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TOKYO (MNI) – Combined investment in equipment (excluding software)
by non-financial firms in Japan is expected to have risen 1.5% on year
in April-June, posting a year-on-year gain for the fourth straight
quarter, according to the median forecast of economists surveyed by
Market News International.

The Ministry of Finance will release Q2 capital investment figures
from its quarterly survey at 0850 JST on Friday, Sept. 2 (2350 GMT
Thursday).

Takeshi Minami, senior economist at Norinchukin Research Institute,
said capital investment in Q2 was firm, thanks to demand generated by
rebuilding northeastern Japan that was ravaged by the March earthquake
disaster.

But the pace of the year-on-year increase in Q2 appeared to have
slowed from +3.0% in Q1.

The projection for Q2 business investment in equipment (excluding
software) released by the Construction Research Institute, which has a
close correlation with the MOF data, showed a 7.4% y/y drop in Q2,
worsening from -1.3% in Q1.

The Cabinet Office will release revised GDP data for Q2 on Friday,
Sept. 9, after taking into account the demand side of capex and
private-sector inventory changes based on the MOF survey.

Some economists polled by MNI forecast Q2 business investment will
show relatively weak y/y growth, which in turn should prompt the Cabinet
Office to revise down its estimate for the capex component in GDP, and
thus, overall economic growth in Q2.

Naoki Tsuchiyama, market economist at Mizuho Securities, said that
a below 2.0% y/y rise in Q2 capital investment in the MOF survey would
lead to a downward revision to capex in the revised GDP data.

In the preliminary data released on Aug. 15, Q2 GDP fell a real
0.3%% q/q (annualized -1.3%), with capital investment up 0.2% q/q
(annualized +0.9%).

On a seasonally adjusted basis, capital spending in Q2 is expected
to have risen 0.6% from the previous quarter, posting the first gain in
three quarters, following -0.8% q/q in Q1.

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

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