Tokyo - Japan's key machinery orders recorded the largest fall since 1998 during the July-September period, a government report said Monday.

The key machinery orders fell 10.4 per cent during the three months compared to the previous quarter, indicating that the corporate capital spending has been weakening, the Cabinet Office said.

The core orders, which exclude those for ships and power equipment, amounted to 2.88 trillion yen (29.32 billion dollars).

The drop in the July-September quarter was larger than the government's expectation of a 3-per-cent fall, reinforcing fears of a prolonged downturn, as many experts see the country on the verge of a recession.

The government maintained its assessment of the nation's machinery orders saying that it would stay on a downward trend due to a slowdown of the economy.

However, it forecast the key orders to increase 1.2 per cent during the October-December quarter.

In September alone, Japan's core machinery orders increased 5.5 per cent in seasonally adjusted terms to 940.7 billion yen, compared to the previous quarter, and declined 4.2 per cent in unadjusted terms year-on-year.

The index is regarded as a key indicator of corporate capital spending for the next six months ahead. (dpa)