Japan's current account surplus predicted to hit JPY300b

Still better than February's number.

According to DBS, the balance of payment statistics for March (due tomorrow) will likely show a small improvement in the current account. 

The unadjusted current account balance is expected to register a surplus of JPY 1.1trn, widening from JPY 637bn in the previous month.

Here's more from DBS:

Striping out seasonal factors, the current account is likely to post a small surplus of JPY 300bn, also better than JPY -0.1bn in February.

Merchandise trade deficit narrowed slightly in March. The services trade deficit has been narrowing more obviously ever since 4Q12, as tourist inflows increased along with the weakening of yen. Meanwhile, the income account surplus should have widened in March, due to the peak season of earnings payments.

A larger improvement in the current account lies ahead in 2H, as export demand is expected to strengthen, and the impact of yen depreciation on goods and services trade will become more noticeable.

The recent fall in global commodity prices also bodes well for Japan, as it reduces costs of energy imports (30% of Japan’s total imports).

Admittedly, the structural headwinds will remain in the longer term, such as the worsening of demographics, fall in household savings and deterioration of  trade competitiveness.

As far as the 6-month outlook is concerned, a cyclical improvement in the current account should be on the way and this will lend some support to the yen exchange rates.