MNI POLICY: Japan Govt Sees Slow Exports in Modest Econ Pickup

By Max Sato

     TOKYO (MNI) - Japan's government on Wednesday warned that external demand

is slowing amid the U.S.-China trade dispute but left its overall view for

August unchanged, saying for the eighth straight month that the economy is

"recovering moderately."

     In its monthly economic report, the government downgraded its view on

exports for the first time in three years, saying the pickup in exports is

"marking time," instead of its previous assessment that exports were "picking

up."

     --EXPORT SLOWDOWN

     Shipments of electronics parts and devices to China have slowed but they

are expected to pick up in preparation for the launch of new smartphone models

in coming months, Hideyuki Ibaragi, director of macro-economic analysis at the

Cabinet Office, told reporters.

     "The slowdown in exports is not serious enough to change the bigger

picture," he said. "We cannot confirm the effects of the trade dispute but we

will keep a close watch on it."

     Japanese auto exports to the U.S. are slowing but it is mainly because of a

decline in sales volumes caused by smaller discounts offered by U.S. car

dealerships, which does not necessarily reflect the overall economic climate,

Ibaragi said.

     The government also revised down its assessment of imports for the first

time in 10 months, saying their pickup is marking time, instead of there were

signs of a pickup.

     "Imports are unlikely to drop sharply as Japan's investment and consumption

are solid," Ibaragi said.

     --SLOW INFLATION PICKUP

     In light of the slow pickup in inflation, the government changed its

assessment of consumer prices for the first time in five months, saying the pace

of increase is "slowing."

     "In the wake of price markups for daily necessities, households have

tightened the purse-strings, making retailers cautious about raising prices and

putting downward pressure on consumer prices," Ibaragi said.

     Consumer inflation in Japan stagnated in July as mobile carrier discounts

offset recent markups in beer prices at restaurants and bars as well as higher

snack prices.

     The national average core consumer price index (excluding fresh food) rose

0.8% on year in July for the 19th straight year-on-year rise, with the pace of

increase unchanged from June, when it rose from 0.7% in May.

     --HOT WEATHER NEUTRAL

     The government maintained its views on other key components of the economy:

private consumption is "picking up" while business investment and factory output

are "increasing moderately."

     The recent drastic weather patterns are having both positive and negative

effects on consumption.

     A series of heat waves boosted demand for beverages and air conditioners

but dampened retail sales in general as extreme weather patterns -- high

temperatures and rain storms -- kept shoppers away.

     Looking ahead, the government maintained its outlook that the economy will

continue "recovering," supported by an improvement in labor and income

conditions and the effects of fiscal spending.

     Among the risks to its outlook, it highlighted the impact of trade disputes

on global growth, and noted lingering uncertainty in overseas economies and the

effects of fluctuations in financial and capital markets.

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

[TOPICS: MAJDS$,M$A$$$,M$J$$$,MT$$$$,MGJ$$$]