MNI POLICY: Japan Q3 GDP Boost On Last-Minute Buying; Q4 Focus

     TOKYO (MNI) - Japan's economy was boosted in the third quarter by a rise in

demand ahead of the October 1 sales tax hike and careful attention should be

paid to how the economy evolves in Q4 as the effects of the front-loading work

through, a senior official at the Cabinet Office said Thursday.

     The official didn't elaborate as to what extent the economy will likely

contract in the fourth quarter.

     Bank of Japan officials expect the economy to contract in Q4 on the back of

weak exports, industrial production and consumer spending.

     The Cabinet Office official said, "The period of the front-loaded rise in

demand before the tax hike was shorter than the previous tax hike in 2014 and

the degree was also smaller than then."

     Private consumption will remain weak immediately after the tax hike but the

spending is expected to rise toward the end of the year, he added.

     Japan's economy posted a fourth straight quarter of growth in the

July-September period, up 0.1% q/q, or an annualized +0.2%, edging into positive

territory on he back of stronger capital investment and solid private

consumption, preliminary GDP data released Thursday by the Cabinet Office

showed.

     Growth slowed slightly from Q2, which rose a revised 0.4% q/q, or an

annualized 1.8%. The quarterly growth was slightly weaker than the MNI median

forecast for a growth of 0.2% q/q, or the annualized forecast of 0.8%.

     Private consumption, which accounts for about 60% of Japan's GDP, rose 0.4%

q/q in Q3, after an unrevised +0.6% in Q2. The median forecast was +0.6% q/q,

ranging from -0.2% to +0.7%.

     "Production for the third quarter was also boosted by the last-minute

buying and downward pressure from weak production on the economy for the fourth

quarter is expected," the official said.

     The official said, however, that the drop in Japan's exports seems to be

bottoming out, as exports of IT-related goods have stopped falling.

     "Exports of capital goods excluding transport equipment remains weak and

exports of automobiles to Asia and the U.S. are also weak. But exports of

IT-related goods to China an South Korea are expected to rise," the official

said.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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