Due to lingering reconstruction demand in areas that were hit by hurricanes last year and brisk demand for Japanese cars that have better fuel efficiency, exports to the US are likely to be solid until around mid-2006.
A deficit because of the Lunar Year holiday is a blip and isn't a concern for the economy. While strong domestic demand is fueling import growth, which partly led to the deficit, it's a good thing because it signals resilient demand.
Export demand is really solid now. Japan can count on overseas demand as long as global economic conditions remain favorable.
New vehicle demand in the US is poised to peak out sooner rather than later, which may weigh on demand for Japanese (automobiles).
New vehicle demand in the US is bound to peak out this year, which may slow output for Japanese (automobile) makers, although to a much lesser extent than US makers.
Overseas demand for autos, IT goods and construction machinery which had long supported the overall economic activity in Japan, is now set to slow down, while input cost for Japanese companies is rising.
But since such reconstruction demand will weaken sooner or later and demand for new vehicles in the US is largely believed to fall this year, I must say there may be some downside risk going forward.