Japanese shares drop as economic slump prompts investor caution

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TOKYO — Japanese shares fell on Wednesday, tracking cues from Wall Street’s weak finish overnight, while domestic cyclicals lost ground as concerns over the country’s pandemic-induced economic slump weighed on investor sentiment.

Nikkei share average was down 1.34% at 28,026.36 by 0207 GMT, while the broader Topix fell 0.67% to 1,895.19.

“Japanese market can’t be free from the influence of overseas markets. At the same time, Japan has its own negative factor – the government’s emergency measures to curb COVID-19 infections,” Yoshihiro Takeshige, general manager at investment management department, Asahi Life Asset Management, said.

“It is hard to find reasons for a market recovery in a short term.”

U.S. stocks closed weaker overnight, slumping on a sharp decline in telecom stocks and weak housing starts data that overshadowed better-than-expected earnings.

A jump in COVID-19 infections stoked alarm in Japan amid a shortage of medical staff and hospital beds in Tokyo, prompting a top medical organization to call for cancellation of the Tokyo Olympics scheduled in July.

Cyclical shares took a hit, with machinery sector losing the most among the 33 sector sub-indexes on the main bourse.

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Air-conditioner maker Daikin Industries fell 3.6%, construction equipment maker Komatsu lost 2.74%, while farm equipment maker Kubota slipped 2.77%.

Toyota Motor, which touched a record high in the previous session, fell 0.74% after the automaker said it would halt its production operations next month in northern Japan due to chip shortage.

Hoya, which climbed 2.34%, gained the most among the Top 30 Core Topix names, followed by Mitsubishi UFJ Financial Group that rose 1.36%.

The underperformers among the Topix 30 were Daikin Industries, followed by SoftBank Group Corp losing 2.20%. (Reporting by Junko Fujita, Editing by Sherry Jacob-Phillips)

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