September 2, 2011 / 7:11 AM / 8 years ago

UPDATE 1-Japan capex unexpectedly falls; Q2 GDP seen revised down

* Q2 capex down 7.8 pct yr/yr vs f’cast +1.2 pct

* Sales, recurring profits also drop in April-June

* Analysts expect slight downward revision to Q2 GDP (Adds analyst quote, detail)

By Tetsushi Kajimoto and Leika Kihara

TOKYO, Sept 2 (Reuters) - Japanese firms’ sales, profits and capital spending for the second quarter fell from a year earlier, as the strong yen and slowing global demand weigh on the economy’s recovery from the March earthquake and tsunami.

Analysts expect the surprise 7.8 percent drop in capital spending to lead to a downward revision to the country’s April-June gross domestic product when the data comes out next week.

While Japan’s economy is expected to rebound in the third quarter as supply constraints from the quake ease, the survey underscores the fragile state of corporate activity.

“Corporate activity was expected to return to levels before the earthquake in July-September as disaster relief proceeds,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“But the pace of recovery may slow given recent developments in output and exports, as well as the slowdown in global growth and yen rises.”

The annual decline in second-quarter capital spending followed a revised 3.0 percent gain in January-March and was the first decrease in a year, data from the finance ministry showed on Friday, surprising analysts who expected a 1.2 percent rise.

Sales fell 11.6 percent from a year earlier, while recurring profits were down 14.6 percent, as sales of cars and flat-screen television sets slumped due to the effect of supply constraints and cooling consumer sentiment after the quake.

The survey’s capital spending figures are used to calculate revised GDP figures for the second quarter, due on Sept. 9.

Many economists now expect Japan’s economy to have shrunk anywhere between 0.4 to 0.6 percent in April-June from the previous quarter, slightly more than the preliminary 0.3 percent fall which was the third straight quarter of contraction.

“The capex fall itself is somewhat negative. But the GDP revision won’t be big so it won’t lead to a major change to our view on the economy,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, who expects GDP growth to be revised down to a 0.4 percent contraction.

The global slowdown and stubborn yen rises have cast doubt on the Bank of Japan’s forecast that the economy will resume a moderate recovery in the autumn when companies restore supply chains hurt by the quake.

Still, the central bank looks set to hold off on easing monetary policy next week with the yen’s retreat from its record high and a resilient stock market allowing it to save for later its limited options for supporting the economy.

Editing by Joseph Radford

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