Japan achieving a sustainable trade surplus will take time

Although Japan's trade deficit is likely to improve as a trend due to better terms of trade, Japan's export recovery remains weak because the US economic recovery remains modest and there is uncertainty surrounding the Chinese economy. 

"Japan's trade deficit is likely to come in at ¥200bn in September 2015, which marks an improvement on the ¥962bn of September 2014. On a seasonally-adjusted basis, the trade deficit should reach ¥302bn in September, slightly better than the ¥359bn seen in August", says Societe Generale. 

However, it will probably take some time to reach that stage. The BoJ's latest Tankan survey confirmed that the business sentiment outlook is deteriorating. There is a larger risk that the Japanese economy will enter an economic downturn if the export recovery is delayed to a large extent. 

"The trade balance is expected to continue to improve in the long term. However, oil prices are no longer falling and the recovery in domestic demand is likely to support import growth. Against this backdrop, it will take some time for a trade surplus to be reached on a sustainable basis", added Societe Generale.