REFILE-UPDATE 2-Japan machinery orders spike up, Europe clouds outlook

* Core orders rise fastest in 4 yrs, +14.8 pct vs f'cast +6.0 pct

* Construction equipment orders up on post-quake rebuilding

* Japan post-quake recovery likely stalled in Q4

* Europe woes weigh on Japan's economic outlook

By Rie Ishiguro

TOKYO, Jan 16 (Reuters) - Japan's key gauge of corporate capital spending rose at the fastest pace in nearly four years in November due partly to post-quake rebuilding demand, but economists worry the upturn will ebb under pressure from Europe's debt crisis and a strong yen.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, jumped 14.8 percent in November from the previous month, much more than economists' median forecast for a 6.0 percent increase.

The data are a sign that Japan was able to quickly shake off the impact of floods in Thailand's industrial base. Economists, however, expect spending to slow again in months ahead as a global slowdown, the fallout from the euro zone debt debacle and the yen's persistent strength dampen the initially brisk recovery from the devastating March 11 earthquake.

"Capital expenditure is still recovering. But the outlook is uncertain due to Europe, which could easily encourage companies to delay capital expenditure," said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

"Data on the economy were weak in November, but companies plan to increase production in December and January. This could lead to a slight pickup in growth. After that, worries about Europe will weigh on the outlook."

Bank of Japan Governor Masaaki Shirakawa on Monday singled out a possible fallout from Europe's two-year-old debt crisis as the biggest risk facing the world's third-largest economy. The continent suffered another setback in its battle to contain the crisis last week when Standard & Poor's cut credit ratings of nine euro zone economies, driving down the euro and hitting stock markets.

Orders from non-manufacturers rose 6.2 percent in November, as demand for construction equipment got a lift from reconstruction of the northeast coast, an official at the Cabinet Office which released the data, said.

As automakers and telecommunications equipment makers continued to recover from damage caused by Thai floods, orders from manufacturers rose 4.7 percent in November, with smartphone-related demand also helping the telecom sector.

"Companies have gotten rid of excess capacity so core machinery orders are unlikely to fall back from here. But strong growth is also unlikely given the global economy's outlook," the official said.

"The orders are likely to be flat for the next few months."

The core orders need to rise 0.4 percent in December in order to achieve a flat reading in October-December, he said. Companies earlier forecast a 3.8 percent drop in the orders for the quarter.

Recent dismal data such as exports and industrial output suggest Japan's economy may have even contracted in the fourth quarter following a brisk rebound in the previous quarter driven by companies' efforts to mend supply chains ripped apart by the March magnitude 9.0 earthquake and a deadly tsunami.

But many economists see a gradual recovery in corporate capital spending later this year as rebuilding shifts into high gear thanks to the government's plan to spend 18 trillion yen ($234.51 billion) in the near term.

The central bank predicts the economy will stagnate for now but resume a moderate recovery later this year on reconstruction spending.

The BOJ is likely to lower its growth forecasts for the fiscal year ending in March and the following year but stand pat on policy at a rate review Jan. 23-24 unless Europe's debt crisis destabilises markets and sparks a renewed yen spike.

Compared with a year earlier, core machinery orders, which exclude those for ships and electric power utilities, increased 12.5 percent in November against a 4.4 percent gain expected.