MNI INSIGHT: Japan Oct Export Index Dips; Outlook Still Weak

By Hiroshi Inoue

     TOKYO (MNI) - Japan's exports continued to slide in October, weighed by

falling auto and auto part sales, and officials at the Bank of Japan see no

signs of a pick-up any time soon, MNI understands.

     The real export index fell 1.5% in October, following an upwardly revised

0.3% gain in September, as trade data showed overseas sales of cars, car parts

and capital goods excluding transport equipment all remained weak.

     The BOJ is unlikely to alter its view that "exports are expected to show

some weakness for the time being" as it fits in with the view that overseas

economies will remain sluggish until around mid-2020. But for now, the hope is

trade frictions dissipate and global capital investment levels pick up in coming

months.

     Although the central bank expects no quick pick-up in exports, neither does

it see a further deterioration - but there is a concern that any worsening will

have a heavy knock-on effect to the economy.

     Exports fell 9.2% y/y in October, for an 11th straight drop following a

5.2% decline in September, while imports fell 14.8% y/y for a sixth straight

drop following a fall of 1.5% in September. Th saw Japan post a trade surplus of

Y17.3 billion - a first in 4 months and followed a deficit of Y124.8 billion in

September.

     Car shipments to the U.S., which account for about 40% of Japan's total

auto exports, fell 17.7% on year in October after a 15.7% fall in September and

those to Asia fell 15.8% in October after a modest 1.0% rise in September.

     There was some light, with auto exports to the EU gaining for a second

consecutive month, albeit at a slower pace than in September.

     Shipments of capital goods excluding transport equipment, a measure of

overseas capital investment, fell 5.7% in October against a 12.9% in September,

underlining continued weakness in the sector.

     Tuesday's data did highlight a further pick-up in semiconductor exports,

suggesting the global adjustment of IT-related goods has bottomed. Shipments of

semiconductors to Asia rose 1.7% on year in October following a 5.9% in

September.

     The BOJ still sees the global slowdown as the main factor dragging exports

lower, but still see domestic demand as strong enough to underpin the economy

for now, although confidence levels could suffer if offshore demand dips any

further.

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

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

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