SQL Server 2017

By using db<>fiddle, you agree to license everything you submit by Creative Commons CC0.

3 rows affected

declare
    @first_name varchar(4), @first_name_state tinyint = 0,
    @last_name varchar(4), @last_name_state tinyint = 0,
    @city varchar(4), @city_state tinyint = 0,
    @country varchar(10), @country_state tinyint = 0,
    @result nvarchar(max) = '{}';
    
select
    @first_name_state =
        case
            when @first_name_state = 0 then 1
            when @first_name_state = 1 and @first_name = t.first_name then 1
            when @first_name_state = 1 and @first_name is null and t.first_name is null then 1
            else 2
        end,
    @first_name = t.first_name,
    @last_name_state =
        case
            when @last_name_state = 0 then 1
            when @last_name_state = 1 and @last_name = t.last_name then 1
            when @last_name_state = 1 and @last_name is null and t.last_name is null then 1
            else 2
        end,
    @last_name = t.last_name,
    @city_state =
        case
            when @city_state = 0 then 1
            when @city_state = 1 and @city = t.city then 1
            when @city_state = 1 and @city is null and t.city is null then 1
            else 2
        end,
    @city = t.city,
    @country_state =
        case
            when @country_state = 0 then 1
            when @country_state = 1 and @country = t.country then 1
            when @country_state = 1 and @country is null and t.country is null then 1
            else 2
        end,
    @country = t.country
from Table1 as t;

if @first_name_state = 1
    set @result = json_modify(json_modify(@result,'$.first_name','null'),'strict $.first_name',@first_name);
    
if @last_name_state = 1
    set @result = json_modify(json_modify(@result,'$.last_name','null'),'strict $.last_name',@last_name);
    
if @city_state = 1
    set @result = json_modify(json_modify(@result,'$.city','null'),'strict $.city',@city);

if @country_state = 1
    set @result = json_modify(json_modify(@result,'$.country','null'),'strict $.country',@country);

select @result;

(No column name)
{"first_name":"John","city":null}