MNI POLICY: BOJ Vigilance Grows As Exports Slow; Q1 Data Key

--Japan January Exports Fall 8.4% Y/Y After -3.9% In December

     TOKYO (MNI) - Further weak trade data has increased Bank of Japan concern

over the outlook for Japan's exports as China's economy slows and officials now

wait to see how the first quarter develops. 

     BOJ officials admit that the impact on production and exports from China's

slowing economy is gradually emerging, although there isn't enough evidence yet

to force a downgrade to their export view. They don't expect China's economy to

worsen sharply from here, as Beijing steps up preventative measures, although

the effectiveness of stimulus remains uncertain.

     Japan posted a second straight year-on-year drop in January, despite

expectations of stronger exports to China before the Lunar New Year holiday in

February. Exports to China actually fell 17.4% on year in January, the second

straight drop following a 7.0% in December.

     Exports to China are expected to fall again in February due to the holiday

period, making it difficult for BOJ economists to examine any underlying trend.

     Exports, a main driver for Japan's economy, fell 8.4% on year in January,

the second straight drop following a 3.9% fall in December, also outpacing the

MNI median forecast of a 6.1 fall%.

     The decrease was led by slower exports of chip-making equipment, iron and

steel products, and ships.

     Imports fell 0.6% on year in January, smaller than the MNI median forecast

of -4.2%. It was the first year-on-year drop in 10 months after +1.9% in

December, led by lower imports of petroleum, petroleum products, and nonferrous

metals.

     January's trade balance was a deficit of Y1.415 trillion, higher than the

MNI median forecast for a Y989.7 billion deficit. It was the fourth straight

deficit following a deficit of Y56.7 billion in December.

     --NEXT DUE DATA

     The next piece of data for officials is the BOJ's real trade indexes for

January, due Wednesday at 1400JST (0500 GMT), with the real export index

develops key. The index rose 1.2% q/q in Q4, but it wasn't enough to offset a

1.9% drop in Q3.

     BOJ officials are concerned over the weaker exports of capital goods, which

are linked to capital investment overseas. The export of capital goods fell 4.2%

on month in December following -1.7% in November.

     The BOJ will release the details of real export indexes in January at 1400

JST (0500 GMT) on Monday.

--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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