1 00:00:00,280 --> 00:00:07,960 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,560 --> 00:00:12,800 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,840 --> 00:00:15,080 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:15,080 --> 00:00:17,840 Speaker 2: anchors all around the world. Straight ahead on the program, Well, 5 00:00:17,840 --> 00:00:20,599 Speaker 2: look ahead to this week's monetary policy decision from the 6 00:00:20,640 --> 00:00:23,560 Speaker 2: Fed what it means for interest rates. I'm Tom Busby 7 00:00:23,600 --> 00:00:24,160 Speaker 2: in New York. 8 00:00:24,400 --> 00:00:26,759 Speaker 3: I'm Caroline Hepkea in London, where we're looking at whether 9 00:00:26,840 --> 00:00:29,720 Speaker 3: the Bank of England does decide to hold steady on 10 00:00:29,840 --> 00:00:30,680 Speaker 3: interest rates. 11 00:00:30,920 --> 00:00:33,400 Speaker 4: I'm Doug Prisner looking at the challenges for the Bank 12 00:00:33,440 --> 00:00:36,960 Speaker 4: of Japan as it faces a decision on interest rates 13 00:00:36,960 --> 00:00:37,800 Speaker 4: in the coming week. 14 00:00:38,520 --> 00:00:42,560 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 15 00:00:42,600 --> 00:00:46,280 Speaker 1: eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, 16 00:00:46,800 --> 00:00:51,040 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 17 00:00:51,479 --> 00:00:54,680 Speaker 1: Sirius XM one twenty one, and around the world on 18 00:00:54,720 --> 00:00:57,880 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business App. 19 00:01:02,720 --> 00:01:03,280 Speaker 5: Good day to you. 20 00:01:03,360 --> 00:01:06,560 Speaker 2: I'm Tom Busby. We begin today's program with the Federal Reserve, 21 00:01:06,920 --> 00:01:09,920 Speaker 2: the FED, concluding its latest two day meeting, issuing a 22 00:01:10,040 --> 00:01:13,160 Speaker 2: monetary policy decision on Wednesday, and for more on what 23 00:01:13,240 --> 00:01:17,399 Speaker 2: to expect, what policymakers are watching, we're joined by Michael McKee, 24 00:01:17,400 --> 00:01:22,520 Speaker 2: Bloomberg International Economics and Policy correspondent. Well, Michael, no change 25 00:01:22,560 --> 00:01:25,240 Speaker 2: in rates in three earlier FED meetings so far this year. 26 00:01:25,640 --> 00:01:27,759 Speaker 2: What are you expecting to hear from the Federal Open 27 00:01:27,800 --> 00:01:29,479 Speaker 2: Market Committee this Wednesday? 28 00:01:30,360 --> 00:01:33,360 Speaker 6: The headline will be no change in race, and I 29 00:01:33,440 --> 00:01:35,400 Speaker 6: think we're going to see that for a little while 30 00:01:35,800 --> 00:01:39,080 Speaker 6: this meeting and then probably the July meeting. It probably 31 00:01:39,120 --> 00:01:42,520 Speaker 6: won't be until September that the Fed has enough of 32 00:01:42,560 --> 00:01:45,400 Speaker 6: a feel for the economy to know whether anything else 33 00:01:45,520 --> 00:01:50,960 Speaker 6: needs to be done. Right now, inflation is under control, basically, 34 00:01:51,000 --> 00:01:54,120 Speaker 6: we saw this last week CPI and PPI come in 35 00:01:54,200 --> 00:01:58,560 Speaker 6: lower than expected. There were some tariff related increases in 36 00:01:58,640 --> 00:02:01,800 Speaker 6: some categories, but nothing that screams problems for the Fed 37 00:02:01,920 --> 00:02:05,440 Speaker 6: at the moment. But all the tariffs haven't been put 38 00:02:05,480 --> 00:02:07,600 Speaker 6: on yet, so they're going to have to wait and 39 00:02:07,640 --> 00:02:11,760 Speaker 6: see the June inflation numbers and the July inflation numbers 40 00:02:11,840 --> 00:02:14,160 Speaker 6: before they might want to make any changes. 41 00:02:14,360 --> 00:02:16,440 Speaker 2: Well, that's the wild card in all this, and we're 42 00:02:16,440 --> 00:02:18,160 Speaker 2: looking at a date right now, and of course this 43 00:02:18,200 --> 00:02:22,760 Speaker 2: is fluid and always changing. July ninth, when the president's 44 00:02:22,840 --> 00:02:26,919 Speaker 2: ninety day you know, pause on tariffs goes into effect. 45 00:02:27,160 --> 00:02:29,440 Speaker 2: I guess after that things could really change. 46 00:02:29,600 --> 00:02:33,920 Speaker 6: They could really change if indeed the tariff's go into effect. 47 00:02:33,919 --> 00:02:36,320 Speaker 6: That's the problem for the FED is nobody has any 48 00:02:36,320 --> 00:02:39,639 Speaker 6: idea what Donald Trump is going to do, so it's 49 00:02:39,680 --> 00:02:43,760 Speaker 6: impossible to model what's going to happen. He raised steel 50 00:02:43,800 --> 00:02:49,360 Speaker 6: tariffs to twenty five percent, and then in the PPI 51 00:02:49,480 --> 00:02:52,519 Speaker 6: we saw that steel prices were up seven percent last month, 52 00:02:52,600 --> 00:02:54,960 Speaker 6: So there is a cause and effect there that will 53 00:02:55,000 --> 00:02:58,440 Speaker 6: probably feed into other categories in the CPI and PPI, 54 00:02:58,600 --> 00:03:01,440 Speaker 6: depending on what gets tarff when it gets tariffed, how 55 00:03:01,520 --> 00:03:05,360 Speaker 6: much the tariffs are, and when they take effect. So 56 00:03:05,520 --> 00:03:07,679 Speaker 6: it's really hard for the FED to think anything other 57 00:03:07,720 --> 00:03:11,640 Speaker 6: than we don't need to do anything because inflation is 58 00:03:12,200 --> 00:03:16,079 Speaker 6: under control and at this point the economy is hanging 59 00:03:16,080 --> 00:03:16,400 Speaker 6: in there. 60 00:03:16,440 --> 00:03:16,639 Speaker 5: Now. 61 00:03:17,600 --> 00:03:19,960 Speaker 6: Jobless claims are a little elevated, but it's a seasonal 62 00:03:19,960 --> 00:03:23,800 Speaker 6: adjustment time of year, so maybe they're not signaling a 63 00:03:23,919 --> 00:03:27,440 Speaker 6: terrible change in the labor market. But I Fed'll be 64 00:03:27,560 --> 00:03:29,840 Speaker 6: keeping an eye on those two things to see if 65 00:03:30,240 --> 00:03:32,680 Speaker 6: there is any move either direction needed. 66 00:03:33,160 --> 00:03:36,640 Speaker 2: Another thing is economic growth, because the fear of these tariks, 67 00:03:36,680 --> 00:03:40,200 Speaker 2: the fear of inflation, really changed things in two earlier 68 00:03:40,240 --> 00:03:43,080 Speaker 2: readings on GDP in the first quarter, and we're going 69 00:03:43,160 --> 00:03:44,520 Speaker 2: to get a third reading pretty soon. 70 00:03:44,480 --> 00:03:47,560 Speaker 6: Right, Yes, we'll get a third reading. That will be 71 00:03:47,600 --> 00:03:51,600 Speaker 6: the final reading for the month, and what we're going 72 00:03:51,640 --> 00:03:56,000 Speaker 6: to see is basically little change. But then we'll get 73 00:03:56,040 --> 00:03:58,480 Speaker 6: the second quarter numbers and we'll see a big change 74 00:03:58,520 --> 00:04:01,400 Speaker 6: because in the first quarter grow was held down by 75 00:04:01,600 --> 00:04:04,040 Speaker 6: the fact that we imported a lot of stuff as 76 00:04:04,080 --> 00:04:07,280 Speaker 6: people tried to front run the tariffs, and that is 77 00:04:07,720 --> 00:04:11,960 Speaker 6: basically comes out of GDP, so we had a negative print. 78 00:04:12,160 --> 00:04:16,520 Speaker 6: But in the current quarter, the second quarter, people are 79 00:04:16,600 --> 00:04:19,800 Speaker 6: not buying a lot of imports. Imports are way down, 80 00:04:19,880 --> 00:04:23,599 Speaker 6: so that will artificially add to GDP. So again for 81 00:04:23,640 --> 00:04:26,880 Speaker 6: the fat they'll probably average the two quarters, but it 82 00:04:26,920 --> 00:04:29,000 Speaker 6: isn't going to be a clean read on exactly what's 83 00:04:29,040 --> 00:04:30,120 Speaker 6: happening now. 84 00:04:30,160 --> 00:04:34,560 Speaker 2: People, you say, are buying fewer of the imports, but 85 00:04:34,640 --> 00:04:39,600 Speaker 2: are we still seeing jittery consumers, especially lower end consumers 86 00:04:39,680 --> 00:04:41,320 Speaker 2: holding back on all purchases. 