* Prolonged US-China trade war seen as drag on global growth
* Stronger yen saps exporters
* Dismal Q1 earnings send Kobe Steel, Sysmex sharply lower
* More earnings coming up; Mitsubishi Heavy on Mon, SBG on Wed
By Tomo Uetake
TOKYO, Aug 5 (Reuters) - Japanese shares tumbled on Monday, as investors grew nervous about a prolonged U.S.-China trade war, with a rapidly strengthening yen dragging down exporters like Panasonic and Daikin.
The Nikkei share average shed 1.7%, extending Friday's sizable loss of 2.1%, to 20,720.29 for its lowest finish since June 5. Of Tokyo's 33 subindexes, 32 industry groups were in the red.
The grim mood followed declines on Wall Street on Friday with the blue chip Dow and the S&P 500 hitting their lowest levels since late June.
U.S. President Donald Trump abruptly decided on Thursday to slap a 10% tariff on $300 billion of Chinese imports, stunning markets and ending a month-long trade truce. China has vowed to fight back on Friday.
The rapidly strengthened yen during Asian trading also soured sentiment and dragged down exporters, with Nissan dropping 4.3%, Panasonic down 3.7% and Daikin Industries slipping 3.1%.
On the currency market, the yen gained as much as 0.8% to 105.785 yen to the dollar, after the Chinese yuan weakened beyond the psychological 7-per-dollar threshold to a record low in offshore trading. All else being equal, a stronger yen hurts Japanese exporters' profits.
"With the yuan's depreciation sparking fears of a currency war, today we're seeing a full-fledged risk-off mood across asset classes. The pace of the yen's appreciation looks quite worrisome," said Yasuo Sakuma, chief investment officer at Libra Investments.
"Some investors are seen selling futures to hedge their positions in a declining market. When the trading volume is not abundant, their actions drag down the market and cause more selling."
With Japan's results season already in full swing, reactions to earnings continued to dominate trading on Monday.
Kobe Steel nosedived 15.2% to a seven-year low, after the country's third-largest steelmaker cut its recurring profit forecast for the financial year ending March by 67% as the U.S.-China trade war battered steel demand for automobiles and aluminium and copper demand for chips.
Sysmex tumbled 12.5% as the medical devices maker reported weaker-than-expected profits for the April-June quarter.
Yahoo Japan slid 12.5% after the internet company's operating profit fell 24%, below analyst estimates.
Bucking the overall weakness, there were also some bright spots on the earnings front.
Subaru climbed 3.9% after the carmaker reported a 48% increase in first-quarter operating profit, thanks to upbeat global sales, led by strong SUV sales in the United States.
Asics soared 23.9% after the sports gear maker reported better-than-expected operating profit for the January-June period and announced a commemorative dividend to celebrate the firm's 70th anniversary.
The broader Topix lost 1.8% to 1,505.88, its loweset closing in two months. Earlier in the session, the index hit the weakest level in seven months.
Turnover on the Tokyo Stock Exchange's main board was subdued at 2.52 trillion yen ($23.8 billion) versus the daily average of 2.33 trillion yen over the past year. ($1 = 105.9100 yen) (Reporting by Tomo Uetake; Editing by Kim Coghill & Shri Navaratnam)