TOKYO (REUTERS) - Japanese capital investment rose at a slower pace in October-December and corporate profits fell for the first time in four years in a worrying sign that flagging business spending will weigh on economic growth.

The data suggests that revised gross domestic product (GDP) due on March 8 may show Japan's economy contracted more than first reported, adding to the sense of pessimism surrounding the strength of domestic demand.

Japan's robust employment pattern continued, however, with seasonally adjusted unemployment falling in January to 3.2 per cent, versus the median estimate for 3.3 per cent. The jobs to applicants ratio rose to a 24-year high of 1.28, versus the median forecast of 1.27.

Separate data on Tuesday (March 1) showed household spending fell more than expected in January, providing further evidence that uncertainty about the economy may be behind consumers cutting expenditure.

Decelerating capital investment and corporate profits are a worrying sign that the government may need to respond with more stimulus measures to prevent business and household activity from weakening further.

"The global economy is stagnating, which points to a slight downward revision to Q4 GDP," said Hiroaki Muto, economist at Tokai Tokyo Research Center Co. "The economy will return to growth in the current quarter, but it won't be strong. This could hasten talk of an extra budget for economic stimulus."

A preliminary estimate showed the economy contracted an annualised 1.4 per cent in October-December as consumer spending and exports slumped.

The 8.5 per cent annual increase in capital expenditure in October-December was slower than an 11.2 per cent annual gain in July-September, data by the Ministry of Finance showed on Tuesday.

Excluding spending on software, capital expenditure on a seasonally-adjusted basis was minus 0.0 per cent from the previous quarter, after rising 5.7 per cent in July-September, finance ministry data showed. The Japanese government often uses minus 0.0 per cent to indicate an extremely small decline.

Compared to the same period a year earlier, corporate profits fell 1.7 per cent, versus a 9.0 per cent annual increase in the previous quarter. That marked the first decline in profits since October-December 2011.

Japan's household spending fell an annual 3.1 per cent in January, more than the median estimate for a 2.7 per cent year-on-year decline.

Japan's economy is expected to return to growth in the current quarter, but there are persistent doubts about the outlook. Economists say the government's reforms have not done enough to raise the potential growth rate.