TOKYO, June 2 (Reuters) - Japan's Nikkei share average

fell on Monday, dragged lower by worries over trade tensions

between the U.S. and China, and a stronger yen, which hurt

automakers.

As of 0204 GMT, the Nikkei dropped 1.4% at 37,428.14

and the broader Topix slipped 1.02% to 2773.

"Investors were worried about rising uncertainties about

trade issues," said Shoichi Arisawa, general manager of

investment research at IwaiCosmo Securities.

"Optimism over the tariff policy, which pushed the Nikkei

over the psychologically important level of 38,000 last week,

has vanished."

U.S. President Donald Trump on Friday accused China of

breaching a trade agreement with the U.S. and issued a new

veiled threat to get tougher with Beijing.

Trump later said he would speak to China's President Xi

Jinping and hopefully work out their differences on trade and

tariffs.

The yen strengthened on Monday, following the declines of

U.S. Treasury yields on Friday, which also weighed on Japanese

stocks, said Arisawa.

The yen rose 0.37% to 143.5 against the U.S.

dollar.

A stronger yen typically weighs on exporter shares by

reducing the value of overseas earnings when converted back into

Japanese currency.

"One market-moving cue would be the G7 leaders' summit to be

held in Canada later this month, where we may see the fate of

trade talks between Japan and the U.S.," said Arisawa.

Automakers fell, with Toyota Motor ( TM ) and Honda Motor ( HMC )

down 2.49% and 2.11%, respectively.

Chip-related shares fell, with Advantest ( ADTTF ) and Tokyo

Electron ( TOELF ) slipping 3.57% and 2%, respectively.

All but three of the Tokyo Stock Exchange's 33 industry

sub-indexes fell, with the auto sector and tyre makers

losing 1.95% and 2.38%, respectively, to become the

worst performers.

Sumitomo Realty & Development ( SURDF ) was up 1.5%, after

jumping as much as 7% as a government filing showed an activist

Elliott International took a 2.99% stake in the property

developer.