TOKYO, June 8 (Xinhua) -- Japan's benchmark Nikkei stock index closed lower Thursday as investors opted to book further profits amid fears the market could be overheating, while central banks hiking rates sparked concerns over higher borrowing costs.

The 225-issue Nikkei Stock Average dropped 272.47 points, or 0.85 percent, from Wednesday to close the day at 31,641.27.

The broader Topix index, meanwhile, lost 14.80 points, or 0.67 percent, to finish at 2,191.50.

Local brokers said that following the market's recent 33-year closing highs, investors were keen to take profits as technical indicators suggested the market could be overheating.

"Based on how overheated Japanese stocks have been, market participants are selling based on the expectation that there will be significant downward movement in the coming days," Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Research Institute, was quoted as saying.

Analysts here also pointed to Australian and Canadian central banks opting to raise their interest rates, raising the prospect that the U.S. Federal Reserve may follow suit to combat inflation, despite the negative impact this will have on its economy, including increased borrowing rates.

Market strategists said high-technology issues weighed on the market, following the tech-heavy Nasdaq losing ground overnight.

As a result, Fujitsu dropped 2.0 percent, while online game company Nexon fell 6.6 percent.

Among highly-capped chip issues, Tokyo Electron lost 4.2 percent, while Advantest fell 3.8 percent.

Chipmaker Renesas Electronics Corp., meanwhile, ended 3.9 percent lower, while heavily-weighted air-conditioner maker Daikin Industries dropped 4.4 percent.

Sharp Corp. was a notable winner, however, ending 3.2 percent higher.

By the close of play, precision instruments, information and communication, and real estate issues comprised those that declined the most.

The turnover on the Prime Market on the penultimate trading day of the week came to 3,716.9 billion yen (26.58 billion U.S. dollars).