MNI DATA PREVIEW: Japan Q1 GDP Seen Lower On Capex, Spending

     TOKYO (MNI) - Japan's economy is expected to post a contraction in the

January-March period, hit by weak capital investment and private consumption.

     Economists are looking for preliminary Q1 GDP lower by 0.1% fall on

quarter, or an annualized -0.2%. That compares with the second preliminary

estimate of +0.5% q/q, or an annualized +1.9% for the fourth quarter of 2018.

     Forecasts ranged from -0.1% to +0.4% q/q, or -0.5% to +1.4% at an

annualized pace.

     The Cabinet Office will release preliminary GDP data for the January-March

quarter at 0850 JST on Monday, May 20 (2350 GMT on Sunday, May 19).

     --LOWER CAPEX, SPENDING

     Economists expect that Japan's economy was hit by weak capital investment

and private consumption in Q1 amid slowing demand and uncertainties over the

global economy, reversing from gains seen in Q4, although they expect weak

private demand to have been partly offset by firm net exports on the back of

weak imports.

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

GDP, to have fallen 0.1% on quarter, compared with +0.4% in the fourth quarter.

Forecasts ranged from -0.2% to +0.1%.

     Capital investment during the first quarter is expected to have fallen 2.2%

q/q due to the cautious corporate stance from weak global demand, down from

+2.7% in Q4. Forecasts ranged from -3.0% to +0.6%.

     Capital investment by major manufacturers was weak in Q1 on the back of the

slowing China's economy. Some companies are putting off the implementation of

capex on the back of the continued uncertainties.

     However, the Bank of Japan's March Tankan survey showed solid capital

investment plans in the current fiscal year, although the plans will be revised

in June.

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

is forecast to be unchanged from the 0.0% in Q4%.

     --STRONG NET EXPORTS

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

to have made a positive 0.3 percentage point contribution to the total domestic

output, reversing from -0.3 percentage point contribution in the fourth quarter.

     The expected rise of net exports during Q1 will be the first pick-up in

four quarters. Economists also expect public investment to have risen 1.4% q/q,

reversing from -1.7% for the first rise in seven quarters.

     Going forward, economists expects Japan's economy to return to a moderate

recovery path in Q2 based on a capital investment boost, but they voiced concern

over its downside risk amid uncertainties a strength of the Chinese economic

recovery.

     The average economist forecast for Q1 GDP growth is annualized at -0.06%,

according to the latest monthly ESP Survey of 36 economists by the Japan Center

for Economic Research conducted from March 26 to April 2.

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

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