Northern Taiwan on Thursday shut businesses and schools while airlines cancelled dozens of flights as the slow-moving Typhoon Khanun skirted past the island's northeast amid warnings of floods and high winds.

Typhoon Khanun, categorised by Taiwan's weather bureau as the second-strongest typhoon level, slowly headed towards its northeastern coast with maximum winds of 198 kph (123 mph).

As of 9:15 A.M. Taipei time (0115 GMT), the eye of the typhoon was 360 km off Taipei in the East China Sea, heading in a westerly direction at around 5 kph.

The storm was expected to brush past Taiwan's northern coast late on Thursday before making a sharp turn to the northeast on Friday, bringing total rainfall of up to 0.6 meter (2 feet) in mountainous central Taiwan and 0.3 meter of rain on the mountains near Taipei.

Northern cities including the capital Taipei shut businesses and schools. Taiwan's stock and foreign exchange markets were also closed.

40 international flights cancelled

Nearly 40 international flights have been cancelled while all domestic ferry lines were suspended.

In Taipei, subway services were reduced while hundreds of soldiers were on standby in nearby cities for disaster response.

The storm hit power lines in Japan's popular tourist destination Okinawa earlier this week, knocking out electricity to more than 200,000 households and killing one man.

Typhoon Khanun comes just a week after Typhoon Doksuri brought heavy rains and strong winds to the Taiwan's south.