Plant and equipment figures will be used in revised GDP data

Annual spending on plant and equipment rose 12% between July and September, compared to the previous quarter's 16.6% growth, official data showed.

Economists fear the numbers could bring down revised third quarter economic growth data, to be released on Friday.

Initial figures showed Japan's economy recovering after years of contraction, expanding 2% over the period.

'Solid trend'

Despite the fall in factory spending, analysts were keen to point out that the figure still marked an annual rise for the world's second largest economy.

"Corporate capital spending, even if it may see some moderation in the growth pace, will maintain its solid trend going forward," said Yasuo Yamamoto, an economist with Mizuho Research Institute.

Preliminary gross domestic product (GDP) figures issued in November were above expectations, showing Japan's economy expanding 2% on a yearly basis.

With signs that Japan's economy is expanding strongly after many years of stuttering growth, some economists expect an interest rate rise in the not too distant future.

But the government is keen not to raise rates too fast, which could hamper growth.

The Bank of Japan raised its interest rates to 0.25% in July, bringing to an end its five-year policy of keeping base rates at zero.