REPEAT: MNI: Japan Q3 GDP Posts Modest Growth on Net Exports

Repeats Story Initially Transmitted at 01:02 GMT Nov 15/20:02 EST Nov 14

--Adds Economic Minister Motegi Quotes, Background Throughout

--Japan Q3 Real GDP +0.3% Q/Q; Median +0.4%

--Japan Q3 Real GDP +1.4% Annualized; Median +1.6%

--Japan Q3 GDP Posts 7th Straight Q/Q Growth

--Japan Q3 Domestic Demand Contribution -0.2 Pct Point

--Japan Q3 Net Export Contribution +0.5 Pct Point

--Japan Q3 Consumption -0.5% Q/Q, -0.3 Point Contribution

--Japan Q3 Capex +0.2% Q/Q, +0.0 Point Contribution

--Japan Q3 Private Inventory Contribution +0.2 Pct Point

--Japan Q3 Public Investment -2.5% Q/Q, -0.1 Point Contribution

--Japan Q2 Real GDP Unrevised at +0.6% Q/Q

--Japan Q2 Real GDP Revised To +2.6% Annualized; Prelim +2.5%

--Japan Q3 Deflator +0.1% Y/Y Vs Q2 -0.4%, 1st Rise in 5 Quarters

--Japan Q3 Domestic Demand Deflator +0.5% Y/Y; Q2 +0.3%

     TOKYO (MNI) - Preliminary gross domestic product for the July-September

quarter was released by the Cabinet Office Wednesday.

     FACTORS: Japan's economy for the July-September quarter posted a modest

0.3% rise on quarter, or an annualized 1.4%, as a rebound in net exports offset

a slump in consumer spending caused by bad weather. The median economist

forecast was +0.4% q/q, or an annualized +1.6%.

     The seventh straight quarterly expansion in GDP followed unusually strong

growth of an unrevised 0.6% on quarter, or an annualized +2.6% (revised up from

a preliminary +2.5%), in April-June.

     The sustained growth period is the longest in 16 years, Economic and Fiscal

Policy Minister Toshimitsu Motegi told reporters, adding nominal GDP grew 0.6%

on quarter, or an annualized 2.5%, to a record Y546 trillion, surpassing the

previous high of Y533.9 trillion seen in the first quarter of 2007.

     The previous GDP growth stretch lasted for eight quarters from April-June

1999 (annualized +1.9%) to January-March 2001 (+2.6%), when the domestic economy

was riding the wave of the global information technology boom after reeling from

the Asian financial crisis that erupted in 1997.

     "Domestic demand was within a flat range as typhoons and the long stretch

of rainy days had a temporary [negative] impact on eating out, among other

things, but external demand made a positive contribution as exports to Asia and

the U.S. increased amid a gradual recovery in the global economy," Motegi said.

     "There is no change to our assessment that the gradual economic recovery

continues," he said.

     The government will put together a supplementary budget for fiscal 2017

toward the end of December in response to additional fiscal demand, including

that for rebuilding areas hit by natural disasters, the minister said.

     "Looking ahead, the economy is expected to continue recovering gradually,

backed by improvement in employment and income conditions and the effects of the

policy measures," he said, repeating the recent official line.

     Private consumption, which accounts for about 60% of GDP, fell 0.5% on

quarter in Q3, marking the first drop in seven quarters after a revised +0.7% in

Q2. The median forecast was -0.3% on quarter, ranging from -0.1% to -0.4%.

     Consumption trimmed Q3 GDP by 0.3 percentage point while domestic demand

lowered total growth by 0.2 percentage point.

     By contrast, net exports of goods and services -- exports minus imports and

the key Q3 growth driver -- made a positive 0.5 percentage point contribution to

total domestic output, as largely expected (the median forecast was +0.4

percentage point). It was the first positive contribution in two quarters after

pushing down Q2 GDP growth by a revised 0.2 percentage point.

     Solid exports of electronics and machinery as well as weaker demand for

smartphones imported from China supported net exports, economists said.

     Exports rose 1.5% on quarter in Q3 for the first rise in two quarters after

falling 0.2% in Q2 while imports fell 1.6% for the first drop in five quarters

after rising 1.4% in the previous quarter.

     Business investment rose 0.2% on quarter in Q3 (the median forecast was

+0.2%) for the fourth straight q/q increase after rising 0.5% in Q2, but it made

zero (+0.0 percentage point) contribution to the Q3 GDP.

     Private-sector inventories pushed up Q3 GDP by 0.2 percentage point (vs.

the median forecast of +0.1% point) following +0.0% point in Q2.

     Housing investment fell 0.9% on quarter in Q3, the seventh straight q/q

drop. It had a slightly negative contribution (-0.0 percentage point) to the

overall economic growth.

     Public investment fell 2.5% on quarter, the first q/q drop in three

quarters. Its contribution to GDP was -0.1 percentage point.

     As a measure of inflation, the GDP deflator rose 0.1% on year in Q3, the

first rise in five quarters after -0.4% in Q2. Lower import costs push up the

deflator while higher import prices push it down. The domestic demand deflator

rose 0.5% on year in Q3, the third straight q/q rise after +0.3% in Q2 and +0.0%

in Q1, reflecting higher raw material costs.

     TAKEAWAY: Going forward, economists expect Japan's economy to post

continued modest growth in the final quarter of 2017, backed by a pickup in

capital investment and exports as well as an expected rebound in private

consumption.

     Companies have been cautious about implementing capital investment amid

uncertainty over global and domestic demand, although capital investment plans

in the current fiscal year have been solid.

     Household spending has also been lackluster due to slow wage hikes and

concerns about the sustainability of social security programs.

     The average economist forecast for Q4 GDP growth is an annualized 1.30%

rise, according to the latest monthly ESP Forecast Survey of 41 economists by

the Japan Center for Economic Research conducted from Oct. 26 to Nov. 1. The

survey showed economists projected GDP growth to continue just above 1% in the

coming quarters through early 2019.

     The ESP survey showed the average economist forecast for GDP was 1.60% in

fiscal 2017, 1.16% in fiscal 2018 and 0.69% in fiscal 2019. The sales tax hike

planned in October 2019 is expected to dampen consumption.

     These figures are slightly lower than the latest median projections by the

Bank of Japan board: 1.9% for fiscal 2017, 1.4% for fiscal 2018 and 0.7% for

fiscal 2019.

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

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com