* Nikkei hits lowest since early June
* Investors monitor U.S. chip stocks' performances - analyst
* Retail sector mixed, Shimamura nosedives, while Takashimaya soars
By Ayai Tomisawa
TOKYO, June 26 (Reuters) - Japanese stocks slumped to 3-1/2-week lows on Tuesday morning, joining a global selloff as an intensifying trade row between the United States and major economies knocked risk appetite, with large cap shares such as SoftBank leading the slide.
The Nikkei dropped 0.5 percent to 22,218.15 in midmorning trade, after slipping to as low as 22,104.12 earlier, the lowest level since June 1.
The benchmark index has fallen for a third day, shedding nearly 2 percent during the period.
Index-heavy Fast Retailing dropped 2.3 percent, while SoftBank fell 2.2 percent, contributing a combined 65 negative points to the Nikkei.
Analysts said that investors are focused on cyclical stocks such as the semiconductor sector. On Wall Street overnight, technology stocks took a battering after U.S. Treasury Secretary Steven Mnuchin on Monday said forthcoming investment restrictions would apply "to all countries that are trying to steal our technology," not just to China.
"Investors are monitoring when a sell-off in U.S. technology stocks will stop as the sector is a leading indicator for economic confidence," said Nobuhiko Kuramochi, a strategist at Mizuho Securities.
He said that shares of Japanese chip equipment makers move in tandem with companies like Applied Materials.
Tokyo Electron stayed near eight-month lows and Advantest Corp around two-month lows, while U.S. chip equipment maker Applied Materials hovered around more than four-month lows.
"The timing of a correction in the U.S. chip sector will likely determine the performances of Japanese technology shares," Kuramochi said.
The retail sector was mixed. Discount clothing chain Shimamura Co nose-dived 13 percent to 9,740 yen, a level not seen since January 2015, after the company posted a 32 percent drop in operating profit for the first quarter.
Department store operator Takashimaya Co soared 6.6 percent to 987 yen, the highest since early April after its operating profit rose 5.7 percent for the first quarter ended May.
The mining sector dropped 1.6 percent and was the worst performer on the board as weakness in oil prices overnight triggered profit-taking in stocks like Inpex Corp which shed 1.2 percent.
The broader Topix declined 0.5 percent to 1,720.06.
Editing by Shri Navaratnam