TOKYO, March 11 (Reuters) - Japan's Nikkei share average

lost more than 2% on Monday, as chip-related stocks tracked

their U.S. peers lower, while the yen's strength also weighed on

sentiment.

The Nikkei had lost 2.48% to 38,704.10 by the midday

break, its biggest daily decline since December 2022 if current

trend holds.

The broader Topix lost 2.25% to 2,665.37.

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

the Nikkei to 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."

The yen strengthened against the dollar as signs the BOJ

will exit negative interest rates at its policy meeting next

week, contrasted with expectations for the U.S. Federal Reserve

to cut rates in June.

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, four sources familiar

with its thinking said.

Japan's benchmark 10-year government bond (JGB) yield hit a

one-month high of 0.76% in early trade. Expectations for

narrowing gap in yields between Japan and the U.S. propped up

the yen.

Chip-equipment maker Tokyo Electron ( TOELF ) lost 4.61% and

chip-testing equipment maker Advantest ( ADTTF ) fell 6.62%.

All but two of the 33 industry sub-indexes on the Tokyo

Stock Exchange fell, with energy explorers losing

4.88% to become the worst performer.

The banking index, which is typically strong amid

rising yields, lost 3.63%, with Mitsubishi UFJ Financial Group ( MUFG )

and Sumitomo Mitsui Financial Group ( SMFG ) slipping

3.71% and 3.87%, respectively.