MNI ANALYSIS: BOJ Sees Solid Exports Despite Soft Feb Data

--BOJ Data: Feb Real Trade Index -2.1% M/M Vs. +2.5% in Jan

--MOF Data: Feb Exports +1.8% Y/Y, Slowing From +12.3% in Jan  

By Hiroshi Inoue

     TOKYO (MNI) - Japan's real export index posted the first month-on-month

drop in two months in February but Bank of Japan officials maintain their view

that exports are on a gradual uptrend in the first quarter of 2018, backed by

solid global demand, MNI understands.

     BOJ officials note trade figures tend to fluctuate sharply month to month

in the January-March quarter due to the impact of the Lunar New Year holidays in

China, the key export market for Japanese chip-making machines and electronics

parts.

     --REAL EXPORTS DOWN

     The seasonally adjusted real export index calculated by the BOJ based on

the trade data released Monday by the Ministry of Finance showed a 2.1%

month-on-month fall in February, the first drop in two months after +2.5%

(revised up from +2.1%) in January. In October-December, real exports rose 2.3%

on quarter, the second straight rise after +1.9% in Q3.

     MOF data showed Japanese exports gained 1.8% on year in February. It was

the 15th straight year-on-year rise but the pace of increase decelerated from

+12.3% in January and double-digit percentage gains in most of 2017 due to

slower shipments around the Lunar New Year holidays.

     BOJ officials expected to see a pullback in February after rush shipments

to China in January ahead of the Lunar New Year holidays in mid-February.

     --SOLID AUTO EXPORTS

     Exports of Japanese automobiles to the world rose 15.7% on year in

February, up from +6.7% in January, indicating global demand remained solid, the

MOF data showed.

     Shipments of automobiles to the U.S., which account for about 40% of total

Japanese auto exports, rebounded 12.3% on year in February after a 3.9% fall in

January, while those to the European Union, with a 12 % share of total Japanese

auto exports, rose 39.3% after a 19.1% rise.

     The BOJ will release the details of its real trade indexes Friday.

     --WATCHING DOMESTIC DEMAND

     The BOJ's real import index rose 6.3% on month in February, the first rise

in two months after -3.1% in January, leading BOJ officials to believe domestic

demand remained solid in early parts of 2018.

     Imports gained 16.5% on year for the 14th straight year-on-year rise after

+7.7% in January, led by increased purchases of clothing, liquefied natural gas

and refined petroleum products, the MOF data showed.

     Other than trade data, BOJ officials are also focused on whether production

of transport equipment rebounded in February after a sharp drop in January in

preliminary industrial production data due on March 30.

     The Ministry of Economy, Trade and Industry said last month the output of

transport equipment was projected to rise 13.6% on month in February after a

14.3% fall in January.

     The BOJ focus is also on how government forecasts for March production of

electronic parts and devices (-10.8% m/m), general machinery (-0.5%) and

transport equipment (-3.3%) will be revised in the upcoming data.

     Production tends to decline in January, May and August due to factory

shutdowns during the public and seasonal holidays.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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