MNI INSIGHT: BOJ Expect Exports To Show Signs of Pick-Up In Q1

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan sees exports picking up in the first

quarter of 2020, although an accelerated slowdown in the global economy or a

worsening of the trade friction between the U.S. and China will impact that

outlook, MNI understands.

     Although the overall trend is seen picking up, the BOJ sees a tug-of-war

between the major export sectors -- continued weak demand for autos in the U.S.

and Asia is offsetting a pick-up in demand for IT-related goods.

     Although the Bank sees continued sluggish demand for the auto sector, it

expects the IT sector to continue its recovery, which will lead to a pick up in

capex spending, giving a further fillip to the manufacturing sector.

     Although the BOJ sees a pick-up in domestic capex underpinning the economy

at home, the overseas market remains sluggish, with little sign of a sharp

upturn in offshore capital investment.

     --SOLID IT SECTOR

     The index of IT-related exports fell 2.2% on month in October after a flat

September. But BOJ officials analyzed that the weak October index wasn't a true

picture, as the underlying trend away from the auto sector remains firm, with

exports of IT-related goods to the China and other Asian countries remaining

solid.

     The index rose 1.9% in Q3 -- a second straight quarterly gain after a 2.4%

gain in Q4. The real export index of capital goods rose 3.9% on month in October

and the index for Q3 rose 2.0% q/q.

     --WEAK CAPEX

     Despite the solid headline readings, the BOJ are hesitant to believe the

numbers, seeing much of the pick-up in capex as temporary, seeing overall demand

for capital goods as largely flat. That leaves the central bank sees no need of

changing the current view "exports are expected to show some weakness for the

time being" as it fits in with the view that overseas economies will pick up

around mid-2020.

     The real export index of motor vehicle and related goods remained weak, hit

by sluggish demand for automobiles in the U.S. and China, falling 1.2% on month

in October, for the third straight fall, and the index for the third quarter

fell 2.8% following -0.4% in Q2.

--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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