— See Separate Tables For Details Of Individual Forecasts

TOKYO (MNI) – Japan’s gross domestic product in October-December is
expected to have posted the first fall in two quarters, down a real 0.4%
q/q, or an annualized -1.5%, due mainly to deterioration in net exports,
following +1.4% q/q in Q3, -0.5% in Q2 and -1.7% in Q1, according to the
median forecast of economists surveyed by Market News International.

The Cabinet Office will release the Q4 GDP data at 0850 JST on
Monday, Jan. 13 (2350 GMT Sunday).

“It is highly possible that the Q4 figures will indicate Japan’s
economy has been in a soft patch,” said Yoshiki Shinke, senior economist
at Dai-Ichi Life Research Institute.

Net exports — exports minus imports — are forecast to have pushed
down Q4 GDP by 0.6 percentage point, which would be the first negative
contribution in two quarters, following +0.6 percentage point in Q3 and
-1.0 point in Q2.

Economists attributed the negative contribution to the European
debt crises, strong yen and disruption of supply chains caused by
flooding in Thailand, plus sharp gains in imports of fossil fuels.

The Bank of Japan’s real export index fell a seasonally adjusted
3.9% on quarter in Q4, while the import index rose 1.3%.

Housing investment is also expected to have lowered Q4 GDP, down
1.1% q/q, the first fall in two quarters, following +5.2% in Q3.

Consumers rushed to buy or build houses before July 31, when the
government ended its program for encouraging building of energy-saving
homes. But that caused a pullback in Q4 housing investment, economists
said.

Adjusted annualized housing starts stood at 796,000 units in Q4,
down from 883,000 units in Q3, official data have shown.

Moreover, public capex is expected to fall q/q in Q4, showing the
second straight quarterly fall, after -1.0% in Q3 and +6,7% in Q2, as
reconstruction of disaster areas, funded by several supplementary
budgets for fiscal 2011, has been delayed.

Meanwhile, two major components of domestic demand are expected to
show q/q gains in Q4.

Personal consumption, the largest component of GDP with around 55%
share, is forecast to have risen by 0.2% q/q in Q4, showing gains for
three quarters in a row, after +0.7% in Q2 and +0.3% in Q1.

Private capital investment is expected to show a 1.0% gain in Q4,
the first rise in five quarters, as firms have restarted capital
investment, which had been halted after the March 11 disaster.

The GDP deflator is expected to show a 1.6% fall on year in Q4,
posting the ninth straight quarterly y/y drop and improving slightly
from -2.2% in Q3 and -2.4% in Q2.

Looking ahead, economists expect the Q1 2012 GDP to show a q/q
growth again, thanks to the government’s spending to reconstruct
disaster areas.

Taro Saito, senior economist at NLI Research Institute, forecast Q1
GDP would show an annualized rise mid-1% q/q.

Ryutaro Kono, chief economist at BNP Paribas, said, “The
possibility that the Japanese economy will enter a downward trend is
low.”

According to the BOJ, spending included in four 2011 supplementary
budgets aiming at rebuilding disastered area will total about 19
trillion yen, about 4% of real GDP for fiscal 2010.

Industrial production — a coincident indicator for the overall
economy — is expected to rise about 5.1% q/q in Q4, if output rebounds
2.5% m/m in January and 1.2% in February, as estimated by the
government, and show no growth in March, posting the first gain in two
quarters after -0.4% in Q3.

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

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