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 and Advantest lost 3.21% and 4.96%, respectively, while Toyota Motor 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 and Mitsubishi Heavy Industries falling 6.36% and 4.5%, respectively.

Brokerage Nomura Holdings fell 5.41%.

Bucking the trend, watchmaker Citizen Watch rose 5.05% and calculator maker Casio Computer gained 4.94% to become the top performers on the Nikkei.

(Reporting by Junko Fujita; Editing by Varun H K and Mrigank Dhaniwala)