Oct.-Dec. GDP upgraded, but still falls fastest in 35 yrs+

TOKYO, March 12 Kyodo - Japan's economy contracted in the October-December quarter at the fastest pace in about 35 years, shrinking an annualized real 12.1 percent, with the pace revised upward from an initially reported 12.7 percent due to an increase in
company inventory levels, the government said Thursday.

The revised decline in Japan's gross domestic product, a 3.2 percent fall from
the July-September quarter, was the steepest since the contraction of 3.4
percent, or an annualized 13.1 percent, in the January-March quarter of 1974
amid the first oil crisis.
In an initial report released Feb. 16, the government said Japan's GDP fell 3.3
percent in the fourth quarter of 2008 from the previous three months. The fresh
data confirmed that the GDP sank for the third straight quarter for the first
time in seven years.
Prime Minister Taro Aso told the House of Councillors Budget Committee that the
revised GDP figures are ''not good'' and that economic conditions ''continue to
worsen.''
A Cabinet Office official said that despite the slight upward modification, the
latest GDP data showed Japan's economic situation was ''not in good shape'' in
the last quarter of 2008, with sharp falls in exports and corporate capital
spending amid the global economic downturn.
He said ''unintended'' growth in private-sector inventory levels due to failure
in adjustments contributed to the GDP's upward revision, but that it bodes ill
for the Japanese economy.
Yasuo Yamamoto, senior economist at the Mizuho Research Institute, said the
inventory increase in the October-December quarter will likely drag the
January-March GDP down as companies are expected to significantly reduce their
stock.
''In addition to the negative impact from inventories, plummeting exports and
slumping corporate capital spending projected in the January-March quarter will
likely further pull GDP down,'' he said.
Yamamoto forecast that external demand will push GDP down about 2.0 percentage
points and that domestic demand will also drag on the nation's growth in the
upcoming period, possibly resulting in the first ever double-digit contraction
for the second straight quarter.
On a nominal basis, or without adjustment for price changes, the economy
contracted 1.6 percent in the October-December period from the previous
quarter, or an annualized 6.4 percent, for the third straight quarterly
shrinkage.
The nominal figures were revised upward from a 1.7 percent quarterly
contraction, or annualized 6.6 percent shrinkage, marked in the preliminary
report.
In the October-December period, private inventory pushed real GDP up half a
percentage point, up from an earlier reported 0.4 point. The official said some
companies may have intentionally piled up their stock, securing raw materials
while commodity prices remain low.
Exports plunged 13.8 percent, upgraded slightly from a 13.9 percent slide,
while imports grew 3.0 percent, up from a 2.9 percent gain.
Revised figures showed that external demand pulled the GDP down 3.0 percentage
points, unchanged from the initial data. Domestic demand pushed the GDP down
0.1 point, an improvement from the original report that said it sent the GDP
down 0.3 point.
Corporate capital spending decreased a real 5.4 percent from the previous
quarter, downgraded from an initially reported 5.3 percent tumble.
Consumer spending, which accounts for about 55 percent of Japanese GDP, fell a
real 0.4 percent from the previous month, unchanged from the preliminary
report.
Housing investment advanced 5.7 percent, also staying flat from the initially
reported figure.
Government consumption rose a real 1.4 percent, up from an originally reported
1.2 percent, with growth in administrative and medical spending on the part of
local governments.
Public investment expanded a real 0.1 percent, compared with a 0.6 percent
contraction in the preliminary report, as newly available data showed firm
public sector investment.
The GDP deflator, a key inflation gauge, climbed 0.7 percent from a year
earlier, down from the initial 0.9 percent.
In 2008, the Japanese economy shrank a real 0.6 percent, its first contraction
in nine years. In nominal terms, the world's second-largest economy shrank 1.6
percent, its first negative growth in five years.
Based on the fresh data, the Cabinet Office predicted that Japan would meet its
projection of 0.8 percent real negative growth for fiscal 2008 through March
31, if real GDP grows 5.0 percent, or an annualized 21.7 percent, in the
January-March quarter.
The office forecast that the country will attain its outlook of a nominal 1.3
percent contraction in fiscal 2008, if nominal GDP gains 4.8 percent, or an
annualized 20.7 percent, in the remaining quarter.
But those figures seem unachievable as many economists predict that the economy
will worsen further in the coming quarter.
GDP is the total value of goods and services produced domestically. Real GDP
figures are adjusted for price and seasonal variations.
==Kyodo