TOKYO (MNI) – Japan’s economy expanded a real 1.1% in
July-September from the previous quarter, revised up from a preliminary
0.9% rise, in light of higher business investment and a bigger increase
in private-sector inventories than initially estimated, the Cabinet
Office said Thursday.

On an annualized basis, GDP rose 4.5%, revised up from a
preliminary 3.9% growth and higher than the 3.0% gain in April-June,
which itself was revised sharply up from +1.8% reported earlier.

The latest GDP growth is far above the economy’s potential annual
growth rate, estimated by the Bank of Japan to be about 0.5%, and is
fourth consecutive quarter of growth.

The 4.5% annualized rate came in higher than the +4.2% median
forecast by economists in a survey by Market News International.

Economists expected the second preliminary GDP figure to be
revised up from the initial estimate following the outcome of the latest
quarterly survey by the Ministry of Finance released on Dec. 2.

The survey showed that combined capital investment by Japanese
non-financial companies rose 5.0% in the third quarter of 2010 from a
year earlier, the first increase in 14 quarters.

On a seasonally-adjusted, quarter-over-quarter basis, capex
excluding spending on software rose 1.9% in July-September, after a
downwardly revised 5.3% rise in Q2, the MOF survey showed,

The Cabinet Office uses this key piece of demand-side data to
calculate revisions to first preliminary GDP, which is based only on
supply side capex information.

From a year earlier, Q3 GDP surged a revised 5.3% (vs. preliminary
+4.4%), marking the third straight y/y rise after rising a revised 3.5%
(+2.7% previously) in the second quarter of 2010.

The latest estimates for private non-residential investment, or
capex, was revised up to a 1.3% quarter-on-quarter rise from the 0.8%
gain initially reported.

Capex pushed up Q3 GDP by 0.2 percentage point, instead of 0.1
percentage point as reported last month.

Another boost came from private-sector inventories, whose positive
contribution to G3 GDP was revised up to 0.2 percentage point from 0.1
percentage point.

As a result, the contribution of domestic demand to the third
quarter GDP was revised up to 1.1 percentage points from the 0.9
percentage point originally reported.

The bulk of it came from private consumption (+0.7-point
contribution), stemming from high spending on durable goods in
July-September, which is expected to taper off in October-December.

Consumers rushed to dealerships before the government ended its
subsidy program for buying low-emission vehicles in September. At the
same time, the government’s reward program for purchases of greener
consumer electronics continued to support sales of TVs and air
conditioners, particularly amid record high temperatures triggered by
heat waves.

Spending on non-durable goods also rose, reflecting unusually high
demand for cigarettes before the tobacco tax hike that took effect
Oct. 1.

As seen in last month’s preliminary data, net exports (exports
minus imports) provided hardly any contribution to Q3 GDP. Their
contribution was revised down slightly to -0.02 percentage point from a
preliminary +0.02 point.

Government consumption was revised up to +0.2% from +0.1% but its
contribution to Q3 GDP remained nil.

The key points of the latest GDP data:

– Exports were revised up to +2.5% q/q from an initial +2.4% in Q3
(vs. +5.6% in Q2).

– Imports were revised up to 3.0% q/q from +2.7% in Q3 (vs. revised
+4.2% in Q2).

– Private consumption was revised up to +1.2% from +1.1% (vs.
revised +0.3% in Q2), but its positive contribution to Q3 GDP was an
unrevised +0.7 percentage point.

– Private capital expenditures were revised up to +1.3% q/q from a
preliminary +0.8% in Q3 (vs. revised +2.7% in Q2). Its contribution was
revised up to +0.2 percentage point from +0.1 point.

In nominal terms the economy rose 0.6% (vs. a preliminary 0.7%) in
the July-September quarter after a revised 0.3% fall in the previous
quarter.

In fiscal 2009, real GDP shrank 2.4%, revised down from an earlier
estimate of the 1.8% drop and compared with a revised 4.1% fall (-3.8%
previously) in fiscal 2008 and +1.8% in fiscal 2007.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

[TOPICS: M$J$$$,M$A$$$,MAJDS$,MT$$$$]