Oct. 8 (Bloomberg) -- Japanese companies unexpectedly ordered less machinery for a second month, suggesting the economy may slow after its fastest expansion in 2 1/2 years in the second quarter. Stocks fell and bonds rose as a government report in Tokyo showed private machinery orders, excluding shipping and utilities, fell 4.3 percent, seasonally adjusted, in August from July. That compares with a 1.1 percent median gain forecast in a Bloomberg News survey of 35 economists. Orders fell to 884.8 billion yen ($8.07 billion). Rising investment by exporters such as Canon Inc. and Sharp Corp. powered a 3.9 percent annual pace of economic growth in the second quarter. An unexpected drop in industrial production in August and a rising yen, which makes Japanese goods more expensive abroad, may dent the expansion, economists said.
``Investments by major exporters may be peaking,'' said Seiji Adachi, an economist at Credit Suisse First Boston Ltd. in Tokyo. ``To keep up with people's expectations for the recovery, Japan must provide other new positive data, but in reality it's difficult to find such numbers.'' The Nikkei 225 Stock Average fell 2.6 percent to 10,536.17 at 2:42 p.m. in Tokyo. The yield on the 1 percent bond due in 2013 fell 5.5 basis points to 1.330 percent. A basis point is 0.01 percentage point. The yen held gains against the dollar in Asian trading, after surging to the highest in almost three years in New York. The yen traded at 109.70 per dollar at 2:44 p.m. in Tokyo from 109.93 late yesterday in New York, when it gained as much as 1.5 percent to 109.37, its biggest advance in two weeks. ``The economy is on course for a moderate recovery, but not at the pace suggested by second-quarter GDP,'' said Mamoru Yamazaki, chief economist at Barclays Capital Japan Ltd. Machinery orders point to actual capital spending in about six months, economists say. Orders for ships and equipment for utilities are excluded because their size may skew the figures. From a year earlier, machinery orders rose 12.2 percent, today's report showed. //www.bloomberg.com