MNI POLICY: BOJ Vigilance Grows As Feb Exports Remain Weak

--Japan February Exports Fall 1.2% Y/Y After -8.4% In January

     TOKYO (MNI) - Japan's exports fell again in February, posting a

year-on-year drop for a third-straight month, indicating that exports continue

to be hit by slowing global demand, with Bank of Japan officials increasingly

watchful over the outlook for exports.

     BOJ officials expect Japan's exports to remain weak for the time on the

back of China's slowing economy and sluggish capital investment overseas, at

least until the impact of the Beijing's economic stimulus measures kick in.

     Exports, a main driver for Japan's economy, fell 1.2% on year in February

following -8.4% in January and weaker than the MNI median forecast of +0.7%, led

by lower exports of motor vehicles, iron/steel products and chip-making

equipment.

     Exports to China rose 5.5% on year in February, reversing the  17.4% fall

in January, the first rise in three months.

     Exports of chip-making equipment and motor vehicles to China rose, while

exports of auto parts, optical equipment and semiconductors fell.

     --BOJ OUTLOOK

     At the latest policy-setting meeting ended on Friday, the BOJ board

maintained the overall moderate expansion assessment, noting the "virtuous cycle

from income to spending" was still operating, adding that the economy "is likely

to continue its moderate expansion".

     But in the wake of weaker data, the BOJ lowered its assessment of exports

and industrial production, reflecting slowing economies in China and Europe.

     "Exports have shown some weakness recently," the BOJ said, moderated from

the previous statement that said "on an increasing trend."

     The BOJ see weaker exports for now, although expect a moderate increasing

trend, with "overseas economies growing moderately on the whole".

     --IMPORTS

     Imports fell 6.7% on year in February, below the MNI median forecast for a

6.1% drop. It was the second straight year-on-year drop following a 0.6% fall in

January, led by lower imports of petroleum, petroleum products, and medical

products.

     January's trade balance was a surplus of Y339.0 billion, lower than the MNI

median forecast for a Y353.1 billion surplus. It was the first surplus in five

months following a deficit of Y1.416 trillion in January.

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

February, due Monday at 1400JST (0500 GMT), with the real export index develops

key. The index fell 5.3% on month in January, for the first drop in two months.

     The BOJ focus is on how domestic demand, such as capital investment and

private consumption, holds up amid slowing global demand.

--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

[TOPICS: MAJDS$,MMJBJ$,M$A$$$,M$J$$$]