TOKYO, March 26 (Reuters) - Japanese shares took a tumble on Thursday following three days of massive gains after a rise in domestic coronavirus cases stoked worries of tougher domestic restrictions for social distancing.
The Nikkei share average dropped 4.51% to 18,664.60. It had risen 18% in the last three sessions, including an 8% gain the previous day - its biggest since 2008.
The rally was driven by a range of factors, including buying from domestic public accounts and hopes of big U.S. stimulus, which all prompted sellers to unwind their positions.
But the sentiment soured after Tokyo’s governor late on Wednesday asked residents to avoid non-essential outings until April 12, warning of the risk of an explosive rise in infections in Japan’s capital.
The Japanese government was preparing to set up a special headquarters on the coronavirus as early as Thursday afternoon, a step that could set the stage for declaring a state of emergency over the outbreak.
Tokyo reported a record 41 new infections on Wednesday to bring the total to 212, while the country’s total cases hit 1,300 - accelerating in the last few days.
“The rise in infections in Tokyo is making lockdowns in Japan realistic, forcing markets to re-assess the impact of the virus,” said Hideyuki Suzuki, head of investment research at SBI Securities.
“Upcoming economic data will likely show an unprecedented level of devastation but it is not clear if that has been priced in at the recent bottom of the market.”
In a sign of things to come, trading house Marubeni lost 11.8% after it forecast a record net loss of 190 billion yen ($1.7 billion) for the year ending March, as the pandemic drives an unprecedented oil price slide and falls in other commodities.
Marubeni’s warning hit its rival companies, such as Mitsubishi Corp, Mitsui Co and Itochu Corp , which fell 2.5%, 5.9% and 4.2%, respectively.
Pepper Food Service, fell 17.4% - its daily limit - after the struggling steak restaurant chain operator said late on Wednesday it is facing funding problems and that there is substantial doubt about its ability to continue as a going concern.
SoftBank Group slumped 9.4% after Moody’s downgraded its debt rating by two notches to “Ba3”, prompting the tech conglomerate to request a withdrawal of the rating.
On the other hand, some telecom companies and manufacturers of soaps and foods continued to do well. Frozen food firm Nichirei jumped 6.0% while mobile carrier NTT Docomo gained 3.9%.
The broader Topix fell 1.8% to 1,399.32. (Reporting by Hideyuki Sano; Editing by Subhranshu Sahu and Christopher Cushing)