87 00:04:41,720 --> 00:04:43,880 Speaker 6: We're seeing jittery consumers, but they don't seem to be 88 00:04:43,920 --> 00:04:48,480 Speaker 6: holding back on all purchases. Right now, consumers seem willing 89 00:04:48,560 --> 00:04:52,240 Speaker 6: to spend on what they need to spend on. Gasoline 90 00:04:52,279 --> 00:04:54,560 Speaker 6: prices have come down. That gives people a little bit 91 00:04:54,560 --> 00:04:56,560 Speaker 6: of a tailwind, little bit of extra money to spend 92 00:04:56,600 --> 00:04:59,839 Speaker 6: on other things, which food prices went up, so that 93 00:05:00,120 --> 00:05:02,400 Speaker 6: the other thing that they watch closely. But this is 94 00:05:02,440 --> 00:05:05,360 Speaker 6: also not a period of time when there is a 95 00:05:05,400 --> 00:05:08,760 Speaker 6: lot of what we would call extra spending because we're 96 00:05:08,880 --> 00:05:13,640 Speaker 6: past the holidays now, we're waiting for basically back to school, 97 00:05:13,680 --> 00:05:16,280 Speaker 6: which will start in July, and if people are going 98 00:05:16,320 --> 00:05:18,480 Speaker 6: to be spending a lot on that or whether they're 99 00:05:18,480 --> 00:05:21,919 Speaker 6: going to hold off. One thing that we are watching 100 00:05:22,600 --> 00:05:26,560 Speaker 6: these days is vacations. Airfares are way down because air 101 00:05:26,600 --> 00:05:29,160 Speaker 6: travel is way down. Hotels are down. These are the 102 00:05:29,160 --> 00:05:30,840 Speaker 6: time of years when you would think they would go up, 103 00:05:30,880 --> 00:05:33,720 Speaker 6: but the prices of those things have come down because 104 00:05:33,760 --> 00:05:36,200 Speaker 6: people aren't traveling as much, which is a sign of 105 00:05:36,920 --> 00:05:38,320 Speaker 6: some nervousness. 106 00:05:38,640 --> 00:05:40,479 Speaker 2: Let's talk about the future of the FED, because this 107 00:05:40,560 --> 00:05:44,440 Speaker 2: has been a subject last week. Jerome Pal's eight year 108 00:05:44,520 --> 00:05:47,600 Speaker 2: tenure as FED chair will end in May of next year. 109 00:05:48,120 --> 00:05:51,760 Speaker 2: We know what President Trump says about him what's next 110 00:05:51,760 --> 00:05:54,159 Speaker 2: for the FED. And I know that there's one big 111 00:05:54,240 --> 00:05:54,880 Speaker 2: name out there. 112 00:05:55,240 --> 00:05:56,800 Speaker 6: Well, there are a couple of big names out there, 113 00:05:56,839 --> 00:05:59,440 Speaker 6: because the President has made no secret of people that 114 00:05:59,480 --> 00:06:04,960 Speaker 6: he thinks could be FED chair. Along with Scott Besson, 115 00:06:05,040 --> 00:06:08,080 Speaker 6: whom you're referring to this last week Bloomberg reporting he's 116 00:06:08,080 --> 00:06:13,240 Speaker 6: on the list, Kevin Walsh, the former FED governor, has 117 00:06:13,279 --> 00:06:15,800 Speaker 6: been on the list twice. He was on the list 118 00:06:15,839 --> 00:06:20,480 Speaker 6: before Jay Powell was chosen, and then Kevin Hassett, who 119 00:06:20,560 --> 00:06:24,320 Speaker 6: is the director of the National Economic Council. So there 120 00:06:24,400 --> 00:06:28,160 Speaker 6: are a number of names out there. The question is 121 00:06:28,520 --> 00:06:32,640 Speaker 6: what does Trump really want. The feeling has been and 122 00:06:32,720 --> 00:06:35,480 Speaker 6: the impression you get from Donald Trump is that he 123 00:06:35,520 --> 00:06:38,599 Speaker 6: wants somebody who's going to cut interest rates. We don't 124 00:06:38,680 --> 00:06:42,960 Speaker 6: know a lot about what Scott Besson thinks about rates. 125 00:06:43,080 --> 00:06:46,120 Speaker 6: We do know that Kevin Walsh, as much as Trump 126 00:06:46,240 --> 00:06:48,640 Speaker 6: likes him, has been a hawk all his life on inflation. 127 00:06:48,760 --> 00:06:50,799 Speaker 6: So he's probably not going to be ready to cut 128 00:06:51,400 --> 00:06:55,080 Speaker 6: interest rates so right away. And the issue for the 129 00:06:55,120 --> 00:06:58,679 Speaker 6: President is he can fill one seat for a governor 130 00:06:58,680 --> 00:07:02,040 Speaker 6: whose term is expiring in January, Adriana Kugler, and then 131 00:07:02,080 --> 00:07:06,520 Speaker 6: he could fill the pole seat if j Powell resigns 132 00:07:06,560 --> 00:07:10,200 Speaker 6: as a governor when his term as FED chair is up, 133 00:07:10,840 --> 00:07:13,800 Speaker 6: so he's got one or two seats, and the FED 134 00:07:14,280 --> 00:07:17,840 Speaker 6: will not otherwise turn over during his term, so he 135 00:07:17,880 --> 00:07:21,560 Speaker 6: doesn't have an opportunity to pick enough people to influence 136 00:07:21,600 --> 00:07:24,200 Speaker 6: monetary policy. Even if he got somebody who walked in 137 00:07:24,240 --> 00:07:26,360 Speaker 6: the door and said, I want us all the cut raids, 138 00:07:26,480 --> 00:07:28,120 Speaker 6: the rest of the FED isn't going to go along 139 00:07:28,200 --> 00:07:30,760 Speaker 6: if they see inflation is still a danger. 140 00:07:31,120 --> 00:07:32,760 Speaker 2: Well, a lot to look forward to, and we can 141 00:07:32,800 --> 00:07:35,680 Speaker 2: look for the Fed's next decision on interest rates this Wednesday, 142 00:07:35,680 --> 00:07:38,600 Speaker 2: two pm Wall Street Time and our thanks to Michael McKee, 143 00:07:38,600 --> 00:07:42,480 Speaker 2: Bloomberger International Economics and Policy correspondent. We moved now to 144 00:07:42,520 --> 00:07:45,480 Speaker 2: a closer look at the troubled US housing industry, which 145 00:07:45,480 --> 00:07:48,520 Speaker 2: has been stung by stubbornly high interest rates, sky high 146 00:07:48,600 --> 00:07:51,280 Speaker 2: home prices, and a lot of economic uncertainty. And this 147 00:07:51,400 --> 00:07:53,880 Speaker 2: week we get housing starts for the month of May 148 00:07:53,920 --> 00:07:56,120 Speaker 2: and the latest earnings from one of the nation's biggest 149 00:07:56,120 --> 00:07:58,880 Speaker 2: home builders. For more on what all this might tell 150 00:07:58,960 --> 00:08:01,160 Speaker 2: us about the state of the house sector, we're joined 151 00:08:01,160 --> 00:08:06,160 Speaker 2: by Drew Reading Bloomberg Intelligence US Home building analyst, Well, Drew, 152 00:08:06,240 --> 00:08:08,640 Speaker 2: let's start with those earnings I'm out on Monday from 153 00:08:08,640 --> 00:08:11,600 Speaker 2: the Miami based builder Lenar, because I think they may 154 00:08:11,640 --> 00:08:14,240 Speaker 2: illustrate a lot of the challenge the home building industry 155 00:08:14,280 --> 00:08:16,680 Speaker 2: is facing right now, a lot of those challenges. So 156 00:08:16,960 --> 00:08:18,240 Speaker 2: what do you expect to see? 157 00:08:19,000 --> 00:08:21,800 Speaker 5: So, the two main things that investors focus on for 158 00:08:21,880 --> 00:08:25,480 Speaker 5: the builders are orders in gross margin. Now, among the 159 00:08:25,600 --> 00:08:29,320 Speaker 5: large publicly traded home builders, Lenars operating a somewhat unique 160 00:08:29,320 --> 00:08:33,240 Speaker 5: strategy in that they're focused primarily on driving pace, so 161 00:08:33,320 --> 00:08:36,920 Speaker 5: higher sales absorptions over price, and they've been willing to 162 00:08:36,960 --> 00:08:39,600 Speaker 5: sacrifice their gross margin to do so. So they'll give 163 00:08:39,679 --> 00:08:41,920 Speaker 5: us a good read on demand trends. We've heard from 164 00:08:42,040 --> 00:08:45,200 Speaker 5: some other builders. You know that the market softened in April. 