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--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.
     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
     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.
     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.
     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
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email:

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