Chubu Electric Power has agreed to suspend operations at a nuclear facility on safety concerns.
On Friday, Prime Minister Naoto Kan asked Chubu to halt operations at its plant in Hamaoka in central Japan.
Mr Kan said three reactors sit in an area due for an earthquake, and new safety measures needed to be put in place.
A shutdown may result in power disruptions to major manufacturers including Toyota Motor.
"This news is triggering uncertainty not just about Chubu Electric, but the whole utility sector," said Yoshinori Nagano, a senior strategist at Daiwa Asset Management.
"Investors are concerned that on the back of this news, other reactors currently under inspection may not resume operations soon."
Chubu stock fell as much as 14% at one point on Monday, pulling down other electricity and gas shares.
The Hamaoka plant, which lies 200km (120 miles) south-west of Tokyo, is in Shizuoka prefecture, an area that seismologists say is overdue an earthquake.
Chubu Electric held an extraordinary board meeting on Monday to decide whether to comply with the government's request.
The board met on Saturday to discuss the potential closure without reaching a decision.
Mr Kan's government is under pressure to review its energy policy after Japan suffered a devastating earthquake and tsunami in March.
Engineers are still struggling to contain damage at the Fukushima Daiichi plant in northeastern Japan.