MNI POLICY: BOJ: Hard To Spot Export Trend Over China New Year

By Hiroshi Inoue

     TOKYO (MNI) - Bank of Japan economists expect a couple of volatile months

for Japan's exports due to the Chinese New Year in late January, leaving them

again waiting on the quarter-on-quarter data to examine the underlying trend.

     Japan's exports tend to rise in the run up to the annual Chinese holiday

and then tail off afterward, making it difficult for BOJ economists to get a

firm handle on the reality.

     That isn't the only distraction for BOJ economists at present. The skewed

recovery that has seen a pick-up in demand for IT-related products whilst demand

remains sluggish for capital goods is also helping disguise an emerging trend.

     --SLUGGISH Q1 2019

     The volatility in Q1 2019 saw Japan's exports to China fall 9.4% on year in

March following a 5.6% gain in February and a 17.4% fall in January.

     Japan's overall exports fell 2.4% on year in March 2019, building on

declines of 1.2% in February and 8.4% in January.

     Bank officials, who focus on broader-trends rather than specific time

points, are encouraged by recovering global PMIs as a leading indicator for

exports, although weak capex and auto demand remains an issue.

     Overseas demand for machinery, pressured by global trade spats, fell 11.5%

m/m in November following a 2.9% gain in October and a 12.6% fall in September. 

     Overseas demand plunged 39.4% on year in November after falling 13.8% in

October and 2.6% in September.

     --DELAYED RECOVERY

     The BOJ doesn't expect Japan's exports to bounce immediately in the Q1 as

they don't think demand for automobiles overseas -- mainly in China and India --

and capex spending will recover quickly.

     They also see it is uncertain how the expected U.S. cut in tariffs on the

Chinese goods to 7.5% from 15% will increase the global trade and encourage

companies into fresh capital investment.

     The BOJ view on exports in policy statement due Jan 21 will likely be

confirmed that "exports have continued to show some weakness".

--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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