TOKYO (MNI) – Japan’s economy has likely continued expanding in the
April-June period from the previous quarter for the fifth consecutive
quarterly gain, thanks to the growth of exports and capital investment
during the period, economists and analysts say.

GDP growth was likely improved by the upward contribution from net
exports on the back of the robust economic growth of emerging countries
and capital investment.

Economists’ median forecast for the real GDP figure for the second
quarter of 2010 is a 0.6% rise from the previous quarter – for an
annualized growth of 2.4%, slowing from a revised 1.2% gain on quarter
and annualized rise of 5.0% for the January-March period.

The forecasts for the GDP estimates for the April-June period range
between a 0.4% rise and a 0.9% gain from the previous quarter,
transferring to a range of an annualized rise of 1.5% and 3.6%.

The Cabinet Office will release the first preliminary GDP estimates
for the second quarter of 2010 at 0850 JST on Aug. 16 (2350 GMT on Aug.
15) and the data will likely indicate the risk that the pace of economic
recovery will slow in the coming quarters.

Nikko Cordial Securities’ chief market economist Mari Iwashita said
Japan’s GDP for the second quarter seemed to have been driven by
external demand and capital investment.

She added that private consumption is likely to have risen from the
previous quarter, up for the fifth consecutive quarter.

Iwashita expects capital investment to have risen 2% (vs. +0.6% for
the first quarter) on quarter and she estimated positive contribution
from overseas demand to be 0.4 percentage points (vs. +0.7 pts for the
first quarter).

Japan’s trade surplus widened 41.1% from a year earlier to Y686.96
billion in June, the 13th consecutive month that the surplus has
exceeded the year-ago level, but the pace of export growth decelerated
for the fourth month in a row.

BNP Paribas’s chief economist Ryutaro Kono said that the pace of
recovery for the second quarter slowed from the first quarter but Japan
likely posted economic growth above its potential growth rate estimated
to be around 0.5%.

He expects capital spending to have risen 1.5% on quarter and the
contribution from net exports to be at around 0.5 percentage points.

Kono predicts private consumption for the second quarter to be flat
(vs. +0.4% for the first quarter) from the previous quarter.

Meanwhile, Barclays Capital’s chief economist Kyohei Morita expects
private consumption to have fallen 0.1% on quarter.

Sumitomo Mitsui Asset Management chief economist Akiyoshi Takumori
estimates private consumption to have risen 0.2%.

Economists voiced concern over future private consumption as the
effects of government measures aimed at stimulating spending will wane.

The government has said that it will at the end of September stop
subsidizing purchases of environmentally friendly cars.

The Bank of Japan has said, “Private consumption is expected to
continue picking up. The pace of improvement, however, is likely to
remain moderate for the time being, since the effects of policy measures
are expected to wane while the employment and income situation remains
severe.”

Preliminary GDP estimates are mainly calculated by supply data and
the Cabinet Office will recalculate the estimates based on demand data
in second preliminary figures.

The pace of economic recovery is expected to slow further in the
coming quarters on the premise that the growth of exports will moderate
due to the expected slowdown of economic growth in emerging countries.

April-June industrial production rose 1.4% from the previous
quarter, marking the fifth straight q/q gain but slowing sharply from
+7.0% in January-March and +5.9% in the final quarter of 2009.

Output in the July-September quarter is estimated to rise just 0.2%
from the previous quarter, based on the above forecasts and assuming
September will be flat.

The BOJ has said that the pace of recovery is expected to slow in
the second half of this fiscal year starting in October, although the
central bank expects Japan’s economy to continue on a moderate recovery
path.

But the BOJ policymakers maintain their optimistic economic view on
the premise that the economic growth of emerging economies will
continue.

In light of evidence of a continued recovery in Japanese exports
and production, the BOJ board upgraded its real gross domestic product
median forecast for fiscal 2010 to +2.6% from the +1.8% it projected in
its semi-annual Outlook Report issued in April.

Board member’s GDP forecasts ranged from +2.5% to +2.7%, revised
from the range of between +1.6% and +2.0% seen in April.

The forecasts for real GDP data for the second quarter
Quarter-on- Annualized Growth
quarter
Nikko Cordial Securities 0.9% 3.6%
Mizuho Research Institute 0.8% 3.4%
NLI Research Institute 0.8% 3.4%
Barclays Capital 0.8% 3.3%
JP Morgan 0.7% 2.8%
BNP Paribas 0.6% 2.5%
Mitsubishi UFJ Morgan
Stanley 0.6% 2.4%
Daiwa Institute of Research 0.6% 2.3%
Japan Research Institute 0.6% 2.3%
Dai-Ichi Life Research Institute 0.5% 2.1%
Nomura Securities 0.5% 1.9%
Sumitomo Mitsui
Asset Management 0.4% 1.8%
Nochu Economic Research 0.4% 1.5%
Morgan Stanley 0.4% 1.5%
————————————————————————
Median 0.6% 2.4%
————————————————————————
Real GDP for the first quarter 1.2% 5.0%

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

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