165 00:08:45,240 --> 00:08:47,800 Speaker 5: We saw that in the data, but maybe improved a 166 00:08:47,800 --> 00:08:49,720 Speaker 5: little bit in May. So we think that any pickup 167 00:08:49,720 --> 00:08:54,040 Speaker 5: in demand is still likely the result of an elevated 168 00:08:54,160 --> 00:08:56,080 Speaker 5: use of sales and incentives. Builders have had to be 169 00:08:56,120 --> 00:08:58,880 Speaker 5: really aggressive. So we're looking for order growth of about 170 00:08:58,960 --> 00:09:02,400 Speaker 5: eight percent with a margin just under eighteen percent, But 171 00:09:02,440 --> 00:09:06,280 Speaker 5: we expect the company to communicate further pressure through the 172 00:09:06,320 --> 00:09:09,560 Speaker 5: remainder of the year. You know, during the first quarter 173 00:09:09,600 --> 00:09:12,200 Speaker 5: a number of builders actually reduced their full year guidance 174 00:09:12,240 --> 00:09:15,320 Speaker 5: for closings, but just given Lenar's business model, we think 175 00:09:15,320 --> 00:09:18,240 Speaker 5: there's probably less risk for this. So you know, they're 176 00:09:18,280 --> 00:09:21,200 Speaker 5: expecting to close eighty six to eighty eight thousand homes 177 00:09:21,200 --> 00:09:24,520 Speaker 5: this year, and really their primary objective is to turn 178 00:09:24,720 --> 00:09:29,840 Speaker 5: through their inventory to generate cash and drive shareholder friendly actions. 179 00:09:30,440 --> 00:09:32,880 Speaker 2: Now, also this week we get housing starts for May. 180 00:09:33,160 --> 00:09:34,560 Speaker 2: So what do you expect to see there? 181 00:09:35,160 --> 00:09:37,600 Speaker 5: Housing starts has been trending lower over the last several months. 182 00:09:37,640 --> 00:09:39,839 Speaker 5: I think we're down about seven percent year to date 183 00:09:39,840 --> 00:09:42,800 Speaker 5: on the single family side, and we expect builders to 184 00:09:42,840 --> 00:09:47,320 Speaker 5: maintain this more cautious approach to production. You've got the 185 00:09:47,360 --> 00:09:51,880 Speaker 5: combination of weak demand trends along with rapidly increasing inventory levels, 186 00:09:52,920 --> 00:09:55,360 Speaker 5: including one of the highest levels of completed new home 187 00:09:55,400 --> 00:09:57,599 Speaker 5: inventory since two thousand and nine. So you're going to 188 00:09:57,640 --> 00:10:00,880 Speaker 5: see builders continue to utilize incentives to work through the 189 00:10:00,960 --> 00:10:04,319 Speaker 5: existing inventory before putting new projects in the grounds. 190 00:10:04,440 --> 00:10:07,200 Speaker 2: Well, let's talk about some of those incentives. What are 191 00:10:07,240 --> 00:10:08,280 Speaker 2: the more popular ones. 192 00:10:08,920 --> 00:10:11,560 Speaker 5: So I think it's pretty well understood that builders have 193 00:10:11,600 --> 00:10:14,160 Speaker 5: been aggressive in the use of mortgage rate buydowns to 194 00:10:14,200 --> 00:10:19,280 Speaker 5: help with the affordability equation. Generally speaking, we think builders 195 00:10:19,360 --> 00:10:21,360 Speaker 5: like to maintain a spread of about one hundred to 196 00:10:21,360 --> 00:10:24,960 Speaker 5: one hundred and fifty basis points versus the headline mortgage rate, 197 00:10:25,000 --> 00:10:28,640 Speaker 5: which is just under seven percent right now. I mean, 198 00:10:28,679 --> 00:10:31,240 Speaker 5: we've seen some builders be even more aggressive getting rates 199 00:10:31,280 --> 00:10:34,440 Speaker 5: into the five percent range, But it's really dependent on 200 00:10:34,480 --> 00:10:37,120 Speaker 5: the buyer. So in addition to what they're doing on 201 00:10:37,160 --> 00:10:39,400 Speaker 5: the buydown side, you also have others who would rather 202 00:10:39,520 --> 00:10:43,760 Speaker 5: up for closing costs, assistance, or credits towards structural options 203 00:10:44,000 --> 00:10:47,640 Speaker 5: or design options. Typically you'll see the first time or 204 00:10:47,800 --> 00:10:50,640 Speaker 5: entry level buyer opt for the rate buydown because they're 205 00:10:50,640 --> 00:10:53,720 Speaker 5: more dependent on that monthly payment, while buyers you know 206 00:10:53,760 --> 00:10:56,160 Speaker 5: with a stronger profile in the move up or second 207 00:10:56,160 --> 00:10:59,800 Speaker 5: time move up market will typically look for, you know, 208 00:11:00,400 --> 00:11:03,320 Speaker 5: credits towards structural and design options. 209 00:11:03,600 --> 00:11:07,000 Speaker 2: Are you seeing anything from the Trump administration that is, 210 00:11:07,200 --> 00:11:11,040 Speaker 2: any moves to help home buying, to help you know, 211 00:11:11,080 --> 00:11:15,359 Speaker 2: people secure loans. I know, some of the mortgage guarantee 212 00:11:15,400 --> 00:11:17,719 Speaker 2: those those you know Fanny made, Freddie mac There's a 213 00:11:17,760 --> 00:11:20,640 Speaker 2: lot of movement there, but what is being done out 214 00:11:20,679 --> 00:11:21,320 Speaker 2: of Washington? 215 00:11:22,440 --> 00:11:24,200 Speaker 5: Yeah, so you know, there was a big topic of 216 00:11:24,240 --> 00:11:27,400 Speaker 5: discussion on the campaign trail. There hasn't been a whole 217 00:11:27,400 --> 00:11:29,600 Speaker 5: lot of movement right now. I mean the three biggest 218 00:11:29,600 --> 00:11:33,120 Speaker 5: things I think from the political spectrum. People are looking 219 00:11:33,160 --> 00:11:36,960 Speaker 5: at our tariffs, which you know, thankfully for the builders, 220 00:11:37,240 --> 00:11:39,800 Speaker 5: is less of a concern perhaps than it was, you know, 221 00:11:39,840 --> 00:11:43,959 Speaker 5: a month or so ago, as well as immigration and deregulation. 222 00:11:44,920 --> 00:11:47,200 Speaker 5: You know, I think there's more focus on immigration. You 223 00:11:47,280 --> 00:11:49,720 Speaker 5: mentioned that, you know, we're starting to see more ice rates. 224 00:11:50,040 --> 00:11:52,559 Speaker 5: It's certainly a headline risk to the industry. You've got 225 00:11:53,040 --> 00:11:56,080 Speaker 5: more than thirty percent of trade contractors are farm born, 226 00:11:56,120 --> 00:11:58,040 Speaker 5: and there's estimates you know that one and ten may 227 00:11:58,080 --> 00:12:01,320 Speaker 5: be undocumented. Now, most of the builders that we've talked 228 00:12:01,320 --> 00:12:03,800 Speaker 5: to have acknowledged that this is a risk, but I 229 00:12:03,800 --> 00:12:06,360 Speaker 5: think to this point there there hasn't been too much 230 00:12:06,440 --> 00:12:10,040 Speaker 5: of an impact on the actual job site. You know, 231 00:12:10,120 --> 00:12:12,160 Speaker 5: this is as you mentioned before, the lack of tree 232 00:12:12,240 --> 00:12:15,040 Speaker 5: labor has been an ongoing issue for the industry really 233 00:12:15,080 --> 00:12:17,319 Speaker 5: since the last downturn, because you have a lot of 234 00:12:17,360 --> 00:12:20,320 Speaker 5: people switch industries, You've had a lot of people age 235 00:12:20,360 --> 00:12:23,560 Speaker 5: out of the industries, so you know, that's really been 236 00:12:23,600 --> 00:12:25,760 Speaker 5: a focal point for the last several years. And to 237 00:12:25,800 --> 00:12:29,080 Speaker 5: the extent that you know that the labor market tightens 238 00:12:29,160 --> 00:12:31,920 Speaker 5: up further because we're we're losing some more of the workforce. 239 00:12:32,280 --> 00:12:34,440 Speaker 5: Now you're looking at the cost impact for the builders. 240 00:12:34,720 --> 00:12:36,760 Speaker 2: Yeah, just another challenge for those builders. 241 00:12:36,800 --> 00:12:36,959 Speaker 5: Well. 242 00:12:36,960 --> 00:12:40,959 Speaker 2: Our thanks to Drew Redding, Bloomberg Intelligence US home building analyst. 243 00:12:41,280 --> 00:12:43,320 Speaker 2: Coming up on Bloomberg day Break weekend, we'll look at 244 00:12:43,320 --> 00:12:45,880 Speaker 2: whether the Bank of England will decide to hold steady 245 00:12:45,880 --> 00:12:49,600 Speaker 2: on interest rates. I'm Tom Busby and this is Bloomberg. 