At closing bell, the 225-issue Nikkei Stock Average declined 99.75 points, or 0.37%, to 27,158.63. The broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 3.37 points, or 0.19%, to 1,791.22.
Japanese shares are dominated by sell orders on profit-taking on following weak lead from Wall Street overnight amid a persisted surge in coronavirus cases in several parts of the world and ahead of crucial Senate election run-offs in Georgia that will determine which party controls the U.S. Senate.
The US stocks eased from record levels on the first trading day of the year on Monday, 04 January 2021, with all three indexes the S&P 500 index, the Dow Jones Industrial Average, and the technology-heavy Nasdaq Composite closing lower, as investors weighed another spike in virus cases and nerves over the outcome of runoff elections in Georgia this week countered optimism over a vaccine-driven recovery in the global economy. The profit taking pullback triggered in the market amid uncertainty ahead of two key Senate runoffs in Georgia on Tuesday. The fate of President-elect Joe Biden's agenda including rewriting the tax code, boosting stimulus and infrastructure spending hinges firmly on Tuesday's twin Senate races in the battleground state that will determine control of the chamber.
Also, dented risk appetite was reports that the government will declare a state of emergency that would take effect by Friday and last about a month. Japan's Prime Minister Yoshihide Suga announced Monday that he was moving to issue a localised state of emergency for the greater Tokyo area, which continues to see record daily infection figures. Suga said the next state of emergency will be "limited" and "focused" in its scope, unlike the nation's last state of emergency last year that kept most consumers at home across the country and brought the economy to a halt.
Airlines and train operators were among the worst hit amid the prospects of fresh curbs to contain the health crisis. ANA Holdings fell 1.2% and Japan Airlines was down 1%.
Tech and electronic players shares outperformed, with Advantest surging 4.8% and Tokyo Electron adding 2.6%. Sony gained 1.3% and Nintendo rose 0.8%.
CURRENCY NEWS: The yen strengthened against greenback amid reports the government will declare a state of emergency that would take effect by Friday and last about a month. The dollar stood at 102.97 yen in Asian afternoon trade, down from 103.14 seen Monday in New York.
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