(Updates for midday break)

By Brigid Riley

TOKYO, March 4 (Reuters) - Japan's Nikkei fell on

Tuesday, as markets were jittery about a trade war ahead of U.S.

tariffs on Canada and Mexico, while a stronger yen also added to

investors' concerns.

The Nikkei was down 1.8% at 37,096.51 by the midday

break, after briefly dropping to its lowest intraday level since

September 18. The broader Topix was down 1.2% at

2,696.99.

The yen rose to near its strongest since early December

against the U.S. dollar after U.S. President Donald

Trump said on Monday that he told leaders of Japan and China

they cannot continue to reduce the value of their currencies as

doing so would be unfair to the United States.

The stronger yen hit exporter shares such as Toyota Motor ( TM )

, which tumbled 2.2%.

Japanese officials have been more concerned about yen

weakness and will likely continue to be relatively hawkish,

going against market hopes, said Naka Matsuzawa, chief macro

strategist at Nomura Securities.

A continued underperformance of technology shares also

weighed on the Nikkei, with chip-testing equipment maker

Advantest ( ADTTF ) down 6.2%, while investors sized up the

impact of tariff policies amid U.S. growth fears.

"It's kind of similar to what happened last summer to a

lesser degree," when the Nikkei suffered steep losses on a mix

of factors including a sharply stronger yen and U.S. recession

worries, Matsuzawa said.

Wall Street's main stock indexes closed sharply lower on

Monday after Trump announced the start of 25% tariffs on Canada

and Mexico from Tuesday, as well as an additional 10% on Chinese

imports.

Among Nikkei heavyweights, Uniqlo parent firm Fast Retailing ( FRCOF )

stumbled 2.6%, AI-focused startup investor SoftBank

Group slid 5.2%, while Seven & i Holdings ( SVNDF ) shed

10.2%.

The Nikkei volatility index briefly jumped to 31.6

points, a level last seen in early November following the U.S.

presidential election.

(Reporting by Brigid Riley; Editing by Rashmi Aich and Varun H

K)