* Japan GDP falls first time in 3 quarters
* Exports slump, private consumption falls
* Capital expenditure drops more than expected
* Govt calls for action from central bank
* BOJ says govt should promote deregulation, reform
TOKYO, Nov 12 (Reuters) - Japan's economy shrank in the
September quarter for the first time since last year, adding to
signs that slowing global growth and tensions with China are
nudging the world's third-largest economy into recession.
The 0.9 percent fall in GDP was in line with expectations,
although a decline in capital expenditure was much steeper than
forecast. Sony Corp and Panasonic Corp have
slashed spending plans to cope with massive losses as they
struggle with competitive markets and a strong yen.
The fall in GDP translated into an annualised rate of
decline of 3.5 percent, government data showed on Monday. While
U.S. growth showed a modest pick up in the third quarter, Japan
and the euro zone economies are shrinking.
"The GDP data confirms that the economy has fallen into a
recession," said Tatsushi Shikano, senior economist at
Mitsubishi UFJ Morgan Stanley Securities in Tokyo. "It is set
for a second straight quarter of contraction in the current
quarter."
A recession is commonly defined as two consecutive quarters
of contraction.
The data kept government pressure on the Bank of Japan to
boost monetary stimulus even after it eased policy in October
for the second straight month as a strong yen and a territorial
row with China exacerbate weak demand for exports.
Economy Minister Seiji Maehara said the central bank should
pursue powerful policy easing to boost the economy, although BOJ
Governor Masaaki Shirakawa shot back that the government should
do its bit too.
Many analysts expect the BOJ to leave policy unchanged at a
review next week, but some see it boosting stimulus again at a
Dec. 19-20 meeting, shortly after the U.S. Federal Reserve is
due to meet.
External demand accounted for 0.7 percentage points of
July-September GDP contraction, matching the median projection.
Japan's exports fell 5.0 percent in July-September, the biggest
slide since a 6.0 percent decline in April-June last year, the
data showed.
A row with China over sovereignty of some islands in the
East China Sea sparked violent protests in China and the boycott
of Japanese goods, which added to the slide in exports,
particularly for automakers such as Nissan Motor Co.
Private consumption - which accounts for roughly 60 percent
of the economy - fell 0.5 percent in the third quarter against a
median forecast of a 0.6 percent drop.
Capital expenditure tumbled 3.2 percent, the fastest pace of
decline since a 5.5 percent drop in April-June 2009, as
companies turned more pessimistic about earnings from domestic
and overseas markets.
In Japan's ailing electronics sector, Sony plans to reduce
capital spending by 29 percent in the year to March 2013 and
Panasonic plans a 27 percent cut, after incurring huge losses in
their TV manufacturing businesses.
The companies are struggling to compete with more nimble
rivals, such as South Korea's Samsung Electronics
and America's Apple Inc, and with a steady rise in the
yen, which makes exports from Japan more expensive.
Analysts said Japanese companies face too many uncertainties
to plan future spending with confidence and that is unlikely to
change in the current quarter.
Resolving the protracted euro zone debt crisis is no nearer,
U.S. tax increases and government spending cuts in early 2013
could tip America into recession unless Congress acts, and
adding domestic uncertainty Japan's Prime Minister Yoshihiko
Noda has promised to call a national election "soon" to break a
political deadlock.
Masamichi Adachi, senior economist at JPMorgan Securities,
said business investment would fall again in the fourth quarter
as the global economy recovers only gradually.
"If some of these uncertainties are removed, it is possible
for things to improve," Adachi said.
He forecast capital expenditure will fall 0.5 percent in
October-December and then rise 0.7 percent in January-March.
Japan's economy outperformed most of its Group of Seven
peers in the first half of this year on robust private
consumption and spending for reconstruction following last
year's earthquake.
But growth has stalled since then. Indeed, second-quarter
growth was revised down in the latest figures by half to just
0.1 percent. The last quarterly economic contraction was in the
Oct-Dec period of 2011, when GDP fell 0.3 percent.
With the economic affect of rebuilding from last year's
earthquake and tsunami fading, the government acknowledged last
week that its index of leading indicators gauge fell to a level
suggesting the onset of a recession.
"I can not deny the possibility that Japan has fallen into a
recession phase," Maehara told reporters after the data was
released.
He said he expected the BOJ to pursue powerful policy
easing, although in a speech BOJ head Shirakawa stressed that
flooding markets with cash alone wouldn't inflation the economy
when interest rates are near zero. The government should boost
the economy's growth potential with deregulation and structural
reform, he said.
"Exports and output are likely to remain weak, and domestic
demand won't increase enough to make up for the weakness in
exports," he said.
The BOJ set a 1 percent inflation target and eased policy in
February. It followed up with further stimulus based on asset
buying in April, September and October on mounting evidence the
economy was on the cusp of a recession.
The euro zone is expected to report on Thursday that the
economy shrank by 0.2 percent in the third quarter, extending a
0.2 percent contraction in the second quarter.