(Updates closing prices)

TOKYO, March 11 (Reuters) -

Japanese shares ended sharply lower on Monday as

chip-related stocks tracked their U.S. peers lower and the yen's

strength hurt appetite for exporters.

The Nikkei fell 2.19% to close at 38,820.49, its

biggest fall since Oct. 4.

"U.S. chip stocks fell at the end of last week, which

helped the Nikkei enter a correction phase," said Shuji Hosoi,

senior strategist, Daiwa Securities.

The S&P 500 and Nasdaq closed lower on Friday, after

touching record highs during the session, with high-flying chip

stocks reversing course.

The Philadelphia Semiconductor index lost 4% on

Friday, with Nvidia ( NVDA ) becoming the biggest drag.

"Japanese equities were also hurt by the stronger yen. This

trend will probably continue until the Bank of Japan (BOJ)

concludes its policy meeting last week."

A growing number of BOJ policymakers are warming up to the

idea of ending negative interest rates this month on

expectations of hefty pay hikes this year.

The yen strengthened against the dollar on speculation about

the BOJ's policy tweak.

Chip-equipment maker Tokyo Electron ( TOELF ) lost 3.15%

and chip-testing equipment maker Advantest ( ADTTF ) fell 4.78%.

The broader Topix fell as much as 3%, before ending

the session down 2.2% at 2,666.83.

The BOJ typically buys Topix-linked exchange-traded

funds when the index falls more than 2% as part of its stimulus

package.

"The Topix loss in the afternoon made us think that the

BOJ might not have stepped in the market," said Takehiko

Masuzawa, trading head at Phillip Securities Japan.

"If that was the case, the BOJ is trying to do what it

will be doing after it changes its ultra-loose policy."

Whether the BOJ intervened in the market will be

announced around 0830 GMT.

The banking index, which is typically strong amid

rising yields, lost 3.84%.

Toyota Motor ( TM ) fell 3.1%, becoming the biggest

drag for the Topix.