TOKYO, June 2 (Reuters) - Japan's factory activity

shrank at the slowest pace in five months in May as the decline

in new orders eased, but worries over U.S. tariffs have dampened

the recovery from an almost year-long contraction, a

private-sector survey showed on Monday.

The final au Jibun Bank Japan Manufacturing Purchasing

Managers' Index (PMI) rose to 49.4 in May from 48.7 in April,

marking the 11th consecutive month of staying below the

50.0-line that indicates contraction.

Still, the reading was higher than the flash figure of 49.0

and the highest so far this year.

"Manufacturing conditions in Japan moved closer to

stabilisation in May, according to latest PMI data, with

companies signalling a softer decline in sales and improved jobs

growth," said Annabel Fiddes, Economics Associate Director at

S&P Global Market Intelligence, which compiled the survey.

Among sub-indexes, new orders fell for the 24th straight

month, with manufacturers citing U.S. tariffs and increased

client hesitancy as factors behind subdued demand conditions.

Factory output also contracted for a ninth consecutive

month, at a quicker pace than in April, the survey showed.

To mitigate the impact of the U.S. tariffs on cars and other

manufacturing sectors, which are the backbone of the Japanese

economy, Tokyo has held four rounds of trade talks with

Washington and plans a fiscal package to support households and

businesses.

In a positive sign, input cost inflation eased to a 14-month

low in May, while output price inflation slowed to the softest

in nearly four years.

Employment increased for the sixth month in a row as firms

filled vacancies and prepared for anticipated production

increases, according to the survey.

Business confidence on future output strengthened from

April's near five-year low, with firms citing expectations of

stronger market demand particularly in the semiconductor

industry.

However, some expressed concerns over U.S. tariffs,

inflation and Japan's declining population as potential

headwinds to growth, the survey showed.