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MNI (London)
--BOJ Concern Delayed Export Recovery Could Impact Capex Spending
By Hiroshi Inoue
     TOKYO (MNI) - Japan's real export index posted a first drop in 3 quarters
in Q4, pressured lower by weak global demand for autos and construction machines
that outweighed recovering demand for IT-related goods.
     The decline in the index, calculated by BOJ economists using government
data, was in line with Bank of Japan expectations and bank officials and
officials are now focusing on the upcoming data, with no great expectations of a
sharp pick up in coming months, MNI understands.
     That becomes a bigger concern for the BOJ if a delayed recovery in the
export sector sees manufacturers delay investment spending, increasing the risk
of an extended domestic slowdown.
     The real export index fell 2.2% q/q in Q4, following a rise of 1.8% in Q3
and 0.1% in Q2. The index rose 1.8% m/m in December, the first rise in three
     Exports drove the Index decline in December, falling 6.3% y/y, a 13th
consecutive month of y/y declines. Imports fell at a slower pace, down 4.9% y/y
after a 15.7% fall in November.
     Overall Japan saw a trade deficit of JPYY152.5 billion -- A second straight
deficit following November's JPY85.2 billion.
     The statement following the Jan. 21 policy meeting repeated the BOJ view
that "exports are expected to show some weakness for the time being," a
sentiment echoed in the quarterly outlook report published Jan. 22.
     The BOJ is particularly concerned over the auto sector and doesn't expect a
global recovery any time soon.
     Car shipments to the U.S., which account for about 40% of Japan's total
auto exports, fell 21.4% y/y in December following a 17.1% fall in November.
Exports to Asia fell 11.8% in December, widening from a 1.0% fall in November.
     Against the trend, auto shipments to China rose again, albeit compared to a
weak 2018, up 36.3% y/y after a 34.4% y/y rise in November.
     If the weak demand does continue, there is an increased risk that firms
will turn more cautious over capital investment, the BOJ worries, which could
further weigh on the manufacturing sector as demand would slow for capital
     Shipments of machinery, a measure of overseas capital investment, fell 6.2%
in December, extending declines after a 12.0% fall in November and underlining
continued weakness in the sector and the BOJ sees a full recovery likely to come
some time after global trade recovers.
     The bright spot in the latest data was the continued recovery in the
IT-sector, underlining the uptick in demand for chips-making equipment and
     Exports of chip-making equipment rose 25.8% y/y in December, accelerating
from a 4.0% y/y gain in November. Shipments of semiconductors rose 2.6% y/y in
December, reversing a modest 0.3% y/y decline in November. Shipment of
chip-making equipment. Exports of chip-making equipment to China rose 59.7% in
December, accelerating sharply from November's 7.7% gain.
--MNI London Bureau; tel: +44 203-586-2225; email:
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
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