Japan March manufacturing activity contracts most in over three years - PMI

TOKYO, April 1 (Reuters) - Japan's manufacturing activity contracted in March at the fastest pace in more than three years as new export orders shrank sharply, a business survey showed on Friday, adding to fears the world's third-largest economy is sliding back into recession.

The Markit/Nikkei Final Japan Manufacturing Purchasing Managers Index (PMI) fell to 49.1 in March on a seasonally adjusted basis, unchanged from a preliminary reading and below the final 50.1 in February.

The reading fell below the 50 threshold that separates contraction from expansion for the first time since April last year, and contracted at the fastest pace since February 2013.

The sub-index for new export orders sank to 46.1, above the flash reading of 45.9 but still well below the 49.0 recorded in February. New export orders contracted at the fastest since January 2013.

Factory output contracted, albeit mildly, for the first time since April 2015, after growth slowed sharply in February.

That has increased the chances that the economy is in a technical recession, which is defined as two consecutive quarters of contraction in gross domestic product.

Japan's government is considering extra fiscal stimulus to pull the economy out of its funk, and there is a growing chance it will delay a sales tax hike scheduled for next year to ease the burden on domestic demand.

(Reporting by Stanley White; Editing by Kim Coghill)

((stanley.white@thomsonreuters.com; +81 3 6441 1984 twitter.com/stanleywhite1; Reuters Messaging: stanley.white.reuters.com@reuters.net))