Japan stocks start year in red as Tokyo braces for state of emergency

TOKYO, Jan 4 (Reuters) - Japanese shares ended lower on Monday after Prime Minister Yoshihide Suga said he is considering a state of emergency for Tokyo and surrounding prefectures to contain a spike in local coronavirus infections.

The Nikkei 225 Index ended down 0.68% at 27,258.38 in its first trading session of 2021 - the biggest daily decline in two weeks. The broader Topix fell 0.56% to 1,794.59.

Shares of airlines, transport companies, real estate firms and retailers fell on fears that travel restrictions and shorter business hours will curb consumer spending and hurt the services sector.

Japanese shares rallied in the final days of last year to a 30-year high due to hopes that the approval of coronavirus vaccines would ramp up the global economy’s recovery from the pandemic, but a record number of cases in Tokyo and surrounding cities has caused investors to temper their optimism.

“There could be a small correction to 26,000 or 25,500,” said Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management.

“Companies related to services are getting hurt, but manufacturers focused on overseas demand should continue to do well.”

The underperformers among the Topix 30 were Central Japan Railway Co down 2.74%, followed by Tokio Marine Holdings Inc losing 1.77%.

The stocks that gained the most among the top 30 core Topix names were Nippon Telegraph and Telephone Corp up 2.57%, followed by Daiichi Sankyo Co Ltd rising 2.26%.

Suga on Monday reiterated a request for some businesses to close early, but on the positive side he said the rollout of vaccinations could start as soon as February-end.

There were 37 advancers on the Nikkei index against 185 decliners.

The volume of shares traded on the Tokyo Stock Exchange’s main board was 0.87 billion, compared with the average of 1.2 billion in the past 30 days. (Reporting by Stanley White, Editing by Sherry Jacob-Phillips)