also fell with Advantest Corp. down 1.9 percent at 5,300 yen, while Dainippon Screen Manufacturing Co. Ltd. retreated 2.9 percent to 922 yen.

Shares of Nomura dropped 4.8 percent to 2,205 yen.

Elsewhere, Doutor Coffee Co. Ltd. slid 3 percent to 2,090 yen after McDonald's Holdings Co. Ltd. (Japan), the nation's largest fast-food chain, said it will open 15 cafes by the end of August by refurbishing existing outlets.

Seven & I Holdings Co. Ltd. climbed 1.7 percent to 3,630 yen after it said a day earlier that it had signed up 4 million users for its nanaco e-money services in less than three months since an April launch. The usage number reached 30 million last month, surpassing Sony Corp.'s rival Edy service.

After the closing bell, Japanese clothing retailer Fast Retailing Co. said its net profit fell 11.5 percent in the past nine months and it cut its full-year forecast for a third time amid a recent slump in same-store sales.

Japan Nikkei 225 Tokyo Stock Exchange