— See Separate Table For Details of Individual Forecasts

TOKYO (MNI) – Combined investment in equipment (excluding software)
by non-financial firms in Japan is expected to have risen 6.0% on year
in July-September, posting the first year-on-year gain in 14 quarters,
according to the median forecast of economists surveyed by Market News
International.

The Ministry of Finance will release Q3 capital investment figures
from its quarterly survey at 0850 JST on Thursday, Dec. 2 (2350 GMT
Wednesday).

On a seasonally adjusted basis, capital spending in Q3 is expected
to have risen 1.1% from the previous quarter, following +6.4% q/q in Q2.

The Cabinet Office will release revised GDP data for Q3 on
Thursday, Dec. 9, after taking into account the demand side of capex and
private-sector inventory changes based on the MOF survey.

Many economists polled by MNI forecast Q3 business investment will
show relatively solid year-on-year growth, which in turn should prompt
the Cabinet Office to revise up its estimate for the capex component in
GDP, and thus, overall economic growth in Q3.

In the preliminary data released on Nov. 15, Q3 GDP expanded a real
0.9% q/q (annualized +3.9%), with capital investment showing a 0.8% gain
q/q (annualized +3.2%).

Naoki Tsuchiyama, market economist at Mizuho Securities, said that
an above-2% y/y rise in Q3 capital investment in the MOF survey would
lead to an upward revision to capex in the revised GDP data.

Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset
Management, forecast the MOF’s capital investment figures will show a
firm 6.5% rise from a year earlier.

He said the projection for Q3 business investment in equipment
(excluding software) released by the Construction Research Institute,
which has a close correlation with MOF data, is for a rise of 10.5% y/y,
reversing the 11.4% fall in Q2.

Kyohei Morita, chief economist at Barclays Capital Japan, who
forecast the highest figure of +7.6% y/y in capex, said if his forecast
is met, capital investment in Q3 would be revised up to +0.9% q/q from
+0.8% and Q3 GDP growth would be revised up to an annualized +4.4% from
a preliminary +3.9%.

Data released recently have shown signs of solid business
investment in the July-September quarter.

Core machinery orders (excluding orders from power firms and for
ships), which are seen as a leading indicator for capex, has been on a
gradual recovery trend since touching bottom in Q3 of 2009. They rose
9.6% q/q in the third quarter this year, the fourth straight quarterly
gain,.

Shipments of capital goods excluding transportation vehicles — a
coincident indicator for the economy — rose 3.4% m/m in October,
improving from +0.2% in September and -1.4% in August.

In the last MOF business survey, current profits at firms excluding
those in the financial sector showed strong growth of +83.4% y/y in Q2
and +163.8% in Q1.

skodama@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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