• Bloomberg


The third-quarter contraction that tipped Japan into recession may not be as sharp as first thought, with economists revising gross domestic product forecasts as the Lower House election campaign started Tuesday.

The economy probably shrank an annualized 0.6 percent in the three months through September, not the 1.6 percent initially projected by the government, according to a survey of 12 economists Monday.

A surprise jump in capital spending led by metals producers and smartphone-part makers prompted the revision, reducing the bad-news impact of the initial report. Abe is also contending with a downgrade of Japan’s credit rating by Moody’s Investors Service, which cited uncertainty over his growth strategy.

“Capital investment is gradually growing, with the level much higher than before the Abe government, but it’s just not that resilient yet,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “The public still doesn’t rate ‘Abenomics’ positively because most people aren’t better off as prices are rising faster than wages.”

Capital spending increased 5.5 percent in the third quarter, beating the median in a separate survey for a 1.8 percent gain.

Manufacturing investment advanced 11 percent, with the metal industry boosting spending 85 percent. Machinery makers showed a 15 percent gain and information technology equipment producers increased investment by 26 percent.

Monday’s figures will be used to revise third-quarter gross domestic product data, which showed the economy contracted 1.6 percent after shrinking 7.3 percent in the April-June period. The revised data is due Dec. 8.

Abe has been calling on companies to spend their cash hoards on investment and wages to pull the economy out of two decades of stagnation.

The investment data accompanied news that corporate profits climbed 7.6 percent and sales increased 2.9 percent during the quarter. Companies invested ¥9.4 trillion in the period, 47 percent less than the high point in the first quarter of 2007, based on comparable data back to 2001.

Japanese stocks rose Monday, with the Topix index extending a six-year high as the slumping yen boosted exporters. The currency swung between gains and losses and traded near lows versus the dollar last seen in 2007.

“The chances are high that July-Sept GDP will be revised upward,” Koya Miyamae, an economist in the financial market and economic research division of SMBC Nikko Securities Inc., wrote in a note.

“If GDP is revised to show growth, the opposition parties’ claim that Abenomics has failed would lose one foundation and markets would see that as a tailwind for the ruling parties.”

Investment by nonmanufacturers, which was 64 percent of the total, climbed 2.7 percent. Spending by real estate companies rose 56 percent and investment by wholesalers and retailers climbed 11 percent.

Metals manufacturers increased purchases of construction materials and other equipment while electronics companies boosted spending for production of smartphone parts. Investment by electrical machinery makers rose as manufacturers including car companies spent more on factory automation.

An unexpected increase in industrial production and other data last week prompted JPMorgan Chase and Co. Japan economist Masamichi Adachi to raise this quarter’s growth forecast to an annualized 4 percent from 2 percent, according to a research report.

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