Japan MOF Survey: Q2 Capex Weak, GDP Seen Revised Down

--Japan Q2 Non-Financial Firm Capex +1.5% Y/Y; Q1 +4.5% 

--Japan Q2 Capex (Ex-Software) +0.6% Y/Y; Q1 +5.2% 

--Japan Q2 Capex (Ex-Software) S/A -2.8% Q/Q; Q1 +0.9% 

--Japan Q2 Manufacturer Capex -7.6% Y/Y Vs Q1 +1.0% 

--Japan Q2 Non-Manufacturer Capex +6.9% Y/Y Vs Q1 +6.3% 

--Japan Q2 Non-Financial Current Profit +22.6% Y/Y Q1 +26.6%

     TOKYO (MNI) - The results of a quarterly survey of capital spending and

corporate profits by major companies called the Financial Statements Statistics

of Corporations by Industry released Friday by the Ministry of Finance.

     * Combined capital investment by non-financial Japanese companies rose 1.5%

on year in the April-June quarter, the third straight quarter of increase after

rising 4.5% in January-March. The pace of business investment decelerated as

firms were cautious about implementing plans amid uncertainty over global and

domestic demand.

     * On quarter, combined capital outlays (excluding software) posted the

first drop in three quarters, down 2.8% after +0.9% in Q1.

     * Weaker capex on the demand side is expected to lead to a downward

revision to private-sector non-residential investment, which surged a real 2.4%

on quarter, or an annualized 9.9%, in preliminary Q2 GDP released last month,

pushing up the 1.0% quarter-on-quarter economic growth by 0.4 percentage point.

     * This will prompt the government to revise down its estimate of Q2 real

GDP growth from a preliminary +1.0% on quarter, or an annualized +4.0%, which

was far above Japan's low growth potential estimated under 1%.

     * The amount of business investment reported in the MOF survey fell a sharp

33.9% to Y9.45 trillion in April-June from Y14.29 trillion in January-March. It

is much weaker than the 28.6% decline on quarter in nominal demand-side capex

estimated by the Cabinet Office based on nominal supply-side capex figures that

were available in preliminary GDP data.

     * "A simple estimate shows the 2.4% quarter-on-quarter rise in business

investment will be revised down to a 0.9% rise. Given capex's 15% share of the

GDP, the 1.5 percentage point downward revision would be a decrease in capex's

contribution by 0.225 percentage point on quarter, which would chop a full

percentage point off the annualized 4% GDP growth," said Akiyoshi Takumori,

chief economist at Sumitomo Mitsui Asset Management. "But we still have to

adjust the gap in statistics as a half of small business samples in the MOF

survey is changed at the start of the fiscal year, which causes a distortion."

     * The MOF survey based on the demand side is the key to calculating

revisions to Q2 GDP due out on Sept. 8. Capex in preliminary GDP, which is based

solely on supply side data, had a high 0.4 percentage point positive

contribution to the total domestic output.

     * The MOF data showed business investment in the non-manufacturing sector

rose (+6.9% on year in Q2 vs. +6.3% in Q1) while that in the manufacturing

sector dropped (-7.6% on year in Q2 vs. +1.0% in Q1).

     * The data also showed combined non-financial current profit rose 22.6% on

year in Q2, the fourth straight year-on-year rise after +26.6% in Q1.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

[TOPICS: MAJDS$,M$A$$$,M$J$$$,MT$$$$]