Japanese shares advance on growing hopes for economic restart

TOKYO/SYDNEY, May 20 (Reuters) - Japanese stocks gained on Wednesday, supported by hopes that the government would allow economic and social activities to resume in response to a decline in new coronavirus infections.

The benchmark Nikkei average .N225 climbed 0.8% to a fresh two-and-a-half month closing high of 20,595.15, with shares in the healthcare and technology sectors leading the advance.

Japan's government is expected to lift its state of emergency for Osaka and Kyoto in western Japan on Thursday after the rate of coronavirus infection fell below the government's numerical target, domestic media have reported. number of infections in Tokyo and its surrounding areas is still above the government's threshold, but growth in new cases is on a clear downtrend, suggesting the government may also lift the state of emergency for the country's capital.

Investor sentiment also got a boost after the Bank of Japan said it would hold an emergency meeting on Friday to decide the details of a loan programme for small firms. futures for the S&P 500 ESc1 , which were last quoted up 0.5% in late Asian trade, provided a tailwind for Tokyo shares.

The broader Topix .TOPX added 0.6% to 1,494.69, its best finish since March 5, with all but six of the 33 sector sub-indexes on the Tokyo exchange closing higher.

Highly cyclical non-ferrous metals .INFRO.T , oil and coal products .IPETE.T and construction .ICNST.T were the top three performing sectors on the main bourse.

Sony Financial Holdings Inc (Sony FH) 8729.T surged 7.6%, after Sony Corp 6758.T said on Tuesday it will turn its listed financial arm Sony FH into a wholly owned unit through a tender offer worth about 400 billion yen ($3.7 billion). Sony Corp fell 2.3%.

Japan Exchange Group Inc 8697.T and Kakaku.com Inc 2371.T jumped 3.9% and 3.7%, respectively, on speculation one of them could replace Sony FH as the benchmark Nikkei's constituent.

Elsewhere, the index of startup-heavy Mothers market advanced 3.3% to a 5-1/2 month closing high, with cloud-based software developer freee KK 4478.T soaring 10.3%.

Bucking the overall trend, shares of Fujifilm 4901.T fell 2.6% after a report that clinical trials of its anti-flu drug Avigan showed it was not affective in treating the coronavirus. Corp 6753.T lost 5.4% after the company reported a 37% decline in annual operating profit and refrained from releasing an earnings outlook for the current year, citing uncertainty over the coronavirus impact. ($1 = 107.7800 yen)