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MNI POLICY: BOJ Sees Export  Shift To Capital Goods

MNI (Sydney)
TOKYO (MNI)

Bank of Japan economists expect the momentum for exports will shift away from automobiles to capital goods and digital and information-related goods in the coming months, MNI understands.

Japan's exports have been driven by automobiles since July and the level of automobile exports has returned to pre-coronavirus levels. but the pace of these exports will now slow, bank officials expect.

CAPITAL GOODS SOLID

Capital investment at home remained weak but demand for capital goods, excluding transport equipment and for general machines, is recovering, especially in China and the U.S., according to official analysis.

Exports of machinery to China rose 15.4% y/y in October for the fourth straight rise following +20.7% in September and +6.0% in August.

Analysis also showed that manufacturers in those countries remained firm on the back of solid demand for goods, although non-manufacturers, mainly those offering face-to-face services, remained weak.

The number of infections is increasing in the U.S. and Europe but economic activity continued to reopen, and bank officials see no need to change their forecasts of global economic recovery.

The Chinese economy also continues to recover, giving support to Asian countries which are major trading partners for Japan's exports.

Japan's machinery orders data showed that orders from overseas posted the first m/m drop in two months in September, down 16.7% but following a surge of +49.6% in August and +13.8% in July.

WEAKER SPENDING WORRIES

Bank officials have been worried about weaker private consumption since mid-November when the number of infections began increasing in Japan, and the impact this will have on corporate profits and sales.

Many restaurants have been requested to shorten their business hours and people are refraining from going out, which in turn will increase liquidity problems.

The lending facilities introduced by the government and the BOJ have produced the intended effects but poor profits and sales caused by social distancing are likely to increase liquidity concerns.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com

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