TOKYO (AP) _ The Tokyo Stock Exchange's chief index lost morning gains to inch lower today, while the dollar strengthened against the Japanese yen on expectations of a decline in the U.S. trade deficit.

The 225-share Nikkei Stock Average lost 1.58 points, or 0.006 percent, ending the day at 28,461.60. The index, which on Monday fell 750.74 points, started lower, regained 349.65 points, and fell back in the afternoon session.

Some of the buying in the morning was carried out to prevent the index from falling below 28,000 points, which is seen as a psychological barrier, said a dealer with Nomura Securities Co., speaking on condition of anonymity.

''The stock market is still very sensitive and nervous, although we believe it has bottomed out,'' the dealer said.

Traders attributed the afternoon losses to intermittent index-linked selling, including arbitrage, by securities firms.

''Both Japanese and foreign securities firms conducted arbitrage selling from time to time in small amounts throughout the afternoon session,'' said Masayoshi Shimoyama, a senior trader with Nikko Securities Co.

Stock traders and analysts have blamed arbitrage sellings for the continuing plunge of the Tokyo stock market since the beginning of this year. Large-scale arbitrage sales in thin trading have a strong impact on the market.

The Tokyo Stock Exchange has asked member firms to make a weekly report on the number of shares and the amount of money traded in arbitrage dealings to eliminate uncertainties among investors, stock market officials said Tuesday.

Shimoyama said participants gradually withdrew to the sidelines toward the end of the day ahead of the announcement of U.S. trade figures for February slated for Wednesday.

In currency dealings, the dollar closed at 159.83 yen, up 0.41 yen from Monday's close of 159.42 yen. The currency opened at 159.71 yen and traded between 159.60 yen and 159.95 yen.

The dollar was pushed up during the afternoon session by investors expecting improvements in the U.S. trade balance, dealers said.

''The U.S. trade deficit is expected to be around $8.1 billion from $9.3 billion in January. Some even predict the deficit will be $4-5 billion,'' said Toru Kanai, foreign exchange analyst with New Japan Securities Co.

However, dollar selling for profit-taking prevented the U.S. currency from climbing over the 160-yen level, Kanai said.

Uncertainties over developments in Lithuania also prompted dollar buying, because the dollar is believed to be the safest investment in times of emergency, said Masato Hayashi, a dealer with the Bank of Tokyo.

Soviet President Mikhail Gorbachev on Friday threatened to impose economic sanctions on Lithuania if the rebel Baltic republic refuses to rescind legislation passed since its declaration of independence last month.

In the bond market, the price of the benchmark No. 119 Japanese government bonds was changing hands at 85.90 points at 4 p.m., up from Monday's close at 85.74. The 119's yield fell to 7.385 percent from 7.415 percent on Monday.