TOKYO, May 15: Japan's machinery orders dropped unexpectedly in March, the government said on Tuesday, raising concern that corporate capital spending, one of the key drivers of the economic recovery, is slowing down. The decline in machinery orders, a very closely watched indicator, hit the yen and Japanese shares, both of which fell, and further clouded the outlook for Japanese interest rates.

The Cabinet Office said March machinery orders fell 4.5 per cent from February, when they had tumbled 4.9 per cent, and they were well short of market forecasts for a 0.2 per cent rise.

Year-on-year, core domestic orders -- which exclude particularly volatile demand from power companies and for ships -- were down 5.8 per cent in March, after falling 4.2 per cent in February.

—AFP