246 00:12:59,280 --> 00:13:01,760 Speaker 2: This is Bloomberg Daybreak weekend, our global look ahead at 247 00:13:01,800 --> 00:13:04,320 Speaker 2: the top stories for investors in the coming week. I'm 248 00:13:04,360 --> 00:13:07,240 Speaker 2: Tom Busby in New York. Up later in our program 249 00:13:07,240 --> 00:13:09,360 Speaker 2: a look ahead to the Bank of Japan meeting and 250 00:13:09,360 --> 00:13:12,679 Speaker 2: what that could mean for monetary policy moving forward. But first, 251 00:13:12,679 --> 00:13:16,000 Speaker 2: the Bank of England policymakers will once again gather on 252 00:13:16,040 --> 00:13:19,720 Speaker 2: Threadneedle Street to determine the country's interest rate path. How 253 00:13:19,760 --> 00:13:23,800 Speaker 2: will the Monetary Policy Committee deal with inflationary pressures as 254 00:13:23,840 --> 00:13:27,760 Speaker 2: the UK economy and the employment market soften. For more, 255 00:13:27,880 --> 00:13:30,000 Speaker 2: Let's go to London and bring in Bloomberg Daybreak. Euro 256 00:13:30,120 --> 00:13:32,280 Speaker 2: banker Caroline hepgar Tom. 257 00:13:32,400 --> 00:13:35,520 Speaker 3: The Bank of England has been slowly cutting interest rates 258 00:13:35,520 --> 00:13:39,160 Speaker 3: since last year, lowering boring costs twice in twenty twenty 259 00:13:39,240 --> 00:13:43,280 Speaker 3: five to four and a quarter percent, but tax rises 260 00:13:43,320 --> 00:13:48,040 Speaker 3: in April, including on employers from higher national insurance contributions, 261 00:13:48,080 --> 00:13:52,000 Speaker 3: have pushed inflation up. There's a big question about how 262 00:13:52,040 --> 00:13:55,160 Speaker 3: the bank deals with this amid an economy in the 263 00:13:55,280 --> 00:13:58,880 Speaker 3: UK that appears to be losing some steam. So do 264 00:13:59,000 --> 00:14:02,360 Speaker 3: the nine member committee at the Bank of England opt 265 00:14:02,360 --> 00:14:05,440 Speaker 3: to skip a rate cut this month and what then 266 00:14:05,600 --> 00:14:09,240 Speaker 3: of the rest of the year? Economic growth began twenty 267 00:14:09,320 --> 00:14:12,200 Speaker 3: twenty five with a bang, it's now dealing with the 268 00:14:12,240 --> 00:14:16,480 Speaker 3: fallout of some US tariffs, and the Bank's decision comes 269 00:14:16,520 --> 00:14:19,240 Speaker 3: only a few days after the Chancellor set out the 270 00:14:19,240 --> 00:14:22,200 Speaker 3: government's spending plans for the next three to four years, 271 00:14:22,560 --> 00:14:25,840 Speaker 3: a record funding boost for the National Health Service but 272 00:14:26,040 --> 00:14:29,760 Speaker 3: tighter budgets for less favored government departments. 273 00:14:30,080 --> 00:14:30,240 Speaker 5: Well. 274 00:14:30,320 --> 00:14:34,200 Speaker 3: Joining me is Bloomberg's chief UK economist, Dan Hanson and 275 00:14:34,280 --> 00:14:37,320 Speaker 3: our senior economics reporter Phil Aldrich. Very good to have 276 00:14:37,400 --> 00:14:39,640 Speaker 3: both of you with me. What do you make of 277 00:14:39,640 --> 00:14:41,800 Speaker 3: the economic picture in the UK right now and whether 278 00:14:41,840 --> 00:14:47,560 Speaker 3: it means interest rate cuts coming. Has the inflation outlook improved? 279 00:14:49,040 --> 00:14:53,080 Speaker 7: Yeah, obviously, as Dan said that there's been a there's 280 00:14:53,080 --> 00:14:55,600 Speaker 7: this temporary hump in inflation which is caused by a 281 00:14:55,600 --> 00:15:00,680 Speaker 7: holload of regulatory household bills which would uterize and that 282 00:15:00,800 --> 00:15:02,760 Speaker 7: increase has happened, and so we've seen that bump. So 283 00:15:03,000 --> 00:15:05,200 Speaker 7: the Bank is trying to look through it and that 284 00:15:05,440 --> 00:15:08,880 Speaker 7: and they're looking particularly at wages and the labor market. 285 00:15:08,920 --> 00:15:11,840 Speaker 7: I mean, you'd hear this from members of the committee 286 00:15:12,400 --> 00:15:16,640 Speaker 7: and that you know that the process is proceeding there, 287 00:15:17,000 --> 00:15:19,760 Speaker 7: they would like it to be proceeding faster, for them 288 00:15:19,760 --> 00:15:26,080 Speaker 7: to cut faster. There's this they have this quarterly trajectory 289 00:15:26,160 --> 00:15:28,200 Speaker 7: for interest rate cuts when they which is which is 290 00:15:28,200 --> 00:15:31,800 Speaker 7: communicated through the gradual and careful language, which remains in place. 291 00:15:31,840 --> 00:15:33,640 Speaker 7: So you don't think, I mean, it doesn't look like 292 00:15:33,680 --> 00:15:37,320 Speaker 7: the governor wants to move from that quarterly pace of cuts. 293 00:15:37,360 --> 00:15:39,600 Speaker 7: And you know, two of the internal members at the 294 00:15:39,600 --> 00:15:44,400 Speaker 7: bank are actually quite hawkish and they don't so Hugh 295 00:15:44,480 --> 00:15:48,960 Speaker 7: pill has already skipped one meeting, so he's voted not 296 00:15:49,080 --> 00:15:51,760 Speaker 7: to cut when when everyone is expecting him to. And 297 00:15:51,840 --> 00:15:55,360 Speaker 7: Clai Lombardelli, who's the Deputy Governor Hughes, the chief economist, 298 00:15:55,600 --> 00:15:59,480 Speaker 7: that they prepare the forecasts, and she and Hugh are 299 00:15:59,600 --> 00:16:03,400 Speaker 7: clearly quite concerned about the stickiness of inflation in the UK. 300 00:16:03,520 --> 00:16:06,360 Speaker 7: So there is that you've got to think about the 301 00:16:06,480 --> 00:16:08,920 Speaker 7: nine member committee when you're thinking about whether the bank 302 00:16:09,000 --> 00:16:10,280 Speaker 7: is going to cut, and you've got to think about 303 00:16:10,280 --> 00:16:12,960 Speaker 7: who you know, they've got to get five people doing it, 304 00:16:13,000 --> 00:16:14,840 Speaker 7: and I think that will be tricky in June. I 305 00:16:15,080 --> 00:16:17,000 Speaker 7: would have thought that in August it's pretty I mean 306 00:16:17,040 --> 00:16:18,560 Speaker 7: it is nailed on in the markets, it seems to 307 00:16:18,600 --> 00:16:21,560 Speaker 7: be completely nailed on, and the economic situation in the 308 00:16:21,640 --> 00:16:23,920 Speaker 7: UK it's it's kind of mixed. If you look at 309 00:16:24,320 --> 00:16:26,320 Speaker 7: if you look at some of the surveys, the business surveys, 310 00:16:26,320 --> 00:16:29,680 Speaker 7: they've been picking up people. Businesses seem more confident. You know, 311 00:16:29,800 --> 00:16:33,160 Speaker 7: there's there's strong profitability among or increasing profitability among small 312 00:16:33,200 --> 00:16:38,000 Speaker 7: businesses and households and businesses are both setting on huge 313 00:16:38,040 --> 00:16:41,600 Speaker 7: cash balances. But actually what's happening in the economy is 314 00:16:41,600 --> 00:16:44,440 Speaker 7: that you know, things things up there. Obviously labor market, 315 00:16:44,600 --> 00:16:48,400 Speaker 7: the employment has risen. There's been this these damaging tax 316 00:16:48,520 --> 00:16:51,400 Speaker 7: rises on business from the Chancellor which only came into 317 00:16:51,440 --> 00:16:55,640 Speaker 7: effect in April. Energy bills are still high and there's 318 00:16:55,800 --> 00:16:59,600 Speaker 7: genuine just just concerns about, you know, the policy outlook 319 00:16:59,600 --> 00:17:01,360 Speaker 7: and whether the more tax risers are going to be coming. 320 00:17:01,400 --> 00:17:03,840 Speaker 7: So you know, this is this is holding back the 321 00:17:03,880 --> 00:17:07,000 Speaker 7: animal spirits. But you can see like the potential for 322 00:17:07,600 --> 00:17:11,320 Speaker 7: a sort of a release of growth energy at some point. 323 00:17:11,440 --> 00:17:13,120 Speaker 7: It's just it's not quite happening yet. 324 00:17:13,600 --> 00:17:15,840 Speaker 3: The backdrop to this Dan of course also in recent 325 00:17:15,920 --> 00:17:18,640 Speaker 3: days is actually is like cooling in terms of economic growth, 326 00:17:18,640 --> 00:17:21,720 Speaker 3: at least on a monthly basis. Though, so again I 327 00:17:21,720 --> 00:17:24,920 Speaker 3: guess the state of the UK economy from your perspective. 328 00:17:25,200 --> 00:17:28,280 Speaker 8: Yeah, I mean I broadly agree with what Phil said there. 329 00:17:28,359 --> 00:17:31,280 Speaker 8: I think we've had a we've had a cooling in activity. 