MNI: ANALYSTS: Japan Q2 GDP Rebounds on Capex, Consumption

     TOKYO (MNI) - Japan's gross domestic product for the April-June quarter is

expected by economists to have expanded a modest 0.2% on quarter, or an

annualized 1.0%, rebounding from what many see as a temporary slump in Q1,

thanks to solid consumption and business investment.

     The median forecast for Q2 GDP is based on projections by eight economists,

which ranged from +0.1% to +0.5% on quarter, or an annualized +0.5% to +2.1%.

     The Cabinet Office will release preliminary GDP data for the second quarter

of 2018 at 0850 JST on Friday, Aug. 10 (2350 GMT on Aug. 9).

     The expected Q2 growth will follow the first contraction in nine quarters

in January-March, when GDP fell 0.2% on quarter, or an annualized 0.6%.

     The modest but sustained economic recovery took a breather in Q1 as the

severe winter weather and high fresh food and fuel prices hurt consumption,

mitigating the positive effect of a slight gain in net exports.

     --CAPEX, CONSUMPTIONS DRIVERS

     For Q2, economists forecast capital investment continued to expand on solid

global and domestic demand despite concerns over U.S. trade disputes while

consumption rebounded in mild spring weather, followed by an unusually short and

dry rainy season.

     Capex is forecast by the economists to have risen 0.6% on quarter for the

seventh straight q/q rise following +0.3% in Q1, with the forecasts ranging from

+0.3% to +1.0%.

     The median forecast for private consumption, which accounts for about 60%

of GDP, is 0.3% on quarter in Q2 (ranging from +0.2% to +0.4%) following -0.1%

in Q1.

     The Bank of Japan's supply-side Consumption Activity Index fell a real 1.4%

on a seasonally adjusted basis for May following a 2.1% rise in April. The June

and Q2 data are due out on Aug. 7.

     The Cabinet Office's Private Consumption Integrated Estimates Index, which

is based on both supply- and demand-side data, posted the first drop in two

months in May, down 0.4% on month after rising 0.7% in April. The June and Q2

data are expected before the Aug. 10 GDP release.

     --EXTERNAL DEMAND UP

     The economists expect the contribution from net exports of goods and

services -- exports minus imports -- to have pushed up the total domestic output

by 0.1 percentage point (their forecasts ranged from -0.1 to +0.2 point) after

adding 0.1 percentage point to Q1 GDP.

     The BOJ's real export index rose 0.5% on quarter in April-June after rising

at the same pace in Q1, supporting the bank's view that exports have been on an

uptrend.

     --BEFORE TAX HIKE

     Economists expect Japan's economic growth to return to an above-potential

rate of over 1% annualized in the second quarter and stay around that level

until it moves up to 2% in Q3 of 2019, just before the sales tax hike to 10%

from 8% planned for October 2019.

     The average economist forecast for Q2 GDP growth is an annualized 1.67%

rise, revised down from +1.73% in the previous survey, according to the latest

monthly ESP Forecast Survey of 39 economists by the Japan Center for Economic

Research conducted from June 25 to July 2.

--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

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