The shrinking trade balance isn't a bad thing because it's partly a result of strong domestic demand. Given that domestic demand is driving the economy, the rise in oil prices alone isn't enough to derail growth.
Consecutive gains of core prices provide strong evidence that Japan is finally shaking off a long bout of deflation. It won't be a surprise if the Bank of Japan makes a policy turn even before April.
Domestic demand is clearly the driving force. With strong capital spending plans and signs of rising bonuses, there's a good chance that the economy will grow more than an annualized 2 percent in the fourth quarter.