Domestic demand is leading growth and will keep driving the expansion. With the end of deflation on the horizon, corporate spending is going to accelerate.
Cold weather in January may have kept consumers at home and hurt spending, but when discounting such special factors, there's no change in the recovery trend in consumption.
The surplus will continue shrinking as oil prices push up imports. The biggest concern is that rising oil prices could derail growth in the U.S. and other countries, which would be a blow to Japanese exports.
Given the domestic demand-led recovery, I would expect Japan to increase imports from China and other Asian economies this year, in a move to share the role with the United States as a major driving force in the world economy.
Setting a new guidepost by the Bank of Japan is crucial. There are growing concerns in financial markets about how to gauge the Bank of Japan's next move after the conditions are met, including when it will start to raise rates.