330 00:17:31,320 --> 00:17:34,399 Speaker 8: It was pretty expect widely expected. The fall was a 331 00:17:34,440 --> 00:17:37,199 Speaker 8: bit sharper than people thought, but most people thought there 332 00:17:37,240 --> 00:17:38,679 Speaker 8: was going to be a fall in GDP. And it 333 00:17:38,720 --> 00:17:42,119 Speaker 8: relates to this idea that the first quarter of the 334 00:17:42,200 --> 00:17:46,199 Speaker 8: year was exceptionally strong, partly to do with what's been 335 00:17:46,200 --> 00:17:49,560 Speaker 8: going on with tariffs and firms front loading in anticipation 336 00:17:49,640 --> 00:17:55,280 Speaker 8: of tariffs. And I think the broad picture is consistent 337 00:17:55,400 --> 00:17:58,400 Speaker 8: with what the Bank of England set out in its 338 00:17:58,400 --> 00:18:01,000 Speaker 8: May forecast, which is you had this wrong, starts the year, 339 00:18:01,320 --> 00:18:03,280 Speaker 8: and then the remainder of the year is going to 340 00:18:03,280 --> 00:18:06,639 Speaker 8: be significantly weaker. So I think on the growth side, 341 00:18:06,880 --> 00:18:08,840 Speaker 8: there's nothing that's going to push them one way or 342 00:18:08,840 --> 00:18:12,680 Speaker 8: the other in terms of speeding up or slowing down 343 00:18:13,480 --> 00:18:16,520 Speaker 8: how fast they cut interest rates. I think that's the 344 00:18:16,560 --> 00:18:19,600 Speaker 8: bit of information that is new to them relative to 345 00:18:19,880 --> 00:18:23,000 Speaker 8: well relative to what they knew in May, is on 346 00:18:23,000 --> 00:18:25,080 Speaker 8: the labor market. And it does look like the labor 347 00:18:25,119 --> 00:18:28,399 Speaker 8: market has called faster than they were expecting. So, you know, 348 00:18:28,480 --> 00:18:31,080 Speaker 8: all else equal, that is a that is a dubbish signal, 349 00:18:31,119 --> 00:18:33,400 Speaker 8: and the markets have responded to that. They've moved from 350 00:18:33,440 --> 00:18:36,840 Speaker 8: pricing one and a bit cuts for the remainder of 351 00:18:36,880 --> 00:18:41,160 Speaker 8: the year to fully pricing two and it's quite possible, 352 00:18:41,200 --> 00:18:44,199 Speaker 8: you know that there's more more to come there. But 353 00:18:44,280 --> 00:18:47,080 Speaker 8: I think that's that's the news. Isn't going to be 354 00:18:47,160 --> 00:18:48,960 Speaker 8: enough to push them to cut interest rates in June? No, 355 00:18:49,040 --> 00:18:49,920 Speaker 8: I don't think it will. 356 00:18:50,600 --> 00:18:50,919 Speaker 2: Will it. 357 00:18:51,720 --> 00:18:53,800 Speaker 8: If the trend continues, I think it will give them 358 00:18:53,800 --> 00:18:56,920 Speaker 8: the confidence to carry on cutting. As Phil said, at 359 00:18:56,920 --> 00:18:59,120 Speaker 8: this quarterly pace over the remainder of the year. 360 00:18:59,359 --> 00:19:00,000 Speaker 2: Yeah. 361 00:19:00,040 --> 00:19:03,560 Speaker 3: I remember speaking to Petra tag from a Manpower UK, 362 00:19:03,640 --> 00:19:06,159 Speaker 3: which is the big recruitment firm on Blueberg Radio and 363 00:19:06,200 --> 00:19:09,760 Speaker 3: she was saying that there is a lot of nervousness 364 00:19:09,960 --> 00:19:12,560 Speaker 3: for employers at the moment, or that they are feeling 365 00:19:12,640 --> 00:19:18,280 Speaker 3: very nervous currently. Look, the other issue is the kind 366 00:19:18,280 --> 00:19:21,960 Speaker 3: of ramifications of Bailey's decision when it comes to Chance 367 00:19:22,040 --> 00:19:24,399 Speaker 3: of Rachel Reeves, who has also recently set out her 368 00:19:24,720 --> 00:19:28,639 Speaker 3: spending plans for effectively the rest of her term or 369 00:19:28,640 --> 00:19:31,480 Speaker 3: the rest of this kind of parliamentary term. And so 370 00:19:31,800 --> 00:19:35,520 Speaker 3: have a listening now to Chief EMEA Market strash is 371 00:19:35,640 --> 00:19:40,400 Speaker 3: Karen Ward at JP Morgan talking about actually the government's 372 00:19:40,440 --> 00:19:43,919 Speaker 3: debt bill and the possibilities and the difficulties that the 373 00:19:43,920 --> 00:19:45,439 Speaker 3: government has with that. Have a listen. 374 00:19:46,240 --> 00:19:49,120 Speaker 9: We have to get productivity going here in the UK. 375 00:19:49,240 --> 00:19:51,040 Speaker 9: I mean, if you look at the long term projections 376 00:19:51,040 --> 00:19:54,479 Speaker 9: the OBR do it. It's their lesser red report than 377 00:19:54,480 --> 00:19:57,800 Speaker 9: their sort of year ahead projections. But the trajectory over 378 00:19:57,840 --> 00:20:00,440 Speaker 9: the next fifty or so years for government and debt 379 00:20:00,520 --> 00:20:04,520 Speaker 9: is unpretty over two hundred and fifty percent. If a 380 00:20:04,640 --> 00:20:08,000 Speaker 9: rising productivity scenario, if there is not a recovery in 381 00:20:08,040 --> 00:20:10,800 Speaker 9: productivity that's headed more towards six hundred percent of GDP. 382 00:20:11,119 --> 00:20:13,600 Speaker 9: So we absolutely have to get growth going. We have 383 00:20:13,640 --> 00:20:17,000 Speaker 9: to get investment going. That's the reason we haven't got productivity. 384 00:20:17,160 --> 00:20:20,560 Speaker 9: Companies are not equipping their staff with better skills and 385 00:20:20,600 --> 00:20:23,360 Speaker 9: better equipment. And until we get that going, then we're 386 00:20:23,359 --> 00:20:26,320 Speaker 9: going to be in this perennial conversation about why there 387 00:20:26,320 --> 00:20:29,280 Speaker 9: isn't enough growth and why therefore we don't have money 388 00:20:29,320 --> 00:20:30,600 Speaker 9: to fund public services. 389 00:20:30,720 --> 00:20:33,320 Speaker 3: So that was JP Morgan's Karen Ward there who was 390 00:20:33,359 --> 00:20:37,000 Speaker 3: speaking to us in the last few days. Phil, what's 391 00:20:37,040 --> 00:20:42,400 Speaker 3: the link then between you know, the cost of boring 392 00:20:42,640 --> 00:20:45,640 Speaker 3: and the UK's debt issues. I mean Karen was talking 393 00:20:45,640 --> 00:20:49,600 Speaker 3: about it in very long term horizons, but but how 394 00:20:49,600 --> 00:20:50,840 Speaker 3: do you thread that needle? 395 00:20:51,640 --> 00:20:54,000 Speaker 7: Well, obviously, the faster the Bank of England brings down 396 00:20:54,480 --> 00:20:56,640 Speaker 7: interest rates, then the more that's going to send messages 397 00:20:56,640 --> 00:20:59,440 Speaker 7: through to the through the market and the whole curve 398 00:20:59,560 --> 00:21:03,560 Speaker 7: or potentially drop, and that will help the chancer because 399 00:21:03,600 --> 00:21:06,239 Speaker 7: their interest is one hundred and one hundred to one 400 00:21:06,280 --> 00:21:08,400 Speaker 7: hundred and ten billion pounds a year across the forecast, 401 00:21:08,400 --> 00:21:11,720 Speaker 7: which is you know virtually almost it is almost double 402 00:21:12,040 --> 00:21:16,320 Speaker 7: the defense budget. So you know that's that's an enormous cost, 403 00:21:16,600 --> 00:21:21,480 Speaker 7: so that that would help basically one of the problems actually, 404 00:21:21,520 --> 00:21:24,760 Speaker 7: I mean when the issues stems from Rachel Reeves's own 405 00:21:24,800 --> 00:21:28,240 Speaker 7: policies here, because she's it's these it's this tiny sliver 406 00:21:28,320 --> 00:21:31,639 Speaker 7: of headroom or the buffer against the fiscal rules that 407 00:21:31,720 --> 00:21:35,879 Speaker 7: she set herselves. Has just sort of embedded this uncertainty 408 00:21:35,920 --> 00:21:39,800 Speaker 7: about future policy into sort of the thinking of business 409 00:21:39,880 --> 00:21:43,080 Speaker 7: leaders and just generally into the economy because every time, 410 00:21:43,400 --> 00:21:45,560 Speaker 7: you know, there is a small shift in borrowing cost, 411 00:21:45,640 --> 00:21:48,119 Speaker 7: that can She's got ten billion of headroom and she 412 00:21:48,160 --> 00:21:51,360 Speaker 7: can lose all of that in just just minor movements 413 00:21:51,359 --> 00:21:52,480 Speaker 7: in the in the markets. 