Japan Q1 capex suggests slight upward GDP revision

* Q1 capex up 3.3 pct yr/yr vs 3.8 pct in Q4

* Analysts say slight upward revision to Q1 GDP possible

* Data exclude companies in the quake-hit areas

By Kaori Kaneko

TOKYO, June 2 (Reuters) – Japanese companies raised spending on plant and equipment in January-March at roughly the same annual rate as in the previous quarter, suggesting the economy may have contracted less in the first quarter than initially reported.

Total capital spending rose 3.3 percent in the first three months of 2011 from a year earlier, compared with a 3.8 percent increase in October-December and marking a third straight quarter of annual gains, Ministry of Finance data showed on Thursday.

However, the figures exclude companies based in the northeastern regions that were devastated by the March 11 earthquake and tsunami, and may have exaggerated the gains in capital spending, ministry officials and analysts said.

“Capital spending showed a bigger increase than expected in the first quarter although it is unclear whether the data actually reflected reality,” said Yuichi Kodama, economist at Meiji Yasuda Life Insurance in Tokyo.

“The economy is expected to recover in the second half of fiscal 2011/12 but a potential political vacuum poses risks to this scenario as it could delay the formation of a second supplementary budget for reconstruction.”

Prime Minister Naoto Kan faces a no-confidence vote in parliament on Thursday and his future hangs in balance after several rebels in his own party said they would back the motion.[ID:L3E7H200W]

The capital spending figures will be used to calculate revised gross domestic product (GDP) figures for the first quarter, due on June 9. Analysts expect the capital spending data to contribute to a slight upward revision.

The immediate blow from the disaster proved more severe than many initially thought, shaving 0.9 percent off first-quarter economic output, preliminary GDP data showed last month.

But economists expect the Bank of Japan to hold off on any more policy easing given the prospects for a recovery later this year with the help of Japan’s biggest reconstruction effort since the post-World War Two era.

The 9.0 magnitude quake and a deadly tsunami that struck Japan’s northeast left around 24,000 dead or missing and triggered the world’s worst nuclear crisis in 25 years, knocking Japan back into a second recession in less than three years.

The BOJ eased monetary policy just days after the earthquake but it has stood pat on policy since then on the view that the economy will resume a moderate recovery before the end of the year. It has signalled, however, that it stands ready to loosen policy further if the damage from the quake proves greater than expected.

Japanese firms’ sales rose 1.4 percent in January-March from a year ago, slower than a 4.1 percent annual rise in the previous quarter, while recurring profits were up 16.2 percent, compared with 27.3 percent annual rise in the final quarter of last year, the ministry data showed.