TOKYO, Aug 5 (Reuters) - Japanese stocks tumbled to their weakest levels since early January on Monday, extending last week's selloff triggered by the rout in global stock markets and worries investments funded by a cheap yen were being unwound.

The Nikkei share average is down 15% in three sessions and seemed set for its biggest three-day plunge since 2011, as banking stocks led the decline.

It fell as much as 7% to 33,369.37 earlier in the session, its lowest level since early January, and was last down 5.6% at 33,912.29 as of 1257 GMT.

The broader Topix was down 6.6% at 2,370.18.

The local currency yen, a safe-haven and carry-funding favourite, traded at 145.43, up 0.8% versus the dollar, after hitting a mid-January peak of 145.28 in early deals.

The yen is up 10% against the dollar in just over three weeks, driven in part by the Bank of Japan's interest rate rise last week and an unwinding of yen-funded carry trades.

U.S. stocks sold off for a second straight session on Friday, and the Nasdaq Composite index confirmed it was in correction territory after a soft jobs report stoked fears of an oncoming recession and expectations for a big Federal Reserve rate cut in September.

"Domestic equities tanked purely because of the worries that the U.S. economy may be heading to a recession," said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities.

"Today's sell-off was driven by fear that the Wall Street may fall again later in the day."

Chip-making equipment maker Tokyo Electron tanked 8.4% to drag the Nikkei the most. Uniqlo brand owner Fast Retailing 4% and technology investor SoftBank Group lost 6.9%.

The banking sector fell 12% to become the worst sector among the Tokyo Stock Exchange's 33 industry sub-indexes. (Reporting by Junko Fujita; Editing by Rashmi Aich)