MNI POLICY: BOJ Sees Japan Exports on Uptrend; Watch US, China

     TOKYO (MNI) - Bank of Japan officials see no need to change their view that

exports are on an uptrend, thanks to solid global growth and despite weak July

real export data.

     The U.S.-China trade dispute may be reducing new orders placed with

Japanese machinery makers for business investment in the U.S., for example, but

two sets of trade data released Thursday showed there had been no serious direct

impact on Japan's exports.

     But the officials are watching whether heightened tensions between the

world's two largest economies will dampen capital investment overseas and lower

demand for capital goods made in Japan.

     --SLOW EXPORT RISE

     The BOJ's real export index rose 0.3% on month in July for the first rise

in three months following -0.5% (revised from -0.6%) in June, but the index fell

1.5%, compared to the average of the April-June quarter,

     In April-June, the real export index rose 0.5% on quarter following +0.5%

in the first quarter.

     The BOJ will release the details of its real trade indexes on Tuesday.

     --CHECKING TEMPORARY FACTORS

     If the weak real export index for July was due to temporary factors, such

as supply constraints caused by heavy rainfall in early July, real exports will

rebound in or after August, the BOJ views.

     Single month weak export data alone is not enough for the BOJ to change its

assessment on external demand as BOJ officials are focused on quarter-on-quarter

changes in exports as well as industrial production to see the underlying trend.

     The BOJ maintains the view that "exports will likely continue their

increasing trend for the time being, as those of capital goods and IT-related

goods -- in which Japan has a comparative advantage -- are likely to be firm

with global production."

     --WATCHING US CAPEX

     Data from the Ministry of Finance released Thursday showed the growth in

Japanese exports slowed further to 3.9% on year in July from +6.7% in June and

+8.1% in May, with auto shipments to the U.S. down, but Asian demand for

Japanese machines and electronics parts remained strong.

     The increase was led by higher shipments of mineral fuels, iron and steel

products as well as semiconductors. But shipments of ships and motor vehicles

fell on year.

     Exports to the U.S. marked the second straight y/y drop while those to the

European Union posted the 18th straight year-on-year rise Exports to Asia and

China showed the fifth straight y/y gains.

     The data also showed that global demand for Japanese capital goods and

chip-making equipment remained solid.

     Shipments of construction machines to the European Union rose 27.4% on year

in July after +26.1% in June. Shipments of chip-making equipment and electronic

parts and devices to the China surged 135.1% on year in July following +79.2% in

June.

     BOJ officials are analyzing whether the drop in shipments of chip-making

equipment to the U.S. (-50.1% on year in July vs. -40.2% in June) has been

caused by weaker capital investment in the U.S.

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

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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