414 00:21:52,520 --> 00:21:54,560 Speaker 3: In terms of the vote split, what we should be 415 00:21:54,560 --> 00:21:57,120 Speaker 3: watching out for, in terms of the language I mean, 416 00:21:57,680 --> 00:22:00,560 Speaker 3: and the comparison obviously between the bank of it consisting 417 00:22:00,600 --> 00:22:03,280 Speaker 3: between the ECB and the Fed. What are we thinking 418 00:22:03,280 --> 00:22:04,439 Speaker 3: about in the next few days. 419 00:22:04,680 --> 00:22:07,240 Speaker 8: Yeah, So with so taking each of those in turns, 420 00:22:07,240 --> 00:22:10,040 Speaker 8: so with the vote split, I think you'll probably get 421 00:22:10,160 --> 00:22:13,920 Speaker 8: though the vote split has been very difficult to call, 422 00:22:14,359 --> 00:22:17,720 Speaker 8: and there have been a few volatile members of the 423 00:22:17,800 --> 00:22:20,480 Speaker 8: NPC in terms of their voting patterns, but as the 424 00:22:20,520 --> 00:22:22,600 Speaker 8: best guess I would say you would have a seven 425 00:22:22,680 --> 00:22:27,000 Speaker 8: to vote split, so you'd have Swatty Dingra and Alan 426 00:22:27,119 --> 00:22:30,600 Speaker 8: Taylor continuing to advocate more easing. I think there's a 427 00:22:30,680 --> 00:22:34,119 Speaker 8: risk that Sarah Breeden, who's one of the internal members, 428 00:22:35,560 --> 00:22:37,520 Speaker 8: votes for a rate cut, but I think a base case, 429 00:22:37,560 --> 00:22:39,880 Speaker 8: a reasonable base case is seven to two. I think 430 00:22:39,880 --> 00:22:40,640 Speaker 8: there's a question. 431 00:22:40,440 --> 00:22:43,800 Speaker 7: We're learning for cut and the rest learning to hot exactly. 432 00:22:43,920 --> 00:22:46,119 Speaker 8: Yeah, so we get we get a hold being interviewed 433 00:22:46,119 --> 00:22:51,159 Speaker 8: by two people now and there's a question mark I 434 00:22:51,200 --> 00:22:53,199 Speaker 8: think about whether that because so in May, both of 435 00:22:53,200 --> 00:22:55,840 Speaker 8: those members voted for a fifty basis point cut, so 436 00:22:56,080 --> 00:22:58,439 Speaker 8: there's a question mark. Do they go twenty five or 437 00:22:58,480 --> 00:23:01,400 Speaker 8: do they stick with fifty? You know, I think that 438 00:23:01,400 --> 00:23:04,639 Speaker 8: there's a question marked there. In terms of the guidance 439 00:23:05,720 --> 00:23:07,600 Speaker 8: going into the main meeting, there was a lot of 440 00:23:07,640 --> 00:23:10,560 Speaker 8: speculation that the bank would drop it. This commitment to 441 00:23:10,600 --> 00:23:13,880 Speaker 8: gradual and careful cuts, the worlding that Phil phil mentioned earlier. 442 00:23:14,840 --> 00:23:16,360 Speaker 8: I think they will stick with that that. I think 443 00:23:16,359 --> 00:23:20,680 Speaker 8: they're very comfortable with that because Fills also alluded to 444 00:23:20,720 --> 00:23:24,040 Speaker 8: the market perceives that as quarterly cuts, and I think 445 00:23:24,040 --> 00:23:26,000 Speaker 8: they're quite comfortable with quarterly cut, so I don't think 446 00:23:26,040 --> 00:23:29,240 Speaker 8: there's any reason for them to upset the apple cart 447 00:23:29,320 --> 00:23:32,960 Speaker 8: on that front. And then on where the bank sits, 448 00:23:32,960 --> 00:23:37,679 Speaker 8: between the FED and the ECB, the ECB inflations in 449 00:23:37,800 --> 00:23:40,120 Speaker 8: the EU area, inflation is sort of beaten. Yes, yeah, 450 00:23:40,160 --> 00:23:42,800 Speaker 8: and they've sort of, you know, close to declare victory. 451 00:23:43,040 --> 00:23:45,520 Speaker 8: They're basically now at a level they're very comfortable with. 452 00:23:45,640 --> 00:23:49,479 Speaker 8: They may do one more, that's our houseview. A lot 453 00:23:49,560 --> 00:23:51,960 Speaker 8: depends on what happens with tariffs, whether they go up 454 00:23:53,680 --> 00:23:57,480 Speaker 8: after this this ninety day pause, that will have a 455 00:23:57,480 --> 00:23:59,920 Speaker 8: big bearing on what's going on there. For the FED, 456 00:24:00,119 --> 00:24:05,320 Speaker 8: it's very difficult. The economy appears to just about beholding 457 00:24:05,400 --> 00:24:08,320 Speaker 8: up at the moment, but of course tariff's create a 458 00:24:08,359 --> 00:24:11,560 Speaker 8: trade off, creates higher inflation though we haven't seen it 459 00:24:11,600 --> 00:24:15,720 Speaker 8: yet in the data, and weaker growth, So there is 460 00:24:15,840 --> 00:24:18,320 Speaker 8: this there's a tough trade off. Whereas if you think 461 00:24:18,359 --> 00:24:21,240 Speaker 8: about tariffs in of themselves, for the ECB and the 462 00:24:21,240 --> 00:24:24,840 Speaker 8: Bank of England, I think most people majority I'm not 463 00:24:24,880 --> 00:24:28,080 Speaker 8: saying everyone, but most people would say they are not 464 00:24:28,200 --> 00:24:31,840 Speaker 8: growth friendly and disinflationary. So that's quite obvious. What you 465 00:24:31,840 --> 00:24:35,399 Speaker 8: do with interest rates against that backdrop, I think the 466 00:24:35,920 --> 00:24:39,399 Speaker 8: challenge for the bank is actually domestic and going to 467 00:24:39,440 --> 00:24:42,439 Speaker 8: what Phil said, this point about sticky inflation and the 468 00:24:42,480 --> 00:24:45,720 Speaker 8: point that I think in the UK inflation expectations are 469 00:24:46,520 --> 00:24:49,760 Speaker 8: probably inconsistent with target levels at the moment, and I 470 00:24:49,800 --> 00:24:53,000 Speaker 8: think the bank is worried about that. So the extent 471 00:24:53,040 --> 00:24:54,920 Speaker 8: to which they can look through this hump in inflation 472 00:24:55,960 --> 00:24:59,040 Speaker 8: is more limited than perhaps it was prior to the 473 00:24:59,040 --> 00:25:02,199 Speaker 8: big inflation shot. You know, remember Brexit, we had this 474 00:25:02,240 --> 00:25:04,840 Speaker 8: big increase in inflation, or a relatively large increase in inflation. 475 00:25:05,119 --> 00:25:08,240 Speaker 8: They eased policy despite of that. Same happened during the 476 00:25:08,240 --> 00:25:11,800 Speaker 8: financial crisis, So I think that the dynamics and the 477 00:25:11,840 --> 00:25:13,680 Speaker 8: trade off and the way they think about the trade 478 00:25:13,680 --> 00:25:14,760 Speaker 8: off has changed. 479 00:25:15,680 --> 00:25:18,880 Speaker 3: Okay, some interesting points. Thank you so much for giving 480 00:25:18,960 --> 00:25:21,240 Speaker 3: us a heads up on what to expect, of course, 481 00:25:21,280 --> 00:25:23,320 Speaker 3: on the Bank of England rate decision in the next 482 00:25:23,359 --> 00:25:26,119 Speaker 3: few days. That is Bloomberg's chief UK economist Dan Hanson 483 00:25:26,280 --> 00:25:28,879 Speaker 3: and our senior economics reporter Phil Aldrick. Thank you so 484 00:25:29,000 --> 00:25:31,760 Speaker 3: much for being with me. I'm Caroline Hepgar in London. 485 00:25:31,800 --> 00:25:34,639 Speaker 3: You can catch us every weekday morning for Bloomberg Daybreak. 486 00:25:34,640 --> 00:25:37,040 Speaker 3: You at beginning at six am in London. That's one 487 00:25:37,080 --> 00:25:38,159 Speaker 3: am on Wall Street. 488 00:25:38,240 --> 00:25:41,560 Speaker 2: Tom, Thank you Caroline. And coming up on Bloomberg day 489 00:25:41,560 --> 00:25:44,240 Speaker 2: Break weekend, we'll look ahead to a monetary policy decision 490 00:25:44,520 --> 00:25:47,480 Speaker 2: from the Bank of Japan. I'm Tom Busby and this 491 00:25:47,600 --> 00:26:01,360 Speaker 2: is Bloomberg. This is Bloomberg Break Weekend, our global look 492 00:26:01,359 --> 00:26:03,720 Speaker 2: ahead at the top stories for investors in the coming week. 493 00:26:03,960 --> 00:26:06,720 Speaker 2: I'm Tom Busby in New York. The Bank of Japan 494 00:26:06,800 --> 00:26:09,119 Speaker 2: is out with an interest rate decision this week, and 495 00:26:09,200 --> 00:26:11,439 Speaker 2: for more on what to expect, let's get to the 496 00:26:11,440 --> 00:26:14,840 Speaker 2: host of the Daybreak Asia podcast, Doug Krisner, for a. 497 00:26:14,800 --> 00:26:18,439 Speaker 4: Preview, Tom, These are interesting times for Bank of Japan 498 00:26:18,520 --> 00:26:22,040 Speaker 4: Governor Kazu o Uweeda. Core inflation in Japan has been 499 00:26:22,080 --> 00:26:25,639 Speaker 4: above the boj's target for nearly three years now, and 500 00:26:25,920 --> 00:26:28,720 Speaker 4: in that time there has been constant worry over the 501 00:26:28,800 --> 00:26:32,479 Speaker 4: durability of higher prices. In the last week, Governor Uwada 502 00:26:32,520 --> 00:26:36,040 Speaker 4: said the BOJ is still some distance from its inflation goal. 503 00:26:36,440 --> 00:26:39,840 Speaker 4: Perhaps the bigger worry these days has to do with trade. 