MNI: DATA PREVIEW: Japan Q3 GDP Seen Lower on Weaker Capex

     TOKYO (MNI) - Japan's economy likely contracted more than initially

estimated in the July-September quarter, with economists now forecasting

business investment much weaker than first expected amid increasing

uncertainties over global demand.

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

the July-September quarter at 0850JST on Monday, Dec. 10 (2350 GMT on Sunday,

Dec. 9).

     The median forecast by seven economists for revised Q3 GDP is for a 0.6%

fall on quarter, or an annualized -2.5%, compared with the preliminary estimate

of -0.3% q/q, or an annualized -1.2%. Forecasts ranged from -0.4% to -0.8% q/q,

or -1.6% to -3.2% at an annualized pace..

     In preliminary Q3 GDP data, Japan's economy posted the first contraction in

two quarters in the July-September period, down 0.3% on quarter, or an

annualized -1.2%, weighed by private consumption, capital investment and exports

following recent natural disasters.

     The downturn in the third quarter followed a gain of 0.8% on quarter, or an

annualized +3.0% in the second quarter.

     --CAPEX DOWNWARD REVISION

     Following the release of a key government survey on Monday, capital

investment in the July-September period is now forecast by economists to be

revised down to -2.2% on quarter from the initial reading of -0.2%, with

forecasts ranging from -1.2% to -3.4%.

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

GDP, to be unrevised at -0.1% on quarter. In the preliminary data released last

month, it pushed down the Q3 GDP by 0.1 percentage point.

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

is forecast to be unrevised at -0.1 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 -1.9% q/q in

Q3. Forecasts ranged from -1.7% to -2.9%.

     The government will also revise the fiscal 2017 GDP due to the change of

its estimation of GDP, which in turn will cause a hefty revision of the second

preliminary GDP for the July-September period, economists said.

     --WEAK MOF SURVEY

     The key points from the Ministry of Finance quarterly survey known as the

Financial Statements Statistics of Corporations by Industry:

     --Combined capital investment by non-financial Japanese companies rose 4.5%

on year in the July-September quarter, after rising 12.8% in April-June.

     --Capex excluding software gained 2.5% on year in Q3, although decelerating

from 14.0% in Q2. Combined capital outlays (excluding software) fell a

seasonally adjusted 4.0% in Q3, marking the first q/q drop in five quarters

after rising a revised 6.1% in Q2.

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

revisions to Q3 GDP due out on Dec. 10. Capex in the preliminary GDP reading is

based solely on supply side data.

     --Investment in equipment remained solid on the back of the continued labor

shortages in Japan, with the impact of the U.S.-China trade dispute on Japan's

economy limited. But some firms were cautious about implementing capex amid

uncertainties over global demand.

     --However, going forward, economists expect Japan's economy to return to a

moderate growth path in the fourth quarter. Industrial production and exports

rebounded in October after their temporary dips in the third quarter caused by

natural disasters.

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

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