Nikkei nearly flat as U.S. government shutdown drags on
* Nikkei's support seen at 14,000
* Event-driven hedge funds unwinding buy positions - analyst
TOKYO, Oct 3 (Reuters) - Japan's Nikkei stock average was mostly flat on Thursday morning, struggling to gain momentum as investors fretted about the U.S. government shutdown and agenda for raising the debt ceiling. Adding to the worries, a report showed that U.S. private employers had added fewer jobs than expected in September. Investors were looking to this data for guidance because Friday's broader, government payrolls report will be delayed if no deal on the budget is reached by then. "Investors have placed their buy positions on expectations that U.S. demand will rise on the back of its economic recovery," said Fumio Matsumoto, a fund manager at T&D Asset Management. "They won't turn sellers all the sudden, but the market may stay sluggish." The Nikkei was up 0.02 percent at 14,172.72 as of 0155 GMT, staying below its 25-day moving average of 14,241.78 as well as 14,193.99, a 50 percent retracement of its May high to its low in June. The Topix rose 0.2 percent to 1,177.19. President Barack Obama met with Republican and Democratic leaders in Congress over the shutdown on Wednesday but a solution seemed unlikely as both sides dug in for what could be a long stalemate. Other market participants said that the Japanese market was likely to underperform other Asian markets as investors take profits from recent rises. "Event-driven hedge funds unwound their buy positions after the government's closely watched growth-strategy announcement, and there may be more profit-taking by funds which still have buy positions," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "But the Nikkei should be supported around 14,000 because if it dips below the level, pension funds may buy as they were said to increase their holdings of Japanese stocks." On Wednesday, the Nikkei dropped 2.2 percent after Prime Minister Shinzo Abe on Tuesday evening decided to increase the sales tax to 8 percent from 5 percent next April as planned and announced a 5 trillion yen ($51 billion) stimulus package to help cushion any blow to the economy. On Thursday, exporters were mixed, with Toyota Motor Corp up 0.5 percent, Nissan Motor Co flat, and Sony Corp down 0.5 percent. Gree Inc dropped 3 percent after the social gaming company said it is calling for 200 employees, around 10 percent of its workforce, to voluntarily resign amid deteriorating profitability.