Japan capex unexpectedly falls; Q2 GDP seen revised down - Reuters

* Q2 capex down 7.8 pct yr/yr vs f'cast +1.2 pct

* Sales, recurring profits also drop in April-June

* Analysts expect slight downward revision to Q2 GDP (Adds analyst quote, detail)

By Tetsushi Kajimoto and Leika Kihara

TOKYO, Sept 2 (Reuters) - Japanese firms' sales, profits and capital spending for the second quarter fell from a year earlier, as the strong yen and slowing global demand weigh on the economy's recovery from the March earthquake and tsunami.

Analysts expect the surprise 7.8 percent drop in capital spending to lead to a downward revision to the country's April-June gross domestic product when the data comes out next week.

While Japan's economy is expected to rebound in the third quarter as supply constraints from the quake ease, the survey underscores the fragile state of corporate activity.

"Corporate activity was expected to return to levels before the earthquake in July-September as disaster relief proceeds," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"But the pace of recovery may slow given recent developments in output and exports, as well as the slowdown in global growth and yen rises."

The annual decline in second-quarter capital spending followed a revised 3.0 percent gain in January-March and was the first decrease in a year, data from the finance ministry showed on Friday, surprising analysts who expected a 1.2 percent rise.

Sales fell 11.6 percent from a year earlier, while recurring profits were down 14.6 percent, as sales of cars and flat-screen television sets slumped due to the effect of supply constraints and cooling consumer sentiment after the quake.

The survey's capital spending figures are used to calculate revised GDP figures for the second quarter, due on Sept. 9.

Many economists now expect Japan's economy to have shrunk anywhere between 0.4 to 0.6 percent in April-June from the previous quarter, slightly more than the preliminary 0.3 percent fall which was the third straight quarter of contraction.

"The capex fall itself is somewhat negative. But the GDP revision won't be big so it won't lead to a major change to our view on the economy," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, who expects GDP growth to be revised down to a 0.4 percent contraction.

The global slowdown and stubborn yen rises have cast doubt on the Bank of Japan's forecast that the economy will resume a moderate recovery in the autumn when companies restore supply chains hurt by the quake.

Still, the central bank looks set to hold off on easing monetary policy next week with the yen's retreat from its record high and a resilient stock market allowing it to save for later its limited options for supporting the economy.

(Editing by Joseph Radford)

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Japan factory output falls short of expectations (AP)

By TOMOKO A. HOSAKA, Associated Press Tomoko A. Hosaka, Associated Press – 2 hrs 37 mins ago

TOKYO – Japan's industrial production fell short of expectations in July as a strong yen, power shortages and slowing global economy compounded the struggle to recover from the March 11 earthquake and tsunami.

The Ministry of Economy, Trade and Industry said Wednesday that industrial production climbed 0.6 percent from the previous month. Its outlook for coming months is mixed.

The increase in July missed forecasts, reflecting the growing pressures of a strong yen and an uncertain global economy. Analysts also blamed electricity shortages around Tokyo and northern Japan.

In its previous report, the ministry had projected a 2.2 percent rise in July following a robust 3.8 percent gain in June.

The Nikkei 225 stock average closed little changed at 8,955.20 while most other Asian markets gained.

The world's No. 3 economy relies on exports to drive growth, and any downturn in overseas demand threatens to undermine progress made since the disaster. The tsunami wiped out much of Japan's northeast coast, damaging factories and disrupting critical supply chains for key Japanese industries like autos and electronics.

The auto industry has yet to completely bounce back. The Japan Automobile Manufacturers Association said in a separate report Wednesday that industrywide production in July fell 8.9 percent from the same month last year.

The chairman of the group, Toshiyuki Shiba, issued a statement Tuesday calling on Japan's new Prime Minister Yoshihiko Noda to revitalize the economy. The auto industry faces "unprecedented" yen strength, which is making domestic production increasingly difficult and threatening to trigger a hollowing out of Japanese industry.

Shiba, who is also chief operating officer at Nissan Motor Co., said the industry seeks steps to weaken the yen, expand economic partnership agreements and ensure a stable supply of electricity.

The outlook for the coming months is mixed. The ministry expects production to jump 2.8 percent in August, then fall 2.4 percent in September.

Shipments in July rose 0.2 percent, and inventories slipped 0.2 percent, the ministry said.

The projected decline in September came as a "significant shock" for Masamichi Adachi, senior economist at JPMorgan Securities Japan, who had expected gains to accelerate.

"It decisively poses a downside risk to our bullish view" on overall economic growth in the fourth quarter, he said in a report.

The direction of Japan's economy will depend in large part on the health of exports, which appear to be weakening, Adachi said.

Government data earlier this month showed that exports contracted for the fifth straight month in July.

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Japan protests China boats' entry in disputed area - Waterloo Cedar Falls Courier

Japan says it has protested to China after two Chinese patrol boats entered waters near islands in the East China Sea claimed by both countries.

Chief Cabinet Secretary Yukio Edano says two Chinese vessels entered Japanese waters off the islands known as Senkaku in Japan and Diaoyu in China early Wednesday. He says the boats left the area about 30 minutes later after warnings by Japanese Coast Guard patrol boats and aircraft.

Edano says Japan's government "strongly" protested to China and reiterated its claim to the islands.

Last year, a collision between a Chinese fishing trawler and Japanese patrol boats sparked a diplomatic spat. Japan says Wednesday's incident is the first time China has entered Japanese waters since then.

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Japanese student swept over, lost at Niagara Falls

NIAGARA FALLS, Ontario — A 19-year-old Japanese student was swept over Niagara Falls and presumed drowned after falling from a railing on the Canadian side of the Niagara River, Niagara Parks Police said Monday.

She was visiting the falls with a friend Sunday evening when she climbed over the railing and straddled it while holding an umbrella.

The woman apparently lost her balance and fell into the water when she stood up to climb back over, police said.

She fell into the swift-moving river about 25 meters upstream from the brink of the Horseshoe Falls.

Foul play is not suspected.

"It appears from the review of surveillance video that this incident was a tragic accident," a Niagara Parks Police news release said.

The department said it was working with the Japanese Consulate General to notify the victim's family. Her name was being withheld pending the notification.

The body had not been found by midday Monday, but the remains of an unidentified male were recovered from the whirlpool below the falls after being spotted by an Erie County Sheriff's Department helicopter search crew.

Police and the coroner were working to identify him; police said his death appears to be unrelated.

Considered one of the world's three greatest waterfalls along with Iguazu Falls in South America and Victoria Falls in southern Africa, Niagara, which includes Horseshoe and American Falls, draws about 11 million visitors a year.

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Japanese woman swept over Niagara Falls in Canada (AP)

NIAGARA FALLS, Ontario – A 19-year-old Japanese student was swept over Niagara Falls and presumed drowned after falling from a railing along the Canadian side of the Niagara River, Niagara Parks Police said Monday.

The woman was visiting the falls with a friend at about 8:30 p.m. Sunday when she climbed over the railing and straddled it while holding an umbrella. The woman apparently lost her balance and fell into the water when she stood up to climb back over, police said. She fell into the swift-moving river about 80 feet upstream from the brink of the Horseshoe Falls.

Foul play is not suspected.

"It appears from the review of surveillance video that this incident was a tragic accident," a Niagara Parks Police news release said.

The department said it was working with the Japanese consulate general to notify the victim's family. Her name was being withheld pending the notification.

The woman's body had not been found by midday Monday but the remains of an unidentified male were recovered from the whirlpool below the falls after being spotted by an Erie County Sheriff's department helicopter search crew. Police and the coroner were working to identify him; police said his death appears to be unrelated.

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