MNI INSIGHT: BOJ Sees Solid Exports, Domestic Demand In Q4

By Hiroshi Inoue

     TOKYO (MNI) - Bank of Japan officials are convinced exports will continue

supporting a modest economic recovery in the October-December quarter while

domestic demand remains solid, MNI understands.

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

released Monday by the Ministry of Finance showed a 5.1% month-on-month rise in

November, for the second straight rise after +2.6% in October.

     The October-November average of the index grew 2.4% over the July-September

quarter, when it rose 1.9% from April-June, indicating Japanese shipments to the

world will continue growing in the whole of the current quarter.

     --IMPORTS LIFT SENTIMENT

     The BOJ's real import index gained 3.9% on month in November after rising

1.5% in October.

     The hefty increase in November, which is believed to be led by imports of

smartphones, eased concerns over a slowdown in domestic demand, which had been

caused by earlier data that showed the rise in October didn't fully make up for

the 3.7% drop in September.

     The real import index average for October-November rose 1.1% over the

July-September quarter.

     Ministry of Finance trade statistics showed Japanese exports rose 16.2% on

year in November, marking the 12th straight year-on-year rise after +14.0% in

October and coming in stronger than the MNI median economist forecast of +14.6%.

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

indicator of sustained economic growth -- rose 7.7% on year in November, with

the pace of growth accelerating from +6.5% in October.

     BOJ officials expect overall exports to remain on an uptrend as Japan

maintains its competitive edge over other economies in the production of

semiconductor producing equipment and capital goods (machinery used for

investment in equipment). Global demand for these goods is likely to stay firm

for now, they believe.

     Exports of chip-making equipment surged 54.7% on year in November following

a 29.5% gain in October, according to the MOF data.

     The MOF data also showed imports increased 17.2% in November for the 11th

straight year-on-year rise, after +18.9% in October. The pace of increase was

slower than the MNI median forecast of +18.8%.

     In November, imports of telephones (mostly smartphones) jumped 87.6% on

year after rising 11.8% in October and falling 34.4% in September.

     Retail sales fell on year in October due to bad weather. Sales of consumer

electronics also dipped last month as many consumers waited for the November

release of the iPhone X instead of buying the iPhone 8 that went on sale in

September.

     --FY17 FORECASTS REVISED UP

     Data released Monday by the Japan Center for Economic Research showed the

average economist forecast for the annualized real GDP in the October-December

quarter was revised down sharply to +0.75% from +1.30% projected last month,

partly due to an expected inventory drawdown after strong above-2% GDP growth in

the previous two quarters.

     But for fiscal 2017 ending in March 2018, the average economist forecast

for GDP growth was revised up to +1.84% from +1.60% last month, according to the

latest monthly ESP Forecast Survey of 41 economists conducted by the center from

Dec. 5 to Dec. 11.

     This was because upward revisions to economist forecasts for capital

investment and exports more than offset downward revisions to forecasts for

consumption, housing investment and public projects.

     The survey showed economists continued projecting annualized GDP growth of

just above 1% in the coming quarters through early 2019. Japan's growth

potential is estimated to be slightly under 1%.

     The ESP survey showed the average economist forecast for GDP in fiscal 2018

was +1.22%, revised up from +1.16% projected last month.

--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 Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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