Japan's trade deficit to expand to ¥1,791bn in January: Societe Generale

Quotes from Societe Generale Cross Asset Research:

-We expect Japan's trade deficit to expand to ¥1,791bn in January, but the deficit has shrunk from ¥2,795bn in January 2014. Export growth is likely to accelerate further to 15.5 % yoy (was 12.8 % yoy in December ), confirming a firm recovery trend. Meanwhile, import growth is likely to decrease 2.3 % yoy after 1.9% yoy in December.

-In addition to the downward pressure on consumption resulting from the consumption tax (CT) hike in April, a drop in oil prices is further affecting import growth. So far, the effect of yen depreciation on reducing the trade deficit has not been evident. However, underpinned by the global economic recovery, exports seem to be growing at a rate exceeding that of imports as a trend. In 2015, yen depreciation is likely not only to push up corporate profits but also exports in volume.

-A sharp drop in oil prices exceeding the pace of yen depreciation is likely to speed up the pace of the reduction in the trade deficit. After confirming that exports are recovering in Q4, they are likely to contribute to pushing up the GDP growth rate in Q1 and there after. While we expect real GDP growth for 2015 to be 1.5%, the net export contribution to 2015 real GDP growth is likely to be as much as 0.6ppt.