Japan's economy shrank by more than previously thought in the April-June quarter, with companies cutting back more severely on capital spending after the March earthquake and tsunami than first expected.

Japan's revised gross domestic product shrank at an annualised pace of 2.1 percent in the quarter, the Cabinet Office said, revising August's reading of a 1.3 percent contraction as firms deferred spending plans after the disasters.

The lower revision comes as recent data have underlined worries about Japan's recovery, as a slowing global economy and the impact of a strong yen on the profitability of exporters cloud hopes for a second-half rebound.

"The risk that the pace of recovery could slow down from the autumn cannot be ruled out," said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute.

"Overseas economies have been weaker than previously expected and it will be harder for exports to help drive the Japanese economy, affecting the pace of growth."

Data on Thursday showed that July machinery orders, a key indicator of corporate capital spending, plunged 8.2 percent after rising the previous month, as firms scaled back.

Friday's downward revision came within market expectations, with capital spending on upgrades or new machinery and equipment in April-June seeing a decline of 0.9 percent compared to a 0.2 percent gain in the preliminary data.

For the third straight quarter the economy contracted, shrinking by a revised 0.5 percent on-quarter compared to an initial reading of a 0.3 percent drop.

The March 11 quake-tsunami left 20,000 people dead or missing, devastated swathes of the northeast coast and sparked a crisis at the Fukushima nuclear plant, which continues to leak radiation into the environment.

The weeks and months that followed in April-June saw a tumble in exports, a major contributor to Japan's third straight quarter of contraction, as component supply chains were shattered, forcing companies to shutter plants.

Private consumption, which accounts for two-thirds of Japan's GDP, also slid as consumers restrained their spending after the disaster, with declines in sales of items such as vehicles.

Japanese companies have raced to restore output more quickly than expected, but with most of Japan's nuclear reactors offline for safety checks, enforced peak-power usage limits have complicating production schedules.

However, an order for big users to reduce peak-power consumption by 15 percent in the eastern and northeastern regions, including Tokyo, was expected to be lifted as early as Friday.

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