MNI INSIGHT: BOJ Sees Solid Exports Despite Soft Dec Data

By Hiroshi Inoue

     TOKYO (MNI) - Bank of Japan data released Wednesday showed a drop in

December real exports but BOJ officials believe Japanese exports remain on a

gradual uptrend backed by firmer global demand, supporting the modest economic

recovery, MNI understands.

     Industrialized and emerging economies are showing signs of higher growth

than predicted three months ago, the officials have judged.

     --Q4 REAL EXPORTS UP

     The real export index calculated by the BOJ based on the trade data

released Wednesday by the Ministry of Finance showed a 2.4% month-on-month fall

in December, the first drop in three months after +5.2% in November +2.6% in

October.

     But the index for the final quarter of 2017 gained 2.4% from the previous

three months, when it rose 1.9%.

     MOF data showed Japanese exports rose 9.3% on year in December, marking the

13th straight year-on-year rise. The pace of increase decelerated from +16.2% in

November while exports to Asia and China both hit record highs, backed by strong

demand for chip-making machines and steel in the region.

     Exports of automobiles -- which BOJ economists are closely watching as an

indicator of sustained economic growth -- rose 5.6% on year in December, with

the pace of growth slowing from +7.7% in November.

     Shipments of automobiles to the U.S., which account for about 40% of total

Japanese car exports to the world, fell 2.7% on year in December following a

3.1% rise in November.

     Some private-sector economists have warned that car demand in the key U.S.

market may be losing steam, but BOJ economists think it is too early to say so

without further analysis.

     Japanese exports of capital goods used for business investment in equipment

-- another key indicator closely watched by BOJ officials -- rose 13.9% on year

in December following a 22.9% gain in November.

     The BOJ will release details of its real trade indexes on Monday.

     BOJ economists are also paying attention to the Jan. 31 release of December

industrial production and the government outlook for factory output in January

and February, a key indicator of the near-term strength of the economy.

     --HIGHER GLOBAL GROWTH

     In its quarterly Outlook Report released Tuesday, the BOJ board slightly

upgraded its risk assessment of overseas economies.

     The BOJ listed the same risks as before -- the U.S. economic policies,

emerging economies, Brexit negotiations and geopolitical risks -- but it also

left out the sentence that "there is uncertainty regarding developments in

overseas economies."

     BOJ officials now regard global growth as firmer than three months ago,

when they last updated their medium-term projections, but going forward, it is

still uncertain whether external demand will help push up domestic inflation.

     The International Monetary Fund on Monday revised up its forecast for

global growth for both 2018 and 2019 to 3.9% from 3.7% projected in October. The

IMF forecast for Japan's growth for 2018 was also revised up to 1.2% from the

0.8% made three months ago, and its forecast for 2019 was revised up slightly to

0.9% from 0.8%.

     --SOLID DEMAND FOR SMARTPHONES

     The MOF data showed Japanese imports rose a sharp 14.9% on year in December

for the 12th straight year-on-year gain after +17.2% in November, led by crude

oil, telecommunications equipment and refined petroleum products.

     Rising energy costs are pushing up import bills but solid demand for the

iPhone X, which was released in November, has also been a driving force behind

the recent sharp increase in imports as well as a major factor supporting retail

sales.

     Imports of telephones (mostly smartphones) more than doubled (+104.7%) on

year in December, accelerating from +87.6% in November.

     The BOJ's real import index rose 2.7% on month in December, the third

straight gain after +3.6% in November. In the October-December quarter, the

index rose 2.6%, after falling 1.5% in July-September.

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

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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

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