Japan's exports fell in May at a faster pace than expected versus year-ago levels, raising concerns that weakness in overseas demand will constrain factory production and delay economic recovery from a massive natural disaster.

The trade balance registered a deficit for a second consecutive month on a jump in imports after the earthquake, tsunami and nuclear crisis on March 11 and marked the nation's second largest deficit after January 2009 which followed the Lehman shock.

The bigger-than-expected decline could raise concern that Japan's economic recovery may be weaker than projected and may lend more weight to the argument that the central bank should ease monetary policy further.

Overall, the data shows that Japan's economy appears to be bottoming out, but the speed of the recovery will be moderate, said Takeshi Minami, chief economist at Norinchukin Research Institute.

Emerging economies are tightening monetary policy so they may experience some slowdown, while advanced economies are also seeing very slow growth. That may affect Japanese exports in the coming months.

Exports fell 10.3 percent in May from a year earlier, compared with a median forecast for an 8.4 percent annual decline, and after a 12.4 percent drop in April, Ministry of Finance data showed on Monday.

As Japan grapples with its worst crisis since World War Two, economists expect gross domestic product to contract for a third straight quarter in April-June and then resume growing in the second half of the year as exports and production recover.

Power cuts could disrupt some manufacturing in the summer, but companies have been making progress in restoring lost production and mending supply chains.

The government's top spokesman voiced confidence that Japan's trade deficit was only a temporary blip due to the disaster.

The situation will change before too long, said Chief Cabinet Secretary Yukio Edano, noting that many manufacturers had said that production was recovering.

Auto exports fell 38.9 percent in May from a year earlier, although the pace of decline was much less than the 67.0 percent drop in April. Shipments of semiconductors, other electronic components and auto parts also fell.

Imports rose 12.3 percent in the year to May, more than the median estimate for an 11.6 percent annual rise, with imports of crude oil and liquefied natural gas climbing in the wake of the nuclear crisis.

The nation's trade balance registered a deficit of 853.7 billion yen ($10.7 billion), greater than the median forecast for a deficit of 711.1 billion yen.

Shipments to China fell an annual 8.1 percent while those to the United States fell 14.6 percent.

The BOJ last week kept monetary policy on hold but expanded a loan scheme targeting growth industries.

($1 = 80.055 Japanese Yen)

(Editing by Edwina Gibbs)

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