4TH LD: Japan's economic growth accelerates to 4.8% in July-Sept. qtr.

TOKYO, Nov. 16 Kyodo

(EDS: ADDING COMMENTS AND DETAILS)

Japan's economy expanded in the July-September quarter for the second straight quarter, marking the fastest pace of growth in more than two years due to pickups in exports and private consumption, the government said Monday.

The nation's gross domestic product grew an annualized real 4.8 percent in the three months through September, the Cabinet Office said in a preliminary report. The expansion is the largest since the January-March quarter of 2007, and overwhelms the average market forecast of a 2.6 percent gain in a Kyodo News survey.

In the previous quarter, GDP rose 2.7 percent, expanding for the first time in five quarters.

Deputy Prime Minister Naoto Kan told a press conference that the GDP report reflects ''moves that the economy is recovering'' in Japan and overseas.

But Kan, who is also state minister for economic and fiscal policy, warned against becoming too optimistic about the prospects of the Japanese economy, saying severe employment conditions, falling prices and other downside risks persist.

The Democratic Party of Japan-led government plans to draw up a second extra budget worth at least 2.7 trillion yen as soon as possible to ensure the recovery takes hold, Kan added.

Many economists say the Japanese economy continued to pick up from the worst recession in decades largely because of stimulus efforts at home and abroad and that it is too early to say that a self-sustainable recovery has started.

''The economic growth is likely to stall early next year,'' said Hiromichi Shirakawa, chief economist at Credit Suisse in Japan.

Shirakawa said an increase in private consumption was front-loaded due to the government's stimulus measures and the real demand has yet to increase amid an expected fall in year-end bonuses and a weak job market.

The Japanese economy will likely ''remain dependent on external demand,'' he said, voicing concern over the prospects for the U.S. economy, a major market for Japanese products.

On a quarter-to-quarter basis, Japan's GDP posted a price-adjusted real 1.2 percent rise from the April-June period, beating a market forecast of a 0.6 percent growth.

In the latest quarter, consumer spending -- which makes up about 60 percent of Japanese GDP -- rose a real 0.7 percent from the previous quarter, for the second straight quarter of growth, as durable goods spending surged on tax breaks on low-emission cars and a government reward program for purchases of greener consumer electronics.

Corporate capital spending rose 1.6 percent for the first increase in six quarters, showing companies' improved appetite for making fresh business investment.

Reflecting higher demand from other parts of Asia, Japanese exports increased 6.4 percent for the second straight quarterly gain.

Imports rose 3.4 percent, posting the first rise in three quarters.

Meanwhile, public investment fell 1.2 percent after increasing for four quarters in a row.

Housing investment continued to fall, logging a 7.7 percent drop.

Domestic demand, made up of private consumption and capital investment among others, sent GDP up 0.8 percentage point from the previous three months, marking the first upward push in one-and-a-half years. Overseas demand drove GDP up 0.4 point.

The domestic demand deflator, a gauge of price trends, dropped 2.6 percent, the largest slide in more than half a century, reflecting falling prices in Japan.

The Bank of Japan projected in its semi-annual outlook report released Oct. 30 that Japan is expected to experience at least three years of deflation.

The central bank also expects Japan's economy will grow about 1.2 percent next fiscal year, which starts in April 2010, after shrinking 3.2 percent in fiscal 2009.

Despite the GDP growth in real terms, nominal GDP fell an annualized 0.3 percent in the reporting period, which corresponds to a 0.1 percent contraction from the previous quarter.

GDP is the total value of goods and services produced domestically.