* Nikkei hits 2-wk high, flirts with 200-day MA before backing off
* Weaker yen, higher commodities prices support the market
* Property shares jump on Goldman Sachs upgrades
* More earnings downgrades seen souring sentiment next week
By Chikafumi Hodo and Antoni Slodkowski
TOKYO, April 1 (Reuters) - Japan's Nikkei average began a new financial year with a small loss on Friday, running out of steam after bumping into key technical resistance, and more losses are expected in the near term as companies are likely to lower their profit outlooks after last month's earthquake.
Japanese shares have recouped around two-thirds of their losses from a massive post-quake sell off but traders said the rebound had run its course and shares may fall next week as more companies threaten to sour the mood with bad news on profits.
Portfolio managers piled back into property shares, which many consider oversold, but they ultimately wanted to lighten recently built positions ahead of the weekend and before the release of U.S. payrolls data later in the day.
"The market has come back up as people bought back on valuations and speculation that firms weren't hurt all that badly in the quake, but we've seen some companies lowering forecasts already and we'll have more of that, including some blue-chips, next week," said Hideyuki Ishiguro, a supervisor at Okasan Securities in Tokyo.
Toto Ltd , known for its high-tech toilets, slipped 1.2 percent to 661 yen after the company lowered its net profit forecast for the business year to March 31, 2011, to 4.5 billion yen ($54 million) from 6 billion yen, citing delays in deliveries and power cuts after the March 11 earthquake.
Ishiguro said the Nikkei may come under greater pressure next week, with options prices due to settle on Friday and a high potential for negative news, boosting the chances for a steep decline.
"We had a similar situation after the Lehman Shock, with stocks tumbling in a week with options prices settling after a rebound."
The benchmark Nikkei climbed as high as 9,822.06 on Friday, hitting its 200-day moving average and its highest since a panic sell-off on March 14, but retreated to end the day down 0.5 percent at 9,708.39. The broader Topix shed 0.8 percent to 862.62.
"PARTICULARLY BULLISH"
Shares in Japan's two biggest publicly traded property firms, Mitsubishi Estate Co and Mitsui Fudosan Co , gained around 2 percent after Goldman Sachs said in a report that property shares were oversold on post-quake concerns.
The brokerage reinstated a "buy" rating for Mitsubishi Estate, which was added to its conviction list, and upgraded Mitsui Fudosan to "buy" from "neutral".
Despite the rebound, Mitsubishi Estate and Mitsui Fudosan are still more than 12 percent below pre-quake levels after being sold on worries over rent declines in the stricken areas, planned power outages and delays in handovers of condominiums.
"We are particularly bullish on Mitsubishi Estate and Mitsui Fudosan, which we see as undervalued," said analyst Sachiko Okada, adding that quake-affected areas account for very little of the firms' profit.
Shares in Japan's biggest oil and gas developer, Inpex Corp , and other oil-related companies extended solid gains racked up after the earthquake, as the price of oil hit a 2-1/2-year high on Thursday on ongoing supply threats due to turmoil in Libya and the Middle East.
Inpex jumped 4.3 percent to 658,000 yen in heavy trade. It has surged nearly 20 percent since the quake, while the benchmark Nikkei has lost 7 percent, as the disaster spurred demand for oil and gas products amid short energy supplies.
Trading houses advanced after the Reuters-Jefferies CRB index , a measure of 19 mostly U.S. commodity futures, finished the first quarter with a strong 8 percent gain as global economic improvement began to take hold. [ID:nN31561963]
Marubeni , Japan's No.5 trader, rose 2.3 percent to 613 yen, while second-ranked Mitsui Co Ltd climbed 0.6 percent to 1,500 yen in heavy trade.
Shares of Tokyo Electric Power Co fell a further 3.7 percent to 449 yen, heading toward their all-time low of 393 yen after advancing shortly after the opening.
The Mainichi newspaper, quoting an unnamed government official, said on Friday that the Japanese government was planning to inject funds into the utility but was unlikely to take more than a 50 percent stake in it. [ID:nL3E7EV46V]
Traders said Tokyo Electric shares were mainly driven by short-term speculators trying to take advantage of massive volatility since the earthquake.
"Tokyo Electric is not a normal share any more," said a trader at a Japanese brokerage house. ($1 = 83.160 Japanese Yen) (Additional reporting by Hideyuki Sano; Editing by Edmund Klamann)