/www.bloomberg.com/ Tokyo, Sept. 11 (Bloomberg) -- Japan raised its estimate of economic growth in the second quarter as companies tempered cutbacks in investment and added to their stockpiles of goods in anticipation of rising overseas orders.
Gross domestic product rose 0.6 percent last quarter, seasonally adjusted, the Cabinet Office said, compared with an initial estimate of 0.5 percent. Companies cut spending 0.4 percent, the smallest drop since reductions began five quarters earlier, and stockpiles more than doubled.
Investment by companies such as Matsushita Electric Industrial Co., maker of Panasonic-brand goods, signals that the economy may grow again this quarter, cementing a recovery from recession. Japan needs stronger growth in the U.S., its main export market, to sustain the rebound.
``We're on track to recovery,'' said Yoshimasa Maruyama, an economist at Mizuho Research Institute, who believes capital spending is rising this quarter. ``The question is how long the recovery will last.''
Stocks rose after the increase in the growth estimate, which was unexpected. The Nikkei 225 Stock Average gained 0.9 percent to 9393.11 as of noon in Tokyo.
The yen was little changed at 119.81 to the dollar at 1 p.m. compared with 119.85 yen before the report.
Japan is counting on the U.S. and other overseas markets to buy products such as Honda Motor Co. cars because consumers at home are cutting back in response to job losses and falling salaries. A slowdown in the U.S., the biggest overseas market for Japan, may hurt exports.
Overseas shipments grew 5.7 percent last quarter, contributing 0.4 percentage point to growth. That was more than the 0.3 percentage point earlier estimated as imports rose less than expected.
New Equipment
Matsushita Electric Industrial, which returned to profit in the quarter ended June 30 as overseas sales surged 11 percent, installed new equipment in August to meet higher demand for memory cards used in digital cameras and mobile phones. The company plans to raise monthly output by 43 percent.
Nitto Denko Corp. is betting on an increase in global demand for digital television sets, saying today it would spend 7 billion yen ($58.4 million) to build a new plant in Japan. The factory will allow the company to increase output of films used in liquid crystal displays by 60 percent.
Exports of steel have been rising for 13 months, helping boost profit at Kobe Steel Ltd., which raised its first-half group net income forecast fourfold to 4 billion yen.
Consumer spending, which makes up 55 percent of the economy, rose 0.3 percent, today's report showed, the same as initially estimated. Losing Confidence
Signs are mounting that consumers and businesses are losing confidence in the recovery as uncertainty over U.S. growth prospects grows.
Business confidence unexpectedly fell last quarter, a government report said last week. Consumer confidence in Tokyo, where a tenth of Japanese live, fell a second month in August.
U.S. economic growth slowed to a 1.1 percent annual pace last quarter from a 5 percent rate in the three months ended March 31, and there are signs it's sputtering this quarter. Manufacturing growth in Japan's largest overseas market stalled in August and its services industry grew at the slowest pace since January.
``The risks right now are the falling stock prices and outlook in the U.S. economy,'' said Takeshi Minami, a senior economist at UFJ Capital Market Securities. ``Japan's economy will probably peak out around the beginning of next year.''
The government forecasts the economy won't grow this fiscal year after shrinking 1.9 percent last fiscal year.