MNI POLICY: BOJ Feb Export Index Dips on Weaker China Exports

Japan's real export index fell 5.6% m/m in February, turning lower again after an unrevised 3.3% gain in January, data released by the Bank of Japan Wednesday showed, with exports to China declining in part due to the Lunar New Year celebrations.

Exports to China, Japan's largest trading partner, rose 3.4% y/y in February for an eighth straight gain but slowed sharply from the 37.5% gain in January.

The real export index for January-February was up 0.9% q/q, extending the 12.8% gain seen in the fourth quarter of 2020.

Officials at the BOJ expect autos to remain weak in the coming months as a shortage of semiconductors continues to weigh on production, but overseas demand is seen continuing for capital goods and IT-related goods, supported by a global recovery.

EXPORTS DROP

Japan's overall exports fell 4.5% y/y in February, the first y/y drop in three months, but the nation still posted a surplus of JPY217.4 billion after a deficit of JPY325.4 billion in January. Exports were largely supported by solid chip-making equipment on the back of recovering global demand.

Exports of chip-making equipment rose 11.7% in February following a 50.5% rise in January, while exports of automobiles fell 12.9% y/y in February after a decline of 5.8%.

The latest trade data confirmed the view of BOJ officials who predicted that capital goods ex-transport equipment would pick up the slack of any dip in auto exports as capital investment recovers China. Exports of machinery to China rose 10.7% y/y in February following +44.2% in January, showing that capital investment remained solid in China.

Exports to the U.S. fell 14.0% in February for the fourth straight drop, Wednesday's data showed. Exports of automobiles to the U.S. also fell 19.7% in February, widening from a 0.6% decline in January.