Japanese shares fall on profit-taking, pandemic worries

TOKYO, May 27 (Reuters) - Japanese shares retreated on Thursday as investors trimmed their positions after a recent rally, while uncertainties about domestic economic growth due to a possible extension of COVID-19 emergency measures weighed on sentiment.

The Nikkei share average fell 0.69% to 28,445.25 by 0157 GMT, after a gain of 2.1% in five straight sessions. The broader Topix fell 0.39% to 1,913.32.

“We can say the market is down due to profit-taking, but there are also uncertainties ahead of us that are making investors cautions,” said Takatoshi Itoshima, strategist at Pictet Asset Management.

“Overseas investors particularly are sceptical about the pace of Japan’s COVID-19 vaccine rollouts, while economic outlook remains unclear as Japan is leaning toward extending the state of emergency.”

Japan, which is slated to host the Tokyo 2020 Olympics in July, is struggling to contain a fourth wave of infections even as biggest cities are covered under emergency measures.

Tokyo governor Yuriko Koike on Wednesday sought the current state of emergency, originally set to be lifted at the end of May, to be extended for “about another month,” while Osaka in the western region has made a similar request.

Investors want to see the impact of the MSCI’s regular rebalancing, which will complete by the end of the session, as 29 Japanese shares will be excluded from its main index, Itoshima added.

Shippers and steel makers led the declines, falling 2.05% and 1.46%, respectively, while airliners , up 2.51%, gained the most among the 33 Tokyo Exchanges subindexes.

Astellas Pharma, up 3.26%, was the biggest percentage gainer among the top 30 core Topix names, followed by Keyence.

The underperformers among the Topix 30 were Recruit Holdings Co, down 2.83%, followed by Seven & i Holdings losing 2.48%. (Reporting by Junko Fujita and Kevin Buckland; editing by Uttaresh.V)