Higher US fiscal outlays benefit Japanese exports – Nomura

Analysts at Nomura suggest that the upswing in US domestic demand should have a positive impact on Japanese exports to the US, and they think this impact needs to be discounted somewhat.

Key Quotes

“The rise in interest rates stemming from this fiscal spending should also raise interest rates on auto loans and it is unclear how much the increase in US military spending will benefit Japanese exports.”

“We think growth in Japanese exports overall will weaken as exports to Asia slow owing to slower economic growth, mainly in China. Meanwhile, for the US economy, we had already seen capex as being in a recovery phase, but we think the latest fiscal spending will accelerate that further. We forecast that Japanese exports will continue to grow strongly through summer 2018 at least, mainly supported by demand in the US.”

“We think the turmoil seen in financial markets will have only a limited impact on the real economy. International commodity prices have moved only slightly and Japanese companies tend to make smaller changes to local sales prices for products exported from Japan than the change in forex rates.”