By Tetsushi Kajimoto
TOKYO (Reuters) - Japan's economy may have suffered a deeper contraction than initially thought in the December quarter on an expected downgrade to business spending figures, as the coronavirus outbreak fuelled fears of recession in the current quarter.
Any downward revision in final gross domestic product (GDP) due on Monday could dash hopes for a domestic-led recovery in the export-reliant economy, with the October's sales tax hike hurting private consumption.
The expected downgrade and the specter of a technical recession - defined as two straight quarters of contraction - could pile pressure on the government and the central bank to deploy further stimulus even as policy options dwindle.
Revised GDP data probably showed Japan's economy - the world's third largest - contracted at an annualized rate of 6.6%, versus a preliminary estimate of 6.3%, due to a downward revision to capital spending, the poll of 16 economists showed.
That would translate into a quarterly contraction of 1.7%, worse than a 1.6% decline seen in the preliminary data issued last month, according to the poll.
"The impact from the coronavirus outbreak curbs service sector consumption and weighs on inbound tourism and exports of goods," said Kentaro Arita, an economist at Mizuho Research Institute.
"If it's prolonged, that could trigger an increase in unemployment and bankruptcies, which will prolong a recession," he added.
GDP's capital spending constituent likely dropped 4.3% quarter-on-quarter in the October-December period, the poll showed. That compared with the preliminary estimate of a 3.7% drop.
Business spending has been a bright spot in Japan's otherwise fragile economy and led by investment in technology to cope with labor shortages, but analysts see the momentum waning due to the coronavirus' damaging hit to Chinese and global economies.
"We're expecting a 0.5% quarter-on-quarter contraction this quarter so the economy is probably now in recession," said Marcel Thieliant, Senior Japan Economist at Capital Economics.
"(BOJ) Governor Kuroda will likely want to play his part in a global monetary policy response by the major developed world central banks."
Thieliant expects the BOJ to cut its short-term policy rate to -0.2% at its March 18-19 meeting and for the government to adopt a supplementary budget as big as 5 trillion yen ($47.25 billion).
Separate data due on Wednesday will likely show the corporate goods price index grew 1.0% year-on-year in February, the Reuters poll found. On the month, the index probably fell 0.3% in February.