Japan's Nikkei falls nearly 3% on slowdown concerns; BOJ comments in focus

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By Junko Fujita

TOKYO, March 19 (Reuters) - Japan's Nikkei fell on Thursday as investors weighed the impact of the Middle East conflict on corporate growth, while markets also focused on how the Bank of Japan will respond to the Iran war-linked oil shock in its policy decision later in the day.

The Nikkei was down 2.8% at 53,689.78, as of 0108 GMT, while the broader Topix slipped 2% to 3,639.78.

"Investors are seeing that the Middle East conflict will drag on, and they weigh the downward pressure on corporate earnings," said Wataru Akiyama, a strategist at Nomura Securities.

Oil prices settled higher on Wednesday and climbed further in extended trade after Iran attacked several energy facilities across the Middle East following a strike on its South Pars gas field, a major escalation in its war with the U.S. and Israel.

A surge in oil prices is weighing on Japan's import-dependent economy by pushing up inflation, raising manufacturing costs, and threatening to slow economic growth.

All but two of the Tokyo Stock Exchange's 33 industry sub-indexes dropped. The shipping and mining sectors rose 0.58% and 0.44%, respectively, suggesting the market's bets on the war to prolong, Akiyama said.

The BOJ is expected to keep its interest rates steady after it concludes a two-day policy meeting later in the day, but market views on the future rate path are divided as the Middle East conflict continues to add to domestic price pressures.

Shares related to Japanese chipmakers and artificial intelligence dragged the Nikkei lower, with Advantest (ADTTF) and Tokyo Electron (TOELF) down 5% and 2.43%, respectively. SoftBank Group lost 4%.

Of more than 1,600 stocks trading on the TSE's prime market, 94% fell and 4% advanced, while 1% traded flat. (Reporting by Junko Fujiat, Editing by Sherry Jacob-Phillips)