MNI POLICY: BOJ Caution Remains, Discouraged By Nov Exports

     TOKYO (MNI) - Bank of Japan officials, who had expected to see a steady

rise in exports, are discouraged by weak November data and maintain their

cautious outlook amid lingering global trade frictions.

     They continue to focus on the extent to which Japan's exports rebound in

the fourth quarter overall from their drop in the third quarter, looking to

examine the underlying trend.

     The BOJ board may consider slightly lowering their assessment that exports

are on an uptrend when they gather for this week's two-day policy-setting

meeting, ending on Thursday.

     Japan's exports rose 0.1% on year in November for the second straight rise.

But the pace of increase decelerated from 8.2% in October. Gains were led by

ships, electrical measuring and organic chemicals.

     BOJ officials are worried about the weak semiconductors export numbers

(-0.1% in Nov. vs. +10.5% in Oct.) and motor vehicles (-0.5% in Nov vs. +7.3% in

Oct).

     --FURTHER DATA DUE

     The next key piece of data is the BOJ's real trade indexes for November,

due Thursday at 1400JST,  with Bank officials now closely watching whether

Japan's real export index returns to the previous uptrend seen before the Q3

drop. The real export index posted the first m/m rise in October, up 6.2%

following a 5.5% fall in September.

     The real export index for the third quarter fell 1.9% q/q, the first drop

since the first quarter of 2016.

     BOJ economists are worried over the risk that the impact of the ongoing

global trade friction and the slowing Chinese economy on Japan's exports will be

seen in 2019. Those officials think, however, that the direct impact from the

trade disputes will be limited, unless global financial markets destabilize

sharply.

     They are more concerned over the impact of the slowing Chinese economy on

both Japan's exports and on the wider Asian region, as Japan's exports to Asia

including China accounts for about 55% of total exports.

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

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

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