The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) fell to 48.9 in April from 49.9 in March on a seasonally adjusted basis.

The index remained below the 50 threshold that separates expansion from contraction for the second consecutive month and showed the biggest contraction in activity since April 2014.

The index for new business fell to 48.6 from 49.4 in the previous month, which is also the fastest contraction in two years.

In 2014, services accounted for 65 percent of Japan's gross domestic product, while manufacturing had a 21 percent share.

Japan probably narrowly escaped recession in the first quarter but weak domestic and external demand and a strong yen will keep a lid on any recovery, a Reuters survey last month showed.

Reporting by Stanley White; stanley.white@thomsonreuters.com; +81 3 6441 1984 twitter.com/stanleywhite1; Reuters Messaging: stanley.white.reuters.com@reuters.net

(Editing by Shri Navaratnam)