* Nikkei down 0.4 pct, Topix down 0.5 pct
* Toyota reportedly agrees on price cut with major steelmaker
* Steelmakers slip broadly (Updates prices through market close)
TOKYO, Aug 24 (Reuters) - Japan's Nikkei share average fell to a 3-1/2-month low on Thursday, dragged down by Wall Street losses, a stronger yen and steel makers after reports that the country's biggest producer was cutting prices.
Bucking gains elsewhere in Asia, the Nikkei ended the session 0.4 percent lower at 19,353.77 points. It slid to 19,351.92 at one point, its lowest since May 2.
The broader Topix shed 0.5 percent to 1,592.20.
Shares on Wall Street fell overnight after a threat from U.S. President Donald Trump to shut down the government if Congress fails to fund a Mexico border wall.
The buoyant yen amid a weaker dollar also soured the mood.
U.S. political uncertainty was seen keeping the Nikkei capped firmly.
"The market is sensitive to Trump's day-to-day comments," said Yoshihiro Okumura, general manager at Chibagin Asset Management.
"Uncertainty over U.S. political risks is the market's major concern now."
Nippon Steel and Sumitomo Metal, Japan's biggest steel producer, fell 2.5 percent after media reports that it had agreed on a price cut with Toyota due to declining costs of steel making materials like coking coal.
The automaker, in turn, was expected to reduce wholesale steel prices for its parts suppliers.
Tokyo's iron and steel subsector was down 2.7 percent. Kobe Steel lost 5.4 percent and JFE Holdings fell 4.4 percent.
Toyota fell 1.1 percent as the bullish yen weighed on exporters, but Toyota-affiliated parts makers edged up amid the prospect of lower input costs, with Toyota Industries Corp rising 0.2 percent.
Mitsubishi Heavy Industries dropped as much as 1 percent to 414.3 yen, the lowest since November 2016, following a report that the MRJ commercial jet the company is developing had engine trouble during a test flight.
Development costs for the MRJ jet has been mounting as the aircraft's launch has already been delayed five times.
Shizuoka Bank rose as much as 3.1 percent after announcing that it would buy back up to 10 million of its own shares, or 1.65 percent of its shares outstanding.
Grilled meat restaurant chain operator Anrakutei Co was down 1.3 percent after reports that some customers were hospitalized and found to have been infected with the O-157 strain of the E.coli bacteria.
(Editing by Kim Coghill)