Japan's core machinery orders decline adding to fears of second-quarter contraction

Fears of a contraction in Japan's economy in the second quarter have intensified as the country reported weak core machinery orders in June, after recording a slump in exports and lower consumer spending.

Japan's core machinery orders, regarded as an indicator of capital spending in the coming six to nine months, fell 7.9% in June on a monthly basis, down for the first time in four months, according to official data.

Compared to 2014, the orders improved by 16.6% in June. Orders rose 2.9% in the second quarter, marking the fourth straight quarterly gain.

Companies surveyed by Japan's Cabinet Office expect core orders will increase 0.3% in July-September from the previous quarter.

The total number of machinery orders, including those for ships and from electric power companies, rose 5.0% month-on-month but fell 3.2% from June last year.

"June's decline was due to a big drop in manufacturers' orders, which came as reaction to gains in the prior month in sectors such as steel," a Cabinet Office official was quoted as saying by Reuters.

After the country reported weak exports and factory output earlier, analysts were projecting a contraction in the economy in the second quarter.

Meanwhile, policymakers expect the economy to record moderate growth in the current quarter. Nevertheless, the Bank of Japan is expected to cut its growth projections and announce fresh stimulus to sustain growth, given a growth slowdown in China, one of its biggest market for its exports, and lower commodity prices.