Japan stocks down on economy worries, awaiting FOMC

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By Elaine Lies

TOKYO, Dec 10 (Reuters) - Japanese stocks fell on Monday despite strong machinery orders data as caution set in ahead of a raft of economic events, with investors worrying about the health of both the Japanese and U.S. economies.

Brief gains on the October machinery orders, which were better than expected, were erased as investors moved in to take profits and then turned defensive, with shares such as drugmaker Eisai Co Ltd (4523.T: Quote, Profile, Research, Stock Buzz) defying the bearish mood.

A lacklustre mood on Wall Street, which ended little changed on Friday with concerns about consumer spending offset by a drop in oil prices and signs of resilience in the labour market, also dampened Tokyo activity, with investors waiting for Tuesday's interest rate decision by the Federal Reserve.

Japan's core private-sector machinery orders, a key gauge of corporate capital spending, rose 12.7 percent in October from the previous month and sent the Nikkei higher from the opening, but worries about the Bank of Japan's tankan survey of corporate sentiment, due out on Friday, carried more weight.

"The reason that this data didn't affect the market in a more positive way is that there's concern about what will show up in the tankan, with many thinking it will show that the economy's slowing," said Masayoshi Yano, senior manager of investment information at Tokai Tokyo Securities.

"For the Nikkei, 16,000 is a key technical point, and while it will go above this without much trouble if there are strong buying factors, we aren't seeing any of those today."

Other market participants said the thin trade had made movements volatile, and that the downward move could well have simply been set off by several large investors dumping stocks to take profits.