By Kaori Kaneko

By Kaori Kaneko


TOKYO (Reuters) - Japan's third quarter economic growth is forecast to be revised up slightly thanks to better-than-expected capital investment, a Reuters poll showed, though recovery is still seen likely to be slow given feeble domestic demand.


The Japanese economy, the world's third-largest, was thought likely to expand an annualized 2.4 percent in July-September versus 2.2 percent annualized growth seen in a preliminary reading, the poll of 16 economists found.


This increase would translate into 0.6 percent growth from the previous quarter, revised up from the initial 0.5 percent reported.


"There is some weakness in domestic demand but the economy is picking up moderately and has escaped from prolonged economic stagnation," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.


The poll showed that capital expenditure, a key component of gross domestic product, was expected to rise 0.6 percent for the quarter, revised up from the 0.5 percent growth seen in the preliminary reading.

Analysts expect public investment to be revised up for the quarter from the initially reported 0.7 percent decline - which would also contribute to an improved growth reading.

The government is to adopt a new base year for calculating gross domestic product which analysts said made forecasting revised third quarter GDP growth more difficult.

The new calculation method, which will include research and development for the first time, will be applied to GDP data going back to 1994.

The revision raises the level of nominal GDP across time, but the impact on GDP growth rates will be small, government officials have said.

The Cabinet Office will issue the revised GDP data at 8:50 a.m on Thursday (2350 GMT Wednesday).

The poll also forecast a current account surplus of 1.5772 trillion yen ($13.84 billion)for October.

The current account data, which will be released at the same time as the GDP figures, is expected to show a 28th straight month of surplus, helped along by some recovery in exports and income gains from overseas investment.

($1 = 113.9400 yen)

(Reporting by Kaori Kaneko; Editing by Eric Meijer)