MNI POLICY: BOJ May Export Index Dn 5.8%; June Seen Rising

By Hiroshi Inoue

     TOKYO (MNI) - Japan's real export index fell 5.8% m/m in May, a third

straight decline following a revised 14.1% fall (from -14.2%) in April. The

April-May

index fell 18.0% compared with the January-March period.

     Bank of Japan officials expect the export index to pick up modestly in June

as economic activities restart in the U.S. and Europe, although a sharp

improvement is unlikely, with June's m/m real export index for June seen higher

although the quarterly data will lag.

     Exports of autos and capital goods are not seen bouncing immediately, as

companies are reducing inventories that have been accumulated amid weak demand,

restricting a rise in overall exports.

     The BOJ on Tuesday lowered its assessment of exports, saying that exports

had declined "significantly."

     --LARGE TRADE DEFICIT 

     Japan's exports fell 28.3% year-on-year in May, for the 18th straight drop

following -21.9% in April and for the biggest drop since September 2009 when it

fell 30.6%. Imports fell 26.2% year-on-year in May, for the 13th straight drop

following -7.1% in April.

     Overall, Japan's trade deficit was JPY833.4 billion in May after a deficit

of JPY931.9 billion in April.

     --WEAK AUTO EXPORTS

     Exports of automobiles fell 64.1% y/y in May following -50.6% in April,

with their goods down 57.6%. Shipments of automobiles to the U.S., which account

for about 40% of the total, plunged 78.9% in May, extending a 65.8% fall in

April. EU exports fell 47.6% after a 55.8% fall in April.

     Latest data showed a continued pick-up in global demand for IT-related

goods, although semiconductors exports fell 1.5% y/y in May, for the first drop

in seven months. Chip-making equipment exports rose 12.4% in May, reversing an

8.8% fall in April.

     --WEAK CAPITAL GOODS

     Machinery shipments fell again in May, down 23.2% after also falling 23.2%

in April, indicating overseas firms remain cautious on capital investment.

     The Chinese economy is recovering but its impact on Japan's exports is

being limited, with overall exports to China, Japan's largest trading partner,

down 1.9% y/y, improving from a 4.0% y/y fall in April.

     Japan's exports to the U.S. fell 50.6% y/y in May, a 10th straight drop,

widening from a 37.8% fall in April.

--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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