March 2, 2018 / 5:02 AM / 4 months ago

Japan's fourth-quarter GDP seen revised up as capex rises, BOJ to stand pat

TOKYO (Reuters) - Japan’s economy was expected to show faster growth in the final quarter of last year than initially estimated, boosted by bullish capital expenditure, a Reuters poll showed on Friday.

FILE PHOTO: A billboard advertising a car is seen in central Tokyo, Japan June 7, 2016. REUTERS/Toru Hanai/File Photo

The poll also found the Bank of Japan was seen as likely to maintain its current stimulus policies at its two-day meeting next week.

The economy was expected to have expanded an annualized 0.9 percent in October-December, revised up from the initial reading of 0.5 percent, the poll of 19 economists found.

This would translate into a 0.2 percent rise on a quarter-on-quarter basis from the preliminary reading of 0.1 percent.

Finance ministry data out on Thursday showed Japanese firms accelerated their investment in plant and equipment last quarter, prompting economists to upgrade their economic growth forecasts.

“Higher capital spending contributed to the upward revision. Domestic demand recovery is likely to confirm the economy’s solidity,” said Yusuke Ichikawa, senior economist at Mizuho Research Institute. “We project exports will retain their rising trend and domestic demand including capital expenditure will keep its steady undertone. The economy will likely continue to grow moderately.”

Capital expenditure, a key component of gross domestic product, was seen likely to have risen 1.2 percent for the quarter, better than the 0.7 percent of growth in the preliminary data.

Capital expenditure rose for the fifth consecutive quarter in October-December, affirming companies’ willingness to invest.

Japan’s economy, the world third-largest, marked eight straight quarters of expansion in October-December, its longest such run since a 12-quarter stretch of growth during the 1980s boom years.

The Cabinet Office will release the revised GDP data at 8:50 a.m. on March 8 Thursday (2350 GMT March 7).

The poll also found the Bank of Japan is expected to keep its short-term interest rate at minus 0.1 percent and the 10-year government bond yield target at around zero percent when policymakers meet on March 8-9.

“Consumer inflation is moving in an upward direction but it is still far from the BOJ’s 2 percent target. So the central bank is expected to keep the current level of stimulus next week,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

The poll also expected a current account surplus of around 310 billion yen ($2.92 billion) in January, falling from December’s 797.2 billion yen surplus partly due to higher oil prices.

Japanese household spending was seen likely to have fallen 1.2 percent in January from a year ago, accelerating from a 0.1 percent slip in December, reflecting higher prices of vegetables and gasoline, the poll showed.

The finance ministry will announce the current account balance at 8:50 a.m. on March 8 Japan time while the internal affairs ministry releases household spending at 8:30 a.m. on March 9.

Reporting by Kaori Kaneko; Editing by Eric Meijer

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