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MNI DATA PREVIEW: Japan Q2 GDP Seen Slowing On Net Exports

MNI (London)
     TOKYO (MNI) - Japan's GDP is expected to have slowed in Q2, weighed by a
negative contribution from net exports, private economists expect, with some
predicting a slip into negative territory.
     Economists surveyed expect Q2 GDP to rise a preliminary 0.1% q/q, or an
annualized +0.5%. That compares with Q1's second preliminary estimate of 0.6%
q/q, or an annualized 2.2%. Forecasts ranged from -0.1% to +0.4% q/q, or -0.3%
to +1.7% at an annualized pace.
     The Cabinet Office will release preliminary GDP data for the April-June
quarter at 0850 JST on Friday, Aug. 9 (2350 GMT on Thursday, Aug. 8).
     --HIGHER CAPEX, SPENDING
     Economists expect a boost from capital investment on the back of solid
domestic demand, fuelled by a last-minute surge in consumption before the tax
hike on Oct. 1. Private consumption, which accounts for about 60% of the GDP, is
seen 0.7% higher q/q, reversing a 0.1% fall in Q1. Forecasts ranged from +0.4%
to +1.0%.
     Capital investment in Q2 is seen 0.9% higher q/q in the wake of the
continued push to increase productivity by non-manufacturers suffering from
labor shortages, up from 0.3% in Q1.
     Capital investment plans by both manufacturers and non-manufacturers are
still expected to be executed, although the speed of implementation may have
slowed as global downside risks grow.
     The BOJ's June Tankan business sentiment survey showed that capital
investment plans by major and smaller firms were above the historical average,
supporting the view that the virtuous cycle from profits to spending continues
operating.
     The contribution of private-sector inventories to the total domestic output
is forecast to be -0.1 percentage point vs. +0.1 pp in Q1.
     --WEAKER NET EXPORTS
     Net exports of goods and services -- exports minus imports -- are expected
to have made a negative 0.4 percentage point contribution to the total domestic
output, reversing the strong 0.4 percentage point contribution in Q1.
     Exports during the second quarter are expected to have posted a second
straight rise but imports were also stronger, giving a negative overall
contribution.
     Going forward, economists expect private consumption to be boosted by the
last-minute surge in demand before the tax hike to increase during the
July-September period, although they expect economic growth to further slow in
Q3 due to weaker capital investment caused by the lingering overseas slowdown.
     The average economist forecast for Q2 GDP growth is annualized at -0.17%,
according to the latest monthly ESP Survey of 37 economists by the Japan Center
for Economic Research conducted from June 25 to July 2.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
[TOPICS: M$A$$$,M$J$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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