TOKYO, Oct 4 (Reuters) - Japan's Nikkei share average touched a more than four-month low on Wednesday, tracking Wall Street declines overnight after U.S. Treasury yields surged to fresh 16-year peaks amid the outlook for higher Federal Reserve interest rates for longer.

The Nikkei dropped 1.8% to 30,678.99 as of 0200 GMT, and was earlier down as much as 2.1% to reach 30,581.61 for the first time since May 25.

Of the Nikkei's 225 components, 198 fell, with 26 up and one flat.

The Nikkei 225 volatility index climbed to its highest since June 15.

The broader Topix slid 1.9% to 2,232.70.

Overnight, the U.S. S%P 500 dropped 1.4%, and stock futures indicated a further 0.3% decline. Benchmark 10-year Treasury yields pushed to a new high of 4.438% on Wednesday.

Data released Tuesday showed U.S. job openings unexpectedly increased in August, raising bets for additional Federal Reserve hikes and fueling nerves ahead of Friday's key U.S. monthly jobs report.

"There's so much uncertainty about the U.S. outlook, and that's weighing on Japanese stocks," Daiwa Securities strategist Kenji Abe said.

"There is a risk in the near term that the Nikkei falls below 30,000 - it's possible."

But Abe reiterated his forecast for the Nikkei to rise to 35,000 by end-March, predicting a potential positive shift in sentiment once earnings season got underway.

Yaskawa Electric marks the unofficial start of the earnings reporting period on Friday, but the pace of earnings announcements would not really pick up until October-end.

Among the Tokyo Stock Exchange's 33 industry groups, transport equipment makers fared worst, dropping 3.8%. Toyota Motor fell 3.7% and Nissan slumped 5.5%.

Banking was next, sliding 3.3%. Mitsubishi UFJ Financial Group declined 4.4% and Mizuho lost 3.5%.

Chip-testing equipment maker Advantest slid 5.2%, while chip-making machinery giant Tokyo Electron fell 3%. Startup investor SoftBank Group was also 3% lower. (Reporting by Kevin Buckland; Editing by Rashmi Aich)