REPEAT: MNI: Japan Offl: Spending Pickup Despite Stocks, Snow

By Max Sato

     TOKYO (MNI) - Japan's modest economic recovery will remain supported by a

gradual pickup in consumer spending and business investment despite the recent

stock market sell-off and severe snow storms, a senior Cabinet Office official

has predicted.

     The core household spending index, which excludes housing, motor vehicles

and other volatile items, fell 1.2% on month in December while retail sales rose

1.4% on quarter in October-December.

     "Overall, consumer spending is on a recovery track," the official told

reporters before Wednesday's release of preliminary Q4 GDP.

     Private consumption, which accounts for about 60% of GDP, rose a real 0.5%

on quarter in Q4, marking the first rise in two quarter after a downwardly

revised -0.6% in Q3, when it was hit by bad weather.

     Japan's economy for the October-December quarter posted a modest 0.1% rise

on quarter, or an annualized 0.5%, as a rebound in consumer spending and

continued solid capital investment offset weak net exports and public works

spending.

     Going forward, the severe winter weather that has caused casualties and

damage is expected to linger, threatening to hurt business sentiment further.

     Freezing temperatures and heavy snowfalls, combined with rising fuel and

food prices, hammered many Japanese regions, hurting the current sentiment in

various sectors, the Economy Watchers Survey for January released last week

showed.

     But the official noted that the drop in the Watchers' outlook index was

limited.

     Asked about the impact of the recent global market plunge, he said, "Many

analysts are saying stock prices are showing a correction to earlier very strong

gains and that they are not due to (any change in) economic fundamentals."

     Business investment rose 0.7% on quarter in Q4 for the fifth straight q/q

increase but the pace of increase slowed from +1.0% in Q3.

     Companies are investing in equipment to make their operations more

efficient in response to serious labor shortages in some sectors, the official

said.

     The slight net export drop in Q4 GDP (-0.0 percentage point contribution to

the GDP) is not so worrisome as exports rose on solid demand for semiconductors

and automobiles, the official said. Imports gained at a faster pace in light of

the release of the iPhone X in Q4 and continued demand for coal and natural gas.

     "There is no big driver but overall domestic demand is up. That's why

imports are up," he said.

     Ministry of Finance trade data showed that the pace of year-on-year

increase in Japanese exports decelerated to 9.3% from 16.2% in November and

14.0% in October, with auto shipments to the U.S. down.

     "Car exports to the U.S. were down a little but the demand for SUVs is

strong there, so we don't have to worry too much," the official said.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com