* Nikkei's drops being trimmed after USD/JPY recovers 117 - traders
* Japan market may stay volatile for Mon and Tues - traders
By Ayai Tomisawa
TOKYO, Jan 18 (Reuters) - Japan's Nikkei share average dived to a one-year low on Monday morning following a big sell-off in Wall Street on Friday after oil prices tumbled and fears grew about economic trouble in China, sending all sectors into the red.
The Nikkei fell 1.4 percent at 16,903.28 in midmorning trade after tumbling to as low as 16,665.05 earlier, the lowest level since Jan. 16, 2015.
Wall Street stumbled with the S&P 500 sinking to its lowest since October 2014 as oil prices sank below $30 per barrel and fears grew about economic trouble in China. A batch of disappointing U.S. data, including a fall in retail sales, added to worries about the global economy.
Although sentiment remains sour, traders say some investors are scooping up battered stocks after the dollar recovered above the 117.00 yen line in Asian trade after dropping to 116.56 yen , from 117.10 late in New York. The pair last stood at 117.31.
"Most investors must have freaked out after seeing a sharp fall in the market. But some of them seem to be buying on the dips when the Nikkei traded below 16,700 points," said Takatoshi Itoshima, chief portfolio manager at Commons Asset Management. "The performances in the Japanese market will likely depend on the forex moves for the time being. As long as the dollar does not drop against the yen sharply, the Nikkei may be supported."
In mid-morning trade, Toyota Motor Corp shed 0.8 percent, Honda Motor Co dropped 2.4 percent and Panasonic Corp shed 2.0 percent.
All of the Topix's 33 subsectors were in negative territory. Oil shares were lower, with Inpex Corp falling 1.6 percent and Japan Petroleum Exploration dropping 2.3 percent.
Financial stocks were lower as well, with Mitsubishi UFJ Financial Group dropping 1.2 percent and Mizuho Financial Group falling 2.8 percent.
"There probably won't be a catalyst from the Japanese market to counter external worries like oil price falls and the U.S. market's slide, so we may expect more volatility for today and tomorrow," said Hikaru Sato, a senior technical analyst at Daiwa Securities, adding that investors will likely stay risk averse as U.S. markets are closed later in the day for a holiday.
The broader Topix dropped 1.3 percent to 1,385.22 and the JPX-Nikkei Index 400 declined 1.2 percent to 12,475.19. (Editing by Simon Cameron-Moore)