UPDATE 4-Japan heads toward longer state of emergency as Olympics approach

* Summer Olympics less than three months away

* State of Emergency has not lowered coronavirus infections

* Restrictions on business activity in doubt (Adds prime minister's comments in paragraph 3)

By Stanley White and Yoshifumi Takemoto

TOKYO, May 5 (Reuters) - Japan is considering extending a coronavirus-spurred state of emergency in the capital, Tokyo, and other major urban areas, sources said on Wednesday, a move that could cast doubt on the planned Summer Olympics.

Officials were leaning toward an extension of the measures in Tokyo, Osaka, Kyoto and Hyogo prefectures beyond May 11 as the country battles a surge in COVID-19 cases, three sources told Reuters.

Prime Minister Yoshihide Suga told reporters after meeting with cabinet ministers and advisers on Wednesday that he wants to make a decision this week.

An official announcement could come as early as Friday, one of the sources told Reuters. The Yomiuri Newspaper earlier reported that an extension was likely.

Extending the measures, which were imposed on April 25, would likely fan persistent concerns about whether the Tokyo Olympics, scheduled to begin on July 23, can be held as planned.

The games have already been delayed once from last year due to the pandemic. The city of Sapporo, on the northern island of Hokkaido, hosted a half-marathon test event on Wednesday.

One proposal that has emerged is an extension until the end of the month, according to two of the sources. All three people requested anonymity because they were not authorised to speak with the media.

The governor of Osaka Prefecture said an extension of three weeks to a month may be necessary, according to domestic media.

Calls by Reuters to Suga's office were not answered. Japan's government buildings and financial markets were closed on Wednesday for the annual Golden Week holidays.

International Olympic Committee President Thomas Bach is expected to visit Japan later this month, but a longer state of emergency could prompt renewed calls from the public to cancel the games.

Under the restrictions in Tokyo and other urban areas, the government has required restaurants, bars, and karaoke parlours serving alcohol to close. Large department stores and cinemas were also shuttered, while spectators were banned from big sporting events.

It was uncertain whether the government will loosen any of the operating restrictions on the services sector, the Yomiuri said. (Reporting by Stanley White; Editing by Himani Sarkar, Jane Wardell and Kim Coghill)