MNI INSIGHT: Apr Export Index Up; BOJ Uncertain Over Recovery

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan is looking through April's pick-up in the

real export index, as they still see an overall weakness in the sector that is

likely to last for a while, MNI understands.

     The BOJ's real export index, calculated using Ministry of Finance trade

data, rose 1.4% on month in April for the first rise in two months following an

upwardly revised 1.2% fall in March.

      Based on one month's data, bank officials believe exports have hit bottom,

but there isn't enough evidence to suggest a pick-up in coming months.

     The Bank of Japan continues to see the export sector as a key driver of the

domestic economy, with prolonged weakness likely to boost calls for an expansion

of their easy policy.

     The real export index for April, albeit for a single month, rose 1.7% from

the previous quarter, having fallen a revised 1.7% in Q1.

     --WEAK ASIA DEMAND

     The decline in exports in the January-March quarter of 2019 can be

explained almost entirely by the negative contribution of "factors specific to

Asia" and "factors specific to IT-related goods and capital goods," the BOJ has

said. 

     And with the strength of the Chinese recovery still in some doubt as trade

tensions linger, there is no reason to expect an early improvement for the

export sector.

     Recent data from the Ministry of Finance showed Japan's exports fell 2.4%

year-on-year in April, with sales o China down 6.3% y/y and to the Greater Asia

region down by 3.3% y/y. Exports of chip-making equipment fell 27% y/y in April

overall and fell 41% to China, underlining sluggish demand.

     With the latest data showing China's demand for IT-related goods remains

weak, the BOJ's outlook remains cautious without clarity for global IT-demand.

But they do expect the adjustment, which began in the Q2 2018, may bottom out in

the second half of this year, as past trends show the cycle normally takes an

average of 5 or 6 quarters to complete.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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