Japan machinery orders slide on economy doubts

Japanese machinery orders tumbled by the most in almost two years in May as companies grew more cautious about the business outlook due to a rising yen and signs of a global economic slowdown.

Bank lending in June also fell, matching the biggest annual decline in almost five years, as demand from companies for funds to invest in plants and equipment remained sluggish.

Bank of Japan Governor Masaaki Shirakawa stuck to the central bank's view that Japan's economy was showing further signs of a moderate recovery, but he and other market watchers voiced concerns about the potential fallout from Europe's woes.

A senior government official said there was a risk Japan's economy may enter a lull, after service sector sentiment worsened for two straight months in June.

“Europe's financial problems haven't had an impact yet, but companies are applying the brakes now,” said Tetsuro Sawano, a senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

“People are also worried about a slowdown in the United States later this year.”

Core private-sector machinery orders, a highly volatile series regarded as an indicator of capital , fell 9.1 percent in May, the biggest decline since August 2008 and far more than the median market forecast for a 3.1 percent decline.

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