MNI BRIEF: BOJ​ Wary On Risks To Q1 Exports, Production

Bank of Japan officials remain vigilant against the risk of weaker exports and production in the first quarter due to a slowing global economy, as well as the threat of weaker private consumption amid ongoing high prices, MNI understands.

Bank officials expect a moderate rising trend in exports and production as high orders have not waned amid the lack of a serious economic downturn so far. They also expect private consumption to be hit by high living costs and weak real income growth, though consumption should remain solid due to pent-up demand and the use of savings accumulated during Covid-19.

They judged overall economic developments, including gross domestic product for the fourth quarter, are on the track as forecast in January. Bank officials expect exports and production to be hit by a slowing global economy, but they don’t expect the components to be derailed from a recovery trend unless the global economy deteriorates sharply and affects orders.

They are also focused on whether Japan’s consumer price index will slow in or after February as they predicted, and how consumer spending evolves as wages will not rise before April.

The Q4 GDP rose 0.2% q/q, or an annualized +0.6% following a revised -0.3% q/q, or an annualized revised -1.0% for the third quarter of 2022. Private consumption, which accounts for about 60% of Japan's GDP, rose 0.5% q/q in Q4, after a revised 0.0% in Q3. Business investment fell 0.5% q/q in Q4, the first drop in three quarters following an unrevised +1.5% in Q3. (See MNI BRIEF: Japan's Q4 GDP Up 0.6%; First Growth in 2 Quarters)