504 00:26:40,320 --> 00:26:42,640 Speaker 4: Joining me now for a closer look is Paul Jackson. 505 00:26:42,680 --> 00:26:46,960 Speaker 4: He is Asia Economy editor for Bloomberg News in Tokyo. Paul, 506 00:26:47,000 --> 00:26:49,120 Speaker 4: thank you for making time to chat with me. It's 507 00:26:49,119 --> 00:26:51,720 Speaker 4: always a pleasure. So we have a BOJ meeting on 508 00:26:51,800 --> 00:26:54,800 Speaker 4: tap in the week ahead, and from what I'm reading, Paul, 509 00:26:54,880 --> 00:26:57,600 Speaker 4: the BOJ is likely to maintain this kind of weight 510 00:26:57,680 --> 00:27:00,359 Speaker 4: and see approach. That's kind of surprising when you look 511 00:27:00,359 --> 00:27:04,679 Speaker 4: at the forcefulness that we have seen in inflation in Japan. 512 00:27:04,800 --> 00:27:07,040 Speaker 4: Why are they adopting this wag and sy approach? Do 513 00:27:07,080 --> 00:27:07,480 Speaker 4: you think? 514 00:27:08,000 --> 00:27:11,960 Speaker 10: I think the answer is Donald Trump. I mean, we 515 00:27:12,040 --> 00:27:17,200 Speaker 10: have this wave of tariffs hitting the world. We still 516 00:27:17,240 --> 00:27:22,520 Speaker 10: don't have the final a view on what those levels 517 00:27:22,560 --> 00:27:26,439 Speaker 10: will be when this kind of temporary pause on the 518 00:27:26,440 --> 00:27:31,400 Speaker 10: reciprocal rates is lifted. We've seen a lot of kind 519 00:27:31,400 --> 00:27:36,120 Speaker 10: of conflicting reports about whether talks will continue or will 520 00:27:36,160 --> 00:27:38,879 Speaker 10: be wrapped up in the next couple of weeks. But 521 00:27:38,920 --> 00:27:40,640 Speaker 10: the long and the short of it is a bit 522 00:27:40,880 --> 00:27:45,240 Speaker 10: all this uncertainty. Would you want to be raising interest 523 00:27:45,320 --> 00:27:47,960 Speaker 10: rates aggressively even if you've got quite a bit of 524 00:27:48,000 --> 00:27:52,119 Speaker 10: inflation there? So I think it's the pause button is 525 00:27:52,160 --> 00:27:55,399 Speaker 10: going to be played next week. We've got economists and 526 00:27:55,400 --> 00:27:59,240 Speaker 10: analysts generally thinking that the Bank of Japan does face 527 00:28:00,280 --> 00:28:04,400 Speaker 10: a strong inflation trend here and it must act at 528 00:28:04,400 --> 00:28:07,840 Speaker 10: some point, but it's going to be later in the 529 00:28:07,920 --> 00:28:11,520 Speaker 10: year or even early next year. Of course, if we 530 00:28:11,560 --> 00:28:16,399 Speaker 10: do get clarity on tariffs and what the levels are 531 00:28:16,400 --> 00:28:19,399 Speaker 10: going to be for Japan going forward, then that could 532 00:28:19,480 --> 00:28:23,399 Speaker 10: change the thinking at the Central Bank, But for now, 533 00:28:23,840 --> 00:28:24,920 Speaker 10: rates on hold. 534 00:28:24,760 --> 00:28:27,119 Speaker 4: So the policy rate we know is just one tool. 535 00:28:27,160 --> 00:28:30,560 Speaker 4: The boj has also been very very forceful about trying 536 00:28:30,600 --> 00:28:33,640 Speaker 4: to manage the yield curve, and from what I understand, 537 00:28:33,960 --> 00:28:36,720 Speaker 4: the pace of tapering bond purchases is going to be 538 00:28:36,720 --> 00:28:38,520 Speaker 4: a hot topic at this meeting right. 539 00:28:38,520 --> 00:28:41,920 Speaker 10: Oh, yes, very much so. So as part of Governor 540 00:28:42,080 --> 00:28:47,520 Speaker 10: Uada's kind of drive to normalize policymaking at the Central 541 00:28:47,600 --> 00:28:50,680 Speaker 10: Bank and kind of help Japan to return to some 542 00:28:50,760 --> 00:28:54,760 Speaker 10: kind of normal status as a G seven economy rather 543 00:28:54,800 --> 00:28:59,280 Speaker 10: than an experimental outlier. He's been looking to pull back 544 00:28:59,320 --> 00:29:03,560 Speaker 10: from all the market interventions that the central Bank had 545 00:29:03,680 --> 00:29:06,120 Speaker 10: gotten into, and one of them is that is the 546 00:29:06,120 --> 00:29:09,480 Speaker 10: bond buying, and the Bank of Japan was buying incredible 547 00:29:09,560 --> 00:29:14,160 Speaker 10: amounts of bonds. Even now it holds around half of 548 00:29:14,200 --> 00:29:19,200 Speaker 10: all the outstanding Japanese central government debt, and it's wanting 549 00:29:19,240 --> 00:29:22,640 Speaker 10: to kind of like remove its status as a whale 550 00:29:22,640 --> 00:29:26,040 Speaker 10: in the pond and let market forces kind of take 551 00:29:26,080 --> 00:29:29,920 Speaker 10: over price setting in the market. Now, that all sounds great, 552 00:29:30,480 --> 00:29:35,080 Speaker 10: but how quickly can you actually do that without triggering 553 00:29:35,200 --> 00:29:38,920 Speaker 10: a lot of volatility in prices? And I think what's 554 00:29:38,960 --> 00:29:42,800 Speaker 10: happened amongst all the uncertainties going around in the world 555 00:29:43,320 --> 00:29:46,040 Speaker 10: the pace at which the Bank of Japan has been 556 00:29:46,400 --> 00:29:49,560 Speaker 10: cutting back its purchases. So it's still buying a lot, 557 00:29:50,000 --> 00:29:53,520 Speaker 10: but it's buying less with each quarter that it's maybe 558 00:29:53,600 --> 00:29:57,080 Speaker 10: going a bit too fast, and there's concerns about what 559 00:29:57,160 --> 00:29:58,640 Speaker 10: happens from this point forward. 560 00:29:58,760 --> 00:30:02,040 Speaker 4: So our policymakers keeping a very close eye on the 561 00:30:02,080 --> 00:30:06,080 Speaker 4: currency right now, particularly the yen's relationship with the dollar, 562 00:30:06,200 --> 00:30:09,320 Speaker 4: at a time when people in the States are expecting 563 00:30:09,480 --> 00:30:11,960 Speaker 4: the Fed to lower rates sometime before the end of 564 00:30:11,960 --> 00:30:13,800 Speaker 4: the year, maybe we get two rate cuts and that 565 00:30:13,840 --> 00:30:16,400 Speaker 4: would be dollar negative. So talk to me a little 566 00:30:16,400 --> 00:30:20,320 Speaker 4: bit about how policymakers in Japan right now are viewing 567 00:30:20,600 --> 00:30:22,960 Speaker 4: the end, which has been a little choppy lately. 568 00:30:23,280 --> 00:30:23,560 Speaker 5: Yeah. 569 00:30:23,600 --> 00:30:27,240 Speaker 10: Absolutely, I mean, I think they're quite happy for a 570 00:30:27,240 --> 00:30:30,760 Speaker 10: bit of strength to come into the end, take it 571 00:30:30,840 --> 00:30:34,280 Speaker 10: well away from those levels that cause so much trouble 572 00:30:34,400 --> 00:30:39,280 Speaker 10: in recent years, and so much money spent on intervention. 573 00:30:39,760 --> 00:30:44,280 Speaker 10: So I don't think the moment that's like the key 574 00:30:45,440 --> 00:30:48,400 Speaker 10: hot topic concern for the central bank at this time 575 00:30:48,960 --> 00:30:54,080 Speaker 10: or the policy makers, really. I think the key point 576 00:30:54,160 --> 00:30:59,160 Speaker 10: here is what kind of deal can Japan cut with 577 00:30:59,360 --> 00:31:02,720 Speaker 10: the US on these trade tariffs. I mean, some of 578 00:31:02,760 --> 00:31:07,960 Speaker 10: these tariffs are really hitting key industries in Japan, you know, 579 00:31:08,000 --> 00:31:12,800 Speaker 10: regardless of the exchange rate. Obviously it's an important aspect 580 00:31:12,840 --> 00:31:15,360 Speaker 10: of it. But in terms of these tariffs, I mean 581 00:31:15,600 --> 00:31:21,280 Speaker 10: twenty five percent on Japan's auto sector, that's a huge 582 00:31:21,320 --> 00:31:26,120 Speaker 10: shadow hanging over Japan's economy going forward. That's around ten 583 00:31:26,160 --> 00:31:31,000 Speaker 10: percent of GDP, eight percent of the workforce employed by 584 00:31:31,120 --> 00:31:35,640 Speaker 10: the auto sector. You know, can they withstand that kind 585 00:31:35,640 --> 00:31:36,280 Speaker 10: of pressure. 586 00:31:36,560 --> 00:31:38,840 Speaker 4: So we were talking a moment ago about the inflation 587 00:31:39,160 --> 00:31:42,080 Speaker 4: environment in Japan, and I'm wondering whether the government is 588 00:31:42,120 --> 00:31:46,720 Speaker 4: still considering cash handouts as a way to help consumers 589 00:31:47,120 --> 00:31:50,040 Speaker 4: deal with this sticky domestic inflation story. 