Japan's Nikkei logs worst day in 4 months on US tariff worries; automakers slump

Updates with closing prices

TOKYO, Feb 3 (Reuters) - Japan's Nikkei fell more than 2% on Monday in its worst session in four months as concerns over the global economy mounted after U.S. President Donald Trump levied tariffs on Canada, Mexico and China, with automakers leading the decline.

The Nikkei .N225 slipped 2.66% to 38,520.09, its lowest close since Jan. 17. The index also posted its biggest daily percentage drop since Sept. 30. The broader Topix .TOPX fell 2.45% to 2,720.39.

Trump imposed 25% tariffs on Canadian and Mexican imports and 10% on goods from China starting Feb. 4. Canada and Mexico immediately vowed retaliatory measures, and China said it would challenge Trump's levies at the World Trade Organization.

"Japanese stocks fell amid uncertainties about the global economic outlook, which includes worries that Japanese exports may be a target of Trump's tariff policy in the future," said Kentaro Hayashi, senior strategist at Daiwa Securities.

"Also, if prices rise in the U.S. and the dollar strengthens, yields will rise. That may affect Japan's monetary policy."

Automakers slumped, with Toyota Motor 7203.T losing 5% to drag the Topix the most. Honda Motor 7267.T fell 7.2% and Nissan Motor 7201.T lost 5.63%, with strategists saying their auto production in Mexico is bigger than their Japanese peers.

In contrast, Suzuki Motor 7269.T, which is not present in the United States, posted a marginal loss of 0.05%.

"If automakers face higher tariffs, they would have to raise prices and their competitiveness might be hurt," said Fumio Matsumoto, chief strategist at Okasan Securities.

Mexican operations of Japanese automakers are largely dependent on U.S. demand and that is a big factor for them, said Tomo Kinoshita, global market strategist at Invesco Asset Management in Japan.

One but all of the Tokyo Stock Exchange's 33 industry sub-indexes fell, with automaker .ITEQP.T shedding 5% to become the worst performer.

The Nikkei volatility index .JNIV rose 20% to its highest level since mid-December.

Shares of video game developer Konami Group 9766.T jumped 14% to become the biggest support for the Nikkei.

(Reporting by Junko Fujita, additional reporting by Brigid Riley; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)

((junko.fujita@thomsonreuters.com;))