REPEAT: MNI POLICY: Govt Sees Japan Econ Recovery in Q4

Repeats Story Initially Transmitted at 00:23 GMT Nov 14/19:23 EST Nov 13

     TOKYO (MNI) - Japan's economy was hit by weaker private consumption and net

exports caused by natural disasters in the third quarter, but the slowdown is

seen as temporary, with the economy expected to return to a moderate recovery

path in the fourth quarter.

     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, preliminary gross domestic product data released Wednesday by the

Cabinet Office showed.

     "The economy was weighed down by the disasters, (heavy rainfall in July and

typhoons and an earthquake in September) in the third quarter," a senior Cabinet

Office official said.

     --ECONOMY TO REBOUND

     The official, however, said, "The economy will likely return to a moderate

recovery path in the fourth quarter as corporate profits and income conditions

are improving."

     Domestic demand took 0.2 percentage points off of total output in Q3 after

adding 0.9 percentage point in Q2, while external demand weighed the overall

growth by 0.1 percentage point in Q3 after pushing down 0.1 percentage point in

Q2.

     Private consumption, which accounts for about 60% of GDP, was also hurt by

high energy and vegetable prices, which have lowered real income levels, the

official said.

     Private consumption fell 0.1% on quarter in Q3, marking the first quarterly

drop in two quarters after an unrevised gain of 0.7% in Q2.

     The official also said that the direct impact of the U.S.-China trade

friction on Japan's economy was limited, but the lingering concern over the

dispute is affecting both corporate and household sentiment.

     The government's Economy Watchers' sentiment index for Japan's current

economic climate rose 0.9 points to 49.5 in October on a seasonally-adjusted

basis, the first rise in two months, after falling 0.1 point to 48.6 in

September. The index stayed below the key level of 50 for a ninth consecutive

month.

     But the Watchers' outlook index showed sentiment regarding the situation

two to three months ahead dropped for a second straight month, down 0.7 point to

50.6, as the rise in gasoline prices and uncertainty over global trade disputes

fed caution. The index fell 0.7 point to 50.6 in October.

     --Q3 SLOW CAPEX

     Business investment fell 0.2% q/q in Q3 (the median forecast was +0.0%),

the first q/q drop in eight quarters, following a gain of 3.1% in Q2.

     The Q3 GDP data showed business investment, another key factor, posted the

first drop in eight quarters, down 0.2% on quarter after rising 3.1% in Q2.

     The Bank of Japan's Tankan business sentiment survey and other surveys

showed that capital investment plans in the current fiscal year remains solid

and policymakers are focused on whether firms postpone planned capex.

     --OCT DATA EYED

     Japanese policymakers are also focused on whether exports and production

rebound in or after October to examine the underlying trend of the Japanese

economy.

     Japanese goods for automobiles and capital goods excluding transport

equipment, remain solid, as overseas demand held up. However, Japan's exports of

capital goods may be affected by a slowing China economy, the official said.

     Machine tool orders in October fell 1.1% on year for the first drop since

November 2016, hit by weak demand in China. If uncertainty over global demand

continued, firms will likely refrain from implementing their capital investment

plans.

--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