In Japan, industrial production gained some speed in January (+0.3% y.y). Yet February trade figures were disappointing. Nominal exports contracted by -1.2% y/y due to lower demand from Asia, especially South Korea (-13.8% y/y), Singapore (-18.2%) and Thailand (-2.7%). Exports to China rose +5.5%. The near term outlook is not encouraging as shown by the manufacturing PMI (48.9 in February due to low new orders). Looking ahead, we expect a modest +0.8% GDP growth this year in Japan, driven mainly by domestic demand. Private consumption fundamentals are still solid with low unemployment rate and rising wages. Financing conditions remain supportive and the BoJ will likely maintain its ultra-loose monetary policy stance considering that deflation fears have resurfaced and the growth outlook has weakened. In the remainder of the year, a de-escalation of trade tensions between China and the US, and a stabilization of growth in China, would allow a modest acceleration of exports
