MNI INSIGHT: BOJ Sees Solid Q1 Exports After Jan Trade Data

--BOJ Officials Watching Factory Output, Volatile Market Impact 

By Hiroshi Inoue

     TOKYO (MNI) - Real exports posted the first month-on-month rise in two

months in January, data released Monday showed, allowing Bank of Japan officials

to maintain their view that Japanese exports are on a gradual uptrend in the

first quarter of 2018, backed by solid global demand, MNI understands.

     But officials expect Japanese exports to fluctuate widely from January to

March due to rush shipments to China and an ensuing slowdown around the Lunar

New Year holidays (mid-February this year).

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

released Monday by the Ministry of Finance showed a 2.1% month-on-month rise in

January, the first rise in two months after falling 2.3% (revised up from -2.4%)

in December. In October-December, real exports rose 2.4% on quarter, the second

straight rise after +1.9% in Q3.

     --SOLID EXPORTS

     MOF data showed Japanese exports gained 12.2% on year in January, coming in

stronger than the MNI median economist forecast of +9.4%. It was the 14th

straight year-on-year rise, with the pace of increase accelerating from +9.3% in

December.

     Exports of chip-making equipment to Asia, particularly China, which are

closely monitored by BOJ economists as an indicator of global technology demand,

rose 27.0% and 44.0% on year, respectively, after +18.1% and +74.4% in December.

     Exports of Japanese automobiles rose 6.7% on year in January, up from +5.6%

in December, which was a sign that global demand was solid.

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

Japanese car exports to the world, fell 3.9% on year in January following a 2.7%

fall in December.

     But BOJ economists are not so concerned about the recent weakness of car

exports to the U.S., which were pushed down by bad weather in the final quarter

of 2017 after sharp gains in the third quarter. They expect demand for Japanese

vehicles to remain solid.

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

     --IMPORTS DROP

     The BOJ's real import index fell 3.1% on month in January, the first drop

in five months after +2.6% (revised down from +2.7%) in December, but BOJ

officials don't see it as an indicator of sluggish consumer spending.

     The decrease was in reaction to the 2.6% increase on quarter in

October-December, which was led by purchases of smartphones from Asia with the

November release of the iPhone X. Higher oil and gas prices are also believed to

have pushed up Q4 imports.

     The MOF data showed Japan posted a trade deficit of Y943.4 billion in

January (vs. the MNI median forecast of a deficit of Y1.064 trillion), the first

negative gap in eight months. It was narrower than the deficit of Y1.092

trillion seen in January 2017.

     --OUTPUT DATA EYED

     For a key indicator of the near-term strength of the modest economic

recovery in Japan, BOJ economists are waiting for industrial production for

January due out on Feb. 28.

     They are focused on how the government forecasts for February production of

electronic parts and devices (+13.5%), general-purpose, production and business

oriented machinery (+8.3%) and transport equipment (+9.8%) will be revised.

     Production tends to drop in January, May and August due to factory

shutdowns during the public and seasonal holidays.

     BOJ officials don't think global demand has fallen in light of the recent

stock market sell-off but they are watching how the uncertainties caused by

volatile financial markets will affect business investment and household

spending.

--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

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