TOKYO (Kyodo) -- Core Japanese private-sector machinery orders shrank a seasonally adjusted 8.3 percent in March from the previous month to hit an almost three-year low of 956.8 billion yen, prompting the government to downgrade its assessment, the Cabinet Office said Thursday.

Compared with a year earlier, the orders represent an unadjusted 6.2 percent slip. The results were worse than the average market projection of a 5.1 percent monthly drop and a 1.4 percent rise on the year in a Kyodo News survey.

March core orders fell following a 12.3 percent decline in February, as demand from machinery makers as well as chemical, telecommunication and construction firms fell for items such as industrial machinery, internal combustion engines, telecommunications equipment and construction machinery.

The core orders figure for March was the lowest since 948.9 billion yen recorded in May 2005, indicating that Japanese firms were reining in capital spending at a time when rising raw materials costs are weighing on their performances.

Based on the weak March data, manufacturers are expecting the core orders they receive to sink 10.3 percent in the April-June quarter from the previous quarter, the office said.

Taking such a pessimistic outlook into account, the office revised downward its basic assessment of machinery orders, saying, ''Core machinery orders have recently been weakening.'' Between May last year and February this year, the office held the view that core orders were ''seesawing.''

The Cabinet Office cut the basic view for the first time since March last year.

Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co., said that the pessimistic outlook for the April-June quarter suggests that the upward trend in machinery orders, which have been kept until the January-March period, will weaken.

Core machinery orders rose 2.2 percent to 3,189.4 billion yen in the January-March period from the previous quarter.

''Companies have become more conservative about their business investment plans as they are increasingly guarded about the future course of the country's economy,'' he said.

Kodama pointed out that surges in raw materials prices and the U.S. economic slowdown have dampened corporate business sentiment. Declines in U.S.-bound exports will adversely affect capital spending in Japan, he added.

A Cabinet Office official, however, downplayed the weak outlook for the April-June quarter, saying manufacturers usually present bearish estimates for the first three months of a business year starting in April.

''When the economy keeps expanding, the weak projection is usually revised upwards later. In past years, actual data surpassed the forecasts,'' the official said.

According to the official, core machinery orders need to post strong gains for April, May and June in order to keep the data for the first three months of fiscal 2008 in positive territory on a quarter-to-quarter basis.

The projected 10.3 percent drop for the April-June period would be realized if the orders fall even by a slight 0.2 percent month-on-month in each of the three months. Even if the orders grow 5.4 percent each month, the April-June figures will stay unchanged from the previous three months.

In fiscal 2007, the core orders declined 3.0 percent from the year before to 12,364.0 billion yen for the first dip in five years.

In March, core machinery orders from manufacturers slipped a seasonally adjusted 7.0 percent from February to 431.9 billion yen, following a 9.2 percent decrease in the previous month.

Orders from nonmanufacturers dropped 9.5 percent from February to 526.7 billion yen.

Demand from the public sector sank a seasonally adjusted 12.7 percent from the previous month to 216.6 billion yen, while demand from overseas declined 16.1 percent to 973.8 billion yen, the lowest level since January 2007.

Core private-sector machinery orders are regarded as a leading indicator of corporate capital spending about six months ahead. The core orders exclude those for ships and from electric power companies as they tend to vary widely due to their large size.

The Cabinet Office examines orders received by 280 major machinery makers in Japan.