TOKYO, Jan. 6 (Xinhua) -- Tokyo stocks closed sharply lower Thursday, with the benchmark Nikkei stock index tumbling almost 3 percent, marking its sharpest drop in over six months amid renewed concerns the U.S. Federal Reserve may hike its interest rates at an earlier juncture than expected.

The 225-issue Nikkei Stock Average dropped 844.29 points, or 2.88 percent, from Wednesday to close the day at 28,487.87, marking its sharpest decline since June 21 last year, when a 3.2 percent plunge was booked.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, fell 42.26 points, or 2.07 percent, to finish at 1,997.01.

Local brokers said investors were spooked by the Fed's latest meeting minutes revealing a more hawkish stance on its interest rates which could be raised earlier than investors' expectations.

"The minutes had a huge impact on the market especially as investors did not expect the Fed to consider shrinking the balance sheet at an early time," Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co., was quoted as saying.

The news sent U.S. stocks tanking overnight, with fears losses could be extended further in U.S. trading Thursday evening, dealers here said.

Kazuharu Konishi, head of equities at Mitsubishi UFJ Kokusai Asset Management, pointed out, "The Nikkei extended losses because U.S. futures fell in Asian trading hours. Investors feared the U.S. market would fall further this evening."

Investors were seen piling into the safe-haven Japanese yen, with the U.S. dollar dropping to the upper 115 yen range, with investors offloading a range of issues throughout trading hours, as was the case on Wall Street overnight, market strategists here said.

Japan's mounting COVID-19 cases, including concerns over the rising numbers of new infections at U.S. military bases here, contributed to a downbeat mood, brokers also said.

Analysts here said that it was likely that Japanese Prime Minister Fumio Kishida will issue a quasi-state of emergency on Friday for Okinawa, Yamaguchi and Hiroshima prefectures following the infection rates spiking there.

Meanwhile, in the capital, official figures showed there were 641 new COVID-19 cases, the highest daily caseload since Sept. 18, as the highly transmissible Omicron virus variant continues to spread rampantly.

Nationwide, the number of new infections on Thursday has topped the 3,000-mark for the first time since around the end of September.

"Seeing how fast the coronavirus cases surged in the United States and Europe because of the Omicron variant, investors are worried that Japan could also see a sharp spike," Fujito was quoted as saying.

By the close of play, issues that fell outpaced those that rose by 2,012 to 138, on the First Section, while 35 ended the day unchanged, with precision instrument, electric appliance, and service issues leading decliners.

Semiconductor-related issues followed their U.S. peers lower overnight, with Screen Holdings falling 4.3 percent, while Tokyo Electron dropped 3.6 percent.

Sony Group was among the day's notable losers, slumping 6.9 percent, while Toyota Motor skidded down 0.3 percent by the close.

Japan Airlines declined 2.3 percent, while East Japan Railway fell 2.5 percent, owing to investors' woes regarding the impact of COVID-19 on the economy.

On the main section on Thursday, 1,210.64 million shares changed hands, dropping from Wednesday's volume of 1,259.72 million shares.

The turnover on Thursday came to 3,099.92 billion yen (26.77 billion U.S. dollars). Enditem

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