* Prolonged US-China trade war seen as drag on global growth
* Yen fetches 105.80 yen vs dollar, saps exporters
* Dismal Q1 earnings send Kobe Steel, System sharply lower
* More earnings coming up; Subaru on Mon, SoftBank Group on Wed
TOKYO, Aug 5 (Reuters) - Japanese shares dropped on Monday, as investors grew nervous about a prolonged U.S.-China trade war, with a stronger yen also dragging down exporters like Panasonic and Daikin.
The Nikkei share average shed 2.4% by the midday break, extending Friday's 2.1% slide, to 20,590.87, its lowest level since June 4.
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 $300 billion on Chinese imports, stunning markets and ending a month-long trade truce. China vowed to fight back on Friday.
The rapidly strengthened yen during Asian trading also soured sentiment and dragged down exporters, with Nissan dropping 4.8%, Panasonic down 3.5% and Daikin Industries slipping 3.9%.
On the currency market, the yen gained as much as 0.8% to 105.80 yen to the dollar, after the Chinese yuan tumbled past 7 per dollar to a record low in offshore trading. All else being equal, a stronger yen hurts on Japanese exporters' profits.
With Japan's earnings season already in full swing, reactions to earnings continued to dominate trading on Monday.
Kobe Steel nosedived 12.8% to its 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 12.7% as the medical devices maker reported weaker-than-expected profits for the April-June quarter.
Yahoo Japan slid 12.2% after the internet company's operating profit fell 24%, below analyst estimates, disappointed investors.
The broader Topix lost 2.4% to 1,496.61, its loweset level in two months, by the midday break. (Reporting by Tomo Uetake; Editing by Kim Coghill)