* Nikkei volatility index jumps to near 2-month high

* Hedge funds seen unwinding positions on risky assets - analyst

By Ayai Tomisawa

TOKYO, Nov 4 (Reuters) - Japan's Nikkei share average fell to a 2-1/2-week low on Friday morning after major stocks like automakers stumbled on continued uncertainty surrounding next week's U.S. presidential election.

The Nikkei tumbled 1.9 percent to 16,803.39, the lowest since Oct. 17. Markets in Japan were closed on Thursday for a national holiday.

The Nikkei volatility index also jumped 17 pct to a near two-month high of 26.43.

Investors have been unnerved by signs the U.S. presidential race between Democrat Hillary Clinton and Republican Donald Trump is tightening, after Clinton had until recently been thought to have a clear lead.

Traders said that hedge funds are seen unwinding their positions on risky assets such as stocks and futures.

"Investors took risks in October. But they want to square their positions for now, and they may even short depending on upcoming developments in the U.S. election," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Even if opinion polls show that Clinton is maintaining a lead, anything can happen at the last minute, something the Brexit outcome taught us," Fujito added.

On Friday, all of the Topix's 33 subsectors fell. Automakers stumbled after the dollar dropped to a one-month low of 102.55 yen overnight, before inching up 0.15 percent to 103.120 yen in Asian morning trade.

Toyota Motor Corp dived 4.5 percent, Honda Motor Co tumbled 4.1 percent and Nissan Motor Co dropped 2.9 percent.

Other exporters also lost ground, with Panasonic Corp falling 3.5 percent and Hitachi Ltd dropping 2.5 percent.

Meanwhile, Takata Corp dropped 5.8 percent after a source told Reuters that the company has been considering a possible bankruptcy filing for its U.S. unit but no filing is expected soon.

The broader Topix dropped 2.1 percent to 1,339.13 and the JPX-Nikkei Index 400 declined 2.1 percent to 11,998.28.

(Editing by Simon Cameron-Moore)