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Beef Exports Deal Expected, CPI Due

--If Stocks Weaken Further, May Impact Biz Investment Plans
By Hiroshi Inoue
     TOKYO (MNI) - Bank of Japan branch managers will likely report limited
regional disruption from ongoing global trade disputes, but volatile financial
markets could impede firms capital investment plans, MNI understands.
     Heads of the BOJ's regional offices will gather for their quarterly meeting
in Tokyo Thursday, with the central bank's headquarters looking for information
on how the trade dispute has been affecting businesses across the regions.
     The regional economic report will likely say that firms remain set to carry
through on capital investments, but are concerned that a deepening trade dispute
could cause further volatility in financial markets. 
     Further weakness in the Nikkei stock index or yen appreciation against the
dollar could push firms to delay implementation of capital investment plans.
     The Nikkei stock index closed at 22,271.30 on Monday, down 423.36 points,
or 1.87%, from Friday's close. The Index hit a multi-decade intraday high of
24,448.07 as recently as Oct 2. 
     BOJ officials don't expected weaker stocks to weigh heavily on business
sentiment now, but they are vigilant against worsening developments in global
financial markets, which will dampen business sentiment and will impede capital
     The latest BOJ Tankan survey, released on Oct 1, showed the impact of the
trade dispute and higher costs on business sentiment was limited and capital
investment plans remained solid.
     Current volatility in certain emerging market economies, largely Turkey and
Argentina, is having a limited impact on Japan's export economy, as trade links
are modest. Newly Industrializing Economies (NIEs) and Association of Southeast
Asian Nation (ASEAN), far more important trading partners for Japan, have yet to
experience any contagion.
     Japan's real export index, calculated by the BOJ based on the government
trade data, rose 2.1% on month in August for the second straight rise following
+0.3% in July. 
     BOJ economists are focused on how domestic firms have changed production
and procurement procedures in China, how they have reviewed their capital
investment in China, and how they have changed their production and investment
in the U.S.
     Japan's industrial production numbers were weak in July (-0.2% on month)
and August saw only a sluggish rebound (+0.2% on month). But BOJ economists are
largely unconcerned, seeing the weak spot as a temporary drop caused by poor
weather and natural disasters, with supply chains now improving, supporting a
recovery in production.
     They believe that both exports and industrial production are on an
increasing trend and don't expect Japan's economy to deviate from that recovery
path anytime soon.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
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