An increasing flow of Japanese money overseas to pay for services like video and music streaming is turning into a structural weight on the yen, according to Barclays.

Japan’s so-called "digital deficit,” stemming from payments to overseas technology companies like Netflix and, has become large relative to trade and travel in the country’s current-account balance, and its continued expansion will pressure the yen, strategists Lhamsuren Sharavdemberel and Shinichiro Kadota wrote in a note Thursday.

The digital deficit reached ¥4.8 trillion ($34.7 billion) last year, almost 90% of Japan’s services account deficit, they said.

"This digital deficit appears to reflect a structural change in the behavior of consumers and businesses, suggesting it will persist,” the Barclays team wrote. "That implies an increase in yen-selling pressure.”

The yen has fallen more than 5% this year against the dollar amid receding speculation the Bank of Japan will deliver an early tweak to its super-easy monetary policy. The Japanese currency tumbled to a three-decade low last year as a significant trade deficit and widening interest-rate gap with the United States weighed.

While the services deficit is expected to put pressure on the yen, the Barclays strategists expect the increase in inbound tourism to Japan to counteract the weakness this year. Together with a combination of lower commodity prices and their expectation that the BOJ will tweak policy suggests the yen could fall to ¥123 against the dollar in the first quarter of 2024, they said. It traded around ¥138.30 on Friday.

"The digital deficit is a structural yen selling factor, but travel account improvement is likely to have a greater impact in 2023,” they said.