TOKYO, Aug 20 (Reuters) - Japan’s Nikkei stock average extended its decline to a seven-month low on Friday, led by a slump in shares with strong link to the global economy, while Toyota Motor dragged its peers and affiliates lower. The Nikkei share average fell 0.68% to 27,096.65 in the morning session, hovering just above the year-to-date low of 27,002 on January 6. The broader Topix dropped 0.4% to 1,889.61. For the week, Nikkei is set to lose after two straight weeks of gains. “The Dow fell for a third straight sessions and that has prompted sell-offs in shares linked to the global economy,” said Takatoshi Itoshima, strategist at Pictet Asset Management. “Japan is in a critical situation due to a resurgence of the COVID-19 infections but so far it has managed to avoid a plunge in the stock markets only because there was a support from the robust U.S. markets.” Shippers fell the most among the Tokyo Stock Exchange’s 33 industry subindexes, with a drop of 6.15%. Auto and parts makers extended losses after Toyota Motor said it would cut its global production by 40% next month. Toyota fell 2.04%, while Honda Motor lost 3.43% and Nissan Motor dropped 5.07%. Toyota’s affiliates Denso tumbled 7.09% while Aisin lost 5.28%. Chip-related shares were also weak despite gains in their U.S. peers after chip maker Nvidia Corp’s forecast of third-quarter revenue beat Wall Street’s expectations. Advantest snapped earlier gains to fall 0.45%, while Tokyo Electron just edged up 0.02%. Daiichi Sankyo gained the most among the top 30 core Topix names, with a gain of 3.52 %, followed by Nintendo , which rose 1.49%. Honda Motor was the worst performer among the top 30 core Topix names, Mitsui & Co, losing 3.33%. (Reporting by Junko Fujita; Editing by Krishna Chandra Eluri) Our Standards: The Thomson Reuters Trust Principles.