Japan first-quarter GDP revised down in fragile export-led expansion

By Tetsushi Kajimoto

TOKYO (Reuters) - Japan's economic growth in the January-March period was severely revised down from the original estimate because of a downward adjustment in business inventories, the Cabinet Office said, underscoring the fragility of its export-led expansion.

Japan's economy, the world's third largest, expanded at an annualised rate of 1.0 percent in the January-March period, less than half the preliminary estimate of 2.2 percent growth, Cabinet Office data showed on Thursday.

The revised gross domestic product (GDP) data compared with the median forecast of a 2.4 percent expansion in a Reuters' poll of economists.

The Cabinet Office data follows a recent run of indicators that suggests continued economic growth in the current quarter because of solid exports and factory output, although wage growth and household spending remain lacklustre, despite a tight job market.

The weaker-than-expected GDP data will likely worry the Bank of Japan, which is expected to stand pat at its next rate review on June 15-16. A majority of the economists projected in a Reuters poll last month the BOJ's next move would be pulling back its stimulus.

Analysts say that to sustain economic growth, the export-led recovery must spread to domestic demand especially given the risk of potential slowdown in overseas economies, particularly the U.S. economy, which some see in a late stage of expansion.

On the quarter, the Japanese economy grew a revised 0.3 percent in real, price-adjusted terms, against a preliminary reading of a 0.5 percent increase and the median estimate of a 0.6 percent expansion.

Capital expenditure, a key component of GDP, rose 0.6 percent for the quarter, versus the preliminary estimate of a 0.2 percent increase.

Inventories shaved 0.1 percentage point off growth, revised down from a 0.1 percent point contribution originally posted.

Private consumption, which accounts for roughly 60 percent of the economy, rose 0.3 percent, down from the preliminary 0.4 percent gain. Tame wages and consumer spending have kept Japan from beating deflation, posing a key challenge for the BOJ in meeting its 2 percent price goal via a massive bond buying programme.

Taken together, domestic demand contributed 0.1 percentage point to growth, versus the initial 0.4 percentage point recorded. Net exports added 0.1 point to growth, unchanged from the preliminary estimate.

(The story has been refiled to remove extraneous word from second paragraph)

(Reporting by Tetsushi Kajimoto; Editing by Eric Meijer)