MNI INSIGHT: BOJ Real Export Index Falls In Q4, Autos Weigh

--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.

     --EXPORTS FALL

     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

months.

     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.

     --INVESTMENT WORRIES

     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

goods.

     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

semi-conductors.

     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: les.commons@marketnews.com

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

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