Nikkei hits 3-1/2-month low as carmakers plunge on Trump's Mexico tariff jolt

* Nikkei drops for 4th week
* Nikkei posts biggest monthly drop since Dec.
* Auto sector second worst performer on the board
* Japan Display soars on news it will get financial aid

By Ayai Tomisawa
TOKYO, May 31 (Reuters) - Japan's Nikkei tumbled to a
3-1/2-month low, led by a plunge in carmakers after U.S.
President Donald Trump said the United States would impose a new
tariff on all imports from Mexico next month until illegal
immigration is stopped.
The Nikkei share average .N225 ended 1.6% lower to
20,601.19, the weakest closing price since February 8.
For the week, it dropped 2.4% to post a fourth straight day
of losses, and is off 7.4% for the month for its the biggest
monthly drop since last December.
The transport equipment sector .ITEQP.T tumbled 3.2% and
was the second worst sectoral performer on the board. Mazda
Motor Corp 7261.T dived 7.1%, Toyota Motor Co 7203.T shed
2.9%, Nissan Motor Co 7201.T slumped 5.3% and Honda Motor Co
7267.T declined 4.3%.
Trump said on Thursday the U.S. will impose a 5% tariff on
all goods coming from Mexico starting on June 10 until illegal
immigration across the southern border is stopped. "The tariff will gradually increase until the Illegal
Immigration problem is remedied, at which time the tariffs will
be removed," Trump said on Twitter.
In a statement issued by the White House, Trump said the
tariff would increase to 10% on July 1, 15% on Aug. 1, 20% on
Sept. 1 and to 25% on Oct. 1.
"It doesn't look like there are prospects of resolving the
immigration issue by the deadline. Although the specific impact
on the Japanese auto industry is unclear at this point,
investors are growing increasingly worried about a negative
effect on auto sales," said Yoshinori Shigemi, a global market
strategist at JPMorgan Asset Management.
"The immigration issue itself is contained between the U.S.
and Mexico, but Trump's latest move reminded investors about his
hardline stance on trade issues so the market is cautious about
a trade deal between the U.S. and Japan as well."
Trump had indicated during his Japan trip this week that
there will be trade announcements between the two sides
"probably in August," and that the trade gap between the two
countries could be "straightened out rapidly." Bucking the weak trend, Japan Display Inc 6740.T jumped
21% after news it secured a financial aid from a
Chinese-Taiwanese consortium in June. Ono Pharmaceutical 4528.T rallied 3.1% after the company
said it will buy back up to 2.92% of its own shares, worth up to
30 billion yen. The broader Topix index .TOPX declined 1.3% to 1,512.28,
with all but one of its 33 subsectors in the red.

(Editing by Shri Navaratnam)