MNI: ANALYSTS: Japan Q2 GDP Seen Revised Up on Stronger Capex

     TOKYO (MNI) - Japan's economy expanded at a much faster pace than initially

estimated in the April-June quarter as business investment appears to be

stronger than expected, despite emerging downside risks posed by the U.S.-China

trade row, economists forecast Monday, following the release of a key government

survey.

     The Cabinet Office will release revised (second preliminary) GDP data for

the April-June quarter at 0850 JST on Monday, Sept. 10 (2350 GMT on Sunday,

Sept. 9).

     The median forecast by six economists for revised Q2 GDP is +0.7% on

quarter, or an annualized +2.9%, compared with the preliminary estimate of +0.5%

q/q, or an annualized +1.9%. The forecasts ranged from +0.6% to +0.8% q/q, or

+2.5% to +3.0% at an annualized pace.

     In preliminary Q2 GDP data, Japan's economy posted a solid 0.5% rise on

quarter, or an annualized 1.9%, backed by stronger consumption and business

investment and rebounding from a slump in the winter months caused by bad

weather. In Q1, the economy posted the first contraction in nine months, down

0.2% on quarter, or an annualized -0.9%.

     --CAPEX UPWARD REVISION

     * In April-June, capital investment is forecast by economists to be revised

up sharply to +2.8% on quarter from the initial reading of +1.3%, with forecasts

ranging from +1.8% to +3.6%, based on the

     * Economists expect private consumption, which accounts for about 60% of

the GDP, to be unrevised at +0.7% on quarter. In the preliminary data released

last month, it pushed up the Q2 GDP by 0.4 percentage point.

     * The contribution of private-sector inventories to the total domestic

output is forecast to be unrevised, being flat with a slightly positive

contribution at +0.0 percentage point.

     * Net exports of goods and services -- exports minus imports -- are

expected to have made a negative 0.1 percentage point contribution to the total

domestic output, unrevised from the preliminary estimate.

     * Economists also expect public investment to be unrevised at -0.1% on

quarter in Q2. Forecasts ranged from -0.3% to +0.2%.

     --BULLISH MOF SURVEY

     The key points from the Ministry of Finance quarterly survey called the

Financial Statements Statistics of Corporations by Industry:

     * Combined capital investment by non-financial Japanese companies surged

12.8% on year in the April-June quarter after rising 3.4% in January-March.

     * On quarter, combined capital outlays (excluding software) rose a

seasonally adjusted 6.9% in Q2, marking the fourth straight rise after rising a

revised 0.8% in Q1.

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

revisions to Q2 GDP due out on Sept. 10. Capex in preliminary GDP is based

solely on supply side data.

     --TRADE, PRICE FEARS

     Investment in equipment was backed by solid global and domestic demand as

well as the need to cope with labor shortages in April-June, when the U.S.-China

trade dispute had little direct impact on Japanese exports or production.

     However, going forward, economists expect Japan's economic growth to slow

in the third quarter.

     Sluggish export and production data for July indicated the economy made a

slow start to July-September amid the uncertainty over global growth and in

light of killer rain storms and heat waves in Japan.

     Japan's current and outlook sentiment indexes plunged in July, hit by heavy

rains in southwestern regions that killed more than 200 people and destroyed

social infrastructure.

     There are concerns about the continued drag from the heavy rains and heat

waves as they have pushed up the prices for farm produce and disrupted land

transportation networks.

--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$$$,M$J$$$]