Japan Q3 growth slashed as capex, inventories shrink

(Adds details on consumer sentiment)

* Q3 GDP revised to annualised +1.3 pct vs prelim +2.2 pct

* Capex -0.4 pct qtr/qtr vs prelim 0.0 pct

* Govt changes base year for GDP, updates capex calculations

* Services sector sentiment rises to 2 1/2-yr high

By Stanley White

TOKYO, Dec 8 (Reuters) - Japan's economy grew much slower than initially estimated in the third quarter, revised data showed, as capital expenditure dried up and companies ran down inventories - renewing concerns about Japan's growth prospects.

The Cabinet Office said on Thursday the economy grew at a 1.3 percent annualised rate in July-September, a severe revision from the 2.2 percent annualised growth first estimated and barely over half the median estimate for a 2.4 percent annualised expansion.

Capital expenditure fell 0.4 percent in the quarter, versus the preliminary estimate of 0.0 percent, as steel and real estate companies reduced investment.

On the positive side, consumer spending was revised up and separate data showed services sector sentiment improved. However, weak capital expenditure may temper optimism that the economy could accelerate heading into next year.

"Capex and consumer spending are the twin engines of domestic demand, and I'm not convinced that both will recover strongly," said Norio Miyagawa, senior economist at Mizuho Securities.

"We have government stimulus and a weak yen, so the economy will continue to grow, but growth will be modest."

Inventories subtracted 0.3 percentage point from growth, more than a preliminary reading of a 0.1 percentage point contraction, which showed that a recent buildup in inventories was slowing, and a positive sign that companies were able to sell excess goods, Miyagawa said.

Net exports added 0.3 percentage point to growth in July-September, less than a 0.5 percentage point contribution in the previous quarter.

However, economists were optimistic that exports would pick up in the future as the yen had fallen to an eight-month low after Donald Trump was elected U.S. president.

Japan's government has also approved a stimulus package with 7.5 trillion yen of spending on public works, which should marginally support growth next year, economists say.

Private consumption, which accounts for roughly 60 percent of the economy, rose 0.3 percent, versus the preliminary estimate of 0.1 percent growth, as households spent more on food and beverages, TV sets and domestic travel.

The government adopted a new base year for calculating gross domestic product, which lifted nominal GDP closer to the Prime Minister Shinzo Abe's target level.