Japan second-quarter GDP seen revised down as external risks hit capex: Reuters poll

TOKYO (Reuters) - Japan’s gross domestic product likely grew at a slower rate than initially estimated in further signs the Sino-U.S. trade war is hurting manufacturing investment in the world’s third largest economy.

The skyline of Osaka, Japan October 25, 2017. REUTERS/Thomas White

A Reuters poll of 18 analysts predict Japan’s GDP grew at an annualized 1.3% in April-June, slower than the preliminary reading of 1.8%, reflecting slowdown in capital expenditure.

The revised data, due to be issued by the Cabinet Office on Sept. 9 at 8:50 a.m. (2350 GMT, Sept. 8), would translate into 0.3% growth quarter-on-quarter, versus the initial reading of a 0.4% expansion.

Revised capital expenditure growth is expected to be trimmed to 0.7% quarter-on-quarter from 1.5% initially.

“Japan’s economic growth will remain slow from now on as output lacks strength,” said Kentaro Arita, senior economist at Mizuho Research Institute. “Capital expenditure will slow due to rising pressure to adjust output. Stagnant production and curbs on overtime will also weigh on wages and consumption.”

Ministry of Finance (MOF) data this week, which is used to estimate revised GDP data, showed manufacturers cut capital spending for the first time in two years in April-June as the bruising Sino-U.S. trade war and slowing global growth take their toll on Japanese exports and factory activity.

On top of external woes, Japanese policymakers are also bracing for a scheduled sales tax hike to 10% from 8% in October. The previous hike from 5% triggered a deep economic slump.

A slowdown in capex could cast doubts over policymakers’ central view that solid domestic demand would offset the blow from trade frictions and a global slowdown.

Separate Cabinet Office data published on Sept. 12, is likely to show core machinery orders tumbled 9.9% month-on-month in July, reversing from a 13.9% gain in the previous month.

Compared with a year earlier, core orders, a highly volatile data series regarded as a leading indicator of capital spending, likely fell 4.5% year-on-year in July, after a 12.5% gain in June.

Underscoring tame inflation, the corporate good prices index likely slid 0.2% month-on-month in August, versus a flat reading in the prior month, central bank data out on Sept. 12 is likely to show. Compared with a year earlier, the index is expected to fall 0.8%, following a 0.6% decline in July.

MOF data due on Monday is also expected to show Japan’s current account surplus stood at 2.0832 trillion yen in July, thanks to hefty gains in return on Japanese investments overseas.

Reporting by Tetsushi Kajimoto; Editing by Sam Holmes