Forex - Japan Preview: due 9/12 Feb - December current account balance/ machine orders

The smaller than expected merchandise trade deficit in December led to some small murmurs that the chronic trade deficit is finally showing signs of easing but we would not be over hasty in jumping to any conclusion. Trade balance might have been bolstered by higher exports, due to the extended fall in JPY in Q4 2014, and lower imports, triggered by lower crude prices, but the country's dependence on external energy sources is not likely to abate anytime soon. We expect the BoP trade balance to come in at -Y440 bn, which would represent the smallest deficit since June 1013. Services should come in at -Y 200 bn.
Primary income should come in at Y1100 bn. Although USDJPY printed a 7.5 year high of 121.84 in December, which should bolster the component, a sharp fall was seen thereafter, though the USD/JPY average for December was still higher at 119.44, vs 116.40 for November. In addition, year end seasonal factors are also at play (primary income tends to fall towards the end of the calendar year.) Finally, we expect secondary income to come in at -Y85 bn, which equates to a total current account balance of Y 375 bn.

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