* Nikkei slips 0.9 pct on futures selling, yen strength
* Investors shun risk, turmoil sparks global economy worry
* Stronger yen weighs on shares of exporters
* Volume set to top 2 bln shares for 13th straight day
By Ayai Tomisawa and Antoni Slodkowski
TOKYO, Feb 23 (Reuters) - Japan's Nikkei average extended losses on Wednesday as investors pull out of riskier assets, with turmoil in Libya driving crude oil prices near 30-month highs and sparking worries about slower global growth.
A stronger yen was also hitting sentiment, with exporters dragged down as the dollar slipped to 82.55 yen, its lowest in nearly two weeks.
While many market participants believe the Nikkei, which has gained 4 percent since the start of the year, is due for a correction, they are waiting for more trading cues to decide how serious it could be.
"Investors are selling futures to hedge against potential falls in Wall Street tonight as the Middle East turmoil intensifies," said Hiroichi Nishi, general manager at Nikko Cordial Securities. "The market is hit by a double whammy of concern about the Middle East and the stronger yen."
The reaction of Wall Street to developments in the Middle East and oil prices will be in focus, particularly now that the three-month daily correlation between the Nikkei and the Standard & Poor's 500 Index stands at 0.94. Major U.S. stock indexes lost over 2 percent in heavy volume on Tuesday.
"Global investors are now trying to decide if the Middle East crisis means a major shift of the geopolitical balance of power in the region and the U.S. losing influence there, meaning more instability and possible further oil price rises," said Masayuki Kubota, a senior fund manager at Daiwa SB Investments.
"If surging oil prices stoke inflation to levels that can seriously threaten the global economic recovery, the mood in equity markets may turn very bleak, but it's still too early to make this call," he said.
By mid-afternoon the Nikkei average was down 0.9 percent or 90.90 points at 10,573.80. It lost almost 2 percent on Tuesday.
Analysts said the Nikkei's immediate resistance level is seen at its 25-day moving average, now at 10,551.
The Nikkei has rallied 15 percent since November, and many analysts predicted it could advance around 20 percent in 2011 as hedge funds turn their attention to Japan on expectations of a pickup in corporate activity such as M&A and share buy-backs.
The broader Topix lost 0.8 percent to 948.67.
By Tuesday, eastern Libya was no longer under the control of Muammar Gaddafi after a revolt spread across the country, soldiers who no longer backed the Libyan leader told a Reuters correspondent. Gaddafi used tanks, helicopters and warplanes to try to quell the growing revolt, witnesses said.
HIGH VOLUME
In contrast to the recent rally on Wall Street, climbs in the Nikkei have been on solid trading volumes, pointing to investors' continued interest in Tokyo stocks and supporting hopes for more gains in the medium term, market players said.
Mid-afternoon volume on Wednesday was again high with 1.9 billion shares changing hands on the Tokyo stock exchange's first section, suggesting the day's total will be above last week's daily average of 2.26 billion and mark a 13th straight day of volume in excess of two billion shares.
Some blue-chip exporters were battered, with Sony Corp shedding 2.0 percent to 2,975 yen and construction machinery maker Komatsu Ltd also slipping 1.7 percent to 2,452 yen on the stronger yen.
Despite oil holding near 2-1/2-year peaks, energy and commodities stocks fell as investors snapped up profits. Having outperformed the rally in the Nikkei and gained some 20 percent in the year to date, Inpex Corp, Japan's largest oil and gas developer, shed 3.1 percent to 572,000 yen on profit-taking.
JGC Corp, a plant engineering firm, advanced 1.9 percent to 1,842 yen, snapping a six-session losing streak after it said there had been no impact on its business from turmoil in the Middle East.
"We have businesses in the Middle East and North Africa, but we don't have projects in nations that are being rocked by unrest. We've been telling analysts this for the past few days," a company spokesman told Reuters on Wednesday, adding that it mainly does business with countries such as Saudi Arabia, the United Arab Emirates and Qatar. (Editing by Michael Watson)