Japan's Nikkei extends losses; bonds rise as global trade frictions weigh

By Junko Fujita

TOKYO, Jan 21 (Reuters) - Japan's Nikkei share average fell for a fifth straight session on Wednesday as global trade frictions weighed on risk sentiment, while the nation's bonds bounced back after a plunge in the previous session.

The Nikkei .N225 was down 0.45% to 52,751.16, as of 0137 GMT, as it pared losses after falling as much as 1.5% earlier in the session.

The broader Topix .TOPX slipped 0.88% to 3,593.85.

Japan's stocks fell, and the yen and bond prices plunged in the previous session, sending yields to record highs after Prime Minister Sanae Takaichi called for a snap election on Monday.

Takaichi echoed her rival parties and vowed to suspend an 8% food levy for two years, fuelling concerns about the potential strain on the country's already precarious finances.

"Today, investors are probing the market with small buys after the sharp declines of the Nikkei. The market wanted to defend the psychological line of 52,000," said Kazuaki Shimada, chief strategist at IwaiCosmo Securities.

Chip-testing equipment maker Advantest 6857.T and chip-making equipment maker Tokyo Electron 8035.T reversed losses to rise 1.23% and 0.56%, respectively, becoming the biggest support for the Nikkei.

"The declines in yields on the Japanese government bonds also eased sentiment," Shimada said.

Japan's 20-year government bond yield JP20YTN=JBTC, which rose to a record high level, slipped 4.5 basis points to 3.3%. The 30-year JGB yield JP30YTN=JBTC slipped 8 bps to 3.795%.

U.S. equities, which ended weaker overnight, also weighed on local stocks, with all three major Wall Street indexes closing with their biggest one-day drops in three months on concerns that fresh tariff threats from President Donald Trump against Europe could signal renewed market volatility. .N

Financial stocks fell, with the brokerage and banking sectors .ISECU.T, .IBNKS.T losing more than 2% each to become the worst-performing sectors.

Mitsubishi UFJ Financial Group 8306.T and Sumitomo Mitsui Financial Group 8316.T fell more than 2% each.