Capex drives Japan's fastest expansion since 2016, seen backing growth
* Q2 GDP revised to annualised +3.0 pct vs prelim +1.9 pct
* Capex revised up to +3.1 pct q/q vs prelim +1.3 pct
* Capex remains key driver of growth -analyst
* Trade tensions, natural disasters pose downside risks
* Q3 GDP seen likely to slow, may suffer contraction
(Adds analyst's quote, detail)
By Tetsushi Kajimoto
TOKYO, Sept 10 (Reuters) - Heavy capital spending in the
second quarter drove Japan's economy to its fastest growth since
2016, underscoring the view that capex continues to back the
economy even as trade tensions and a string of natural disasters
pose risks to the outlook.
Revised Cabinet office data out on Monday showed the economy
grew an annualised 3.0 percent in April-June, handily beating
economists' median estimate for 2.6 percent gain and the initial
estimate of a 1.9 percent expansion.
It was the fastest expansion since first-quarter 2016.
The economy's improved performance should be a relief for
policymakers worried over fallout from a trade war between the
United States and China, which could derail global growth and in
turn damage Japan's export-reliant economy.
Capital expenditure has been a bright spot in Japan's
economy, the world's third largest, although companies remain
cautious about sharing more of their profits with workers,
keeping a lid on private consumption and inflation.
"The environment surrounding capex is favourable thanks to
labour-saving investment because of labour shortages,
construction demand related to the 2020 Tokyo Olympics and
inbound tourism, and research and development, on top of hefty
company profits," said Yoshiki Shinke, chief economist at
Dai-ichi Life Research Institute.
"The Bank of Japan's tankan survey has indicated there's a
strong appetite for business investment. As such, capex is
likely to remain in an uptrend to underpin the economy ahead."
The updated second-quarter growth showed quarter-on-quarter
expansion of 0.7 percent in real, price-adjusted terms, compared
with an initial reading of a 0.5 percent growth and the median
estimate for a 0.7 percent gain.
The capital expenditure component of GDP grew 3.1 percent in
April-June from the previous quarter, versus the median forecast
for 2.8 percent growth, and the preliminary 1.3 percent gain.
That was the fastest increase since the start of 2015,
driven by transport and postal services, and electrical and
The upbeat GDP data followed a finance ministry survey that
last week showed corporate capex rose at the fastest pace in 11
years in the second quarter, driven by procurement of production
equipment for cars and semiconductors.
Still, a recent run of soft data such as exports and factory
output, has cast doubt on the robustness of recent growth.
A series of disasters including floods, last week's typhoon
and an earthquake, prompted some analysts to forecast a
contraction in the current quarter.
"Japan's exports and factory output are set to slow in
July-September as supply and shipments are constrained due to
natural disasters and inbound tourism slumps," said Yoshimasa
Maruyama, chief economist at SMBC Nikko Securities.
"Japan's economy may suffer a temporary contraction in this
Private consumption, which accounts for roughly 60 percent
of GDP, grew 0.7 percent in April-June from the previous three
months, unchanged from the preliminary estimate.
Domestic demand contributed 0.9 percentage points to revised
GDP, while net exports - or exports minus imports - shaved 0.1
percentage point off the second quarter growth.
(Reporting by Tetsushi Kajimoto; Editing by Eric Meijer)
First Published: 2018-09-10 01:58:33
Updated 2018-09-10 07:11:25
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