590 00:31:50,400 --> 00:31:53,560 Speaker 10: You know, this is a very good point because if 591 00:31:53,560 --> 00:31:56,920 Speaker 10: the central bank can't aggressively raise interest rates, that means 592 00:31:56,960 --> 00:32:00,479 Speaker 10: you're going to have inflation kicking around for long and 593 00:32:00,680 --> 00:32:04,360 Speaker 10: voters are are sick of hit. They want something to 594 00:32:04,400 --> 00:32:08,360 Speaker 10: be done. There have been subsidy measures for electricity bills 595 00:32:08,360 --> 00:32:12,920 Speaker 10: and gas bills and stuff over recent years, but they're 596 00:32:12,920 --> 00:32:16,680 Speaker 10: wanting more. And as you've got increasing tax revenue, people 597 00:32:16,720 --> 00:32:18,479 Speaker 10: are thinking, you know what's going on. You're getting all 598 00:32:18,520 --> 00:32:23,000 Speaker 10: this extra tax money and we've still got a high 599 00:32:23,360 --> 00:32:27,320 Speaker 10: levels of taxation. From a consumer's perspective, they're thinking, why 600 00:32:27,400 --> 00:32:31,000 Speaker 10: don't you lower the sales tax on a temporary basis, 601 00:32:31,320 --> 00:32:35,320 Speaker 10: give us some relief while this inflation trend is continuing. 602 00:32:35,520 --> 00:32:38,720 Speaker 10: And we've got a national election for the upper House 603 00:32:39,200 --> 00:32:41,880 Speaker 10: coming next month, and I think this is going to 604 00:32:41,880 --> 00:32:43,840 Speaker 10: be a key point with a lot of the opposition 605 00:32:44,040 --> 00:32:49,160 Speaker 10: parties saying, hey, look, lower the sales tax, give consumers 606 00:32:49,200 --> 00:32:53,640 Speaker 10: a break. For the central government that is problematic. You've 607 00:32:53,640 --> 00:32:57,720 Speaker 10: got debt that's more twice the size of the economy. 608 00:32:58,000 --> 00:33:01,720 Speaker 10: You've got this volatility in the long term super long 609 00:33:01,960 --> 00:33:07,280 Speaker 10: end of the bond market. Are you wanted to, you know, 610 00:33:08,160 --> 00:33:12,360 Speaker 10: pay your way with extra spending through more debt issuance? No, 611 00:33:12,440 --> 00:33:14,600 Speaker 10: you don't, So they're gonna have to come up with 612 00:33:14,640 --> 00:33:15,400 Speaker 10: some other measures. 613 00:33:15,640 --> 00:33:18,720 Speaker 4: Let's talk about Prime Minister Ishiba's meeting in the coming 614 00:33:18,760 --> 00:33:21,800 Speaker 4: week with President Trump that will happen on the sidelines 615 00:33:22,040 --> 00:33:23,880 Speaker 4: of the G seven in Canada. 616 00:33:24,000 --> 00:33:26,920 Speaker 10: What are we expecting, Well, first of all, you know 617 00:33:27,000 --> 00:33:29,760 Speaker 10: these meetings, you know, nothing's kind of set in stone. 618 00:33:30,440 --> 00:33:32,880 Speaker 10: If they don't meet, I think that would be a 619 00:33:32,960 --> 00:33:37,120 Speaker 10: setback for Ishuba. I think we're seeing a lot of 620 00:33:37,240 --> 00:33:42,080 Speaker 10: momentum going forward. This is we have negotiators. Japan's top 621 00:33:42,120 --> 00:33:47,080 Speaker 10: trade negotiator is on his sixth visit to DC this 622 00:33:47,080 --> 00:33:50,000 Speaker 10: this week to try and get closer to the line 623 00:33:50,440 --> 00:33:54,040 Speaker 10: on some kind of trade deal. I think that the 624 00:33:54,080 --> 00:33:57,720 Speaker 10: two leaders probably will meet and they probably will have 625 00:33:57,880 --> 00:34:00,800 Speaker 10: some kind of statement. Now, whether it's it's a deal 626 00:34:01,160 --> 00:34:05,160 Speaker 10: perhaps with nothing much fleshed out, but you know, grand 627 00:34:05,160 --> 00:34:08,719 Speaker 10: statements about we've done it, we've reached the deal, or 628 00:34:08,800 --> 00:34:12,160 Speaker 10: whether it's just a statement saying significant progress has been 629 00:34:12,160 --> 00:34:16,040 Speaker 10: made in trade talks. I think there probably will be 630 00:34:16,360 --> 00:34:18,000 Speaker 10: some kind of joint statement. 631 00:34:18,200 --> 00:34:20,680 Speaker 4: So you were talking a moment ago about the tariff 632 00:34:20,719 --> 00:34:24,120 Speaker 4: story as it relates to the automobile industry in Japan, 633 00:34:24,160 --> 00:34:28,680 Speaker 4: which as we both know, is enormous. Let's not forget steel, right, 634 00:34:28,719 --> 00:34:31,520 Speaker 4: and we have those steel tariffs in place, and in 635 00:34:31,560 --> 00:34:35,200 Speaker 4: the last week, Commerce Secretary Howard Lutnik was saying that 636 00:34:35,239 --> 00:34:38,520 Speaker 4: the deal between Nippon Steel and US Steel will be 637 00:34:38,640 --> 00:34:42,319 Speaker 4: done reasonably soon. Do you have a sense of what 638 00:34:42,480 --> 00:34:45,600 Speaker 4: this possibly may entail, what it could look like. 639 00:34:46,080 --> 00:34:48,960 Speaker 10: Well, I think there's been all all manner of question 640 00:34:49,080 --> 00:34:52,799 Speaker 10: marks about what this is and how much investment is 641 00:34:52,880 --> 00:34:57,280 Speaker 10: going to the US. The investment figure looked very similar 642 00:34:57,600 --> 00:35:01,799 Speaker 10: to the buyout figure. What we do see is, you know, 643 00:35:01,800 --> 00:35:06,040 Speaker 10: we've got this kind of golden share arrangement for the 644 00:35:06,160 --> 00:35:10,879 Speaker 10: US government essentially to have a veto on key decisions. 645 00:35:11,680 --> 00:35:15,040 Speaker 10: So this is something that Donald Trump is putting forward 646 00:35:15,080 --> 00:35:18,759 Speaker 10: as a great success for his administration. No matter how 647 00:35:18,880 --> 00:35:22,279 Speaker 10: much it looks like something close to a biout, I 648 00:35:22,320 --> 00:35:26,120 Speaker 10: think there are key provisos that have given the optics 649 00:35:26,120 --> 00:35:29,160 Speaker 10: a much better look for the US administration. 650 00:35:29,680 --> 00:35:32,399 Speaker 4: So, if Prime Minister Ishibai he is really trying to 651 00:35:32,440 --> 00:35:35,239 Speaker 4: strike a favorable trade deal with the US right now, 652 00:35:35,360 --> 00:35:38,279 Speaker 4: is it in his best interest not to get too 653 00:35:38,360 --> 00:35:42,360 Speaker 4: involved with the China side of Japanese trade and perhaps 654 00:35:42,640 --> 00:35:45,000 Speaker 4: put that off for the moment and focus more on 655 00:35:45,040 --> 00:35:46,480 Speaker 4: the relationship with Washington. 656 00:35:46,719 --> 00:35:49,080 Speaker 10: I think for Ishiba at the moment, it's got to 657 00:35:49,160 --> 00:35:53,680 Speaker 10: all be about the relationship with the US now. Of course, 658 00:35:53,719 --> 00:35:58,480 Speaker 10: for all the players in Asia, threading treading the difficult 659 00:35:58,520 --> 00:36:02,920 Speaker 10: path between how much you deal with these huge trading partners, 660 00:36:03,360 --> 00:36:08,000 Speaker 10: the United States and China is a real head scratcher. 661 00:36:08,400 --> 00:36:11,520 Speaker 10: You look at South Korea for example, I mean, you 662 00:36:11,520 --> 00:36:15,799 Speaker 10: know that reliant on both economiest heavily. You know, how 663 00:36:15,840 --> 00:36:20,239 Speaker 10: do they navigate that. Japan's in a similar position. But 664 00:36:20,320 --> 00:36:23,919 Speaker 10: I think at the moment that the big scary thing 665 00:36:24,640 --> 00:36:28,160 Speaker 10: standing in front of you is this wave of tariffs 666 00:36:28,200 --> 00:36:32,600 Speaker 10: and how you tran get concessions on that topic. 667 00:36:32,719 --> 00:36:35,319 Speaker 4: We were talking a moment ago about the potential for 668 00:36:35,480 --> 00:36:38,920 Speaker 4: cash handouts to consumers in Japan. We've got an election 669 00:36:39,320 --> 00:36:42,640 Speaker 4: just around the corner, and I'm wondering how people are 670 00:36:42,680 --> 00:36:44,920 Speaker 4: feeling right now about the ishi A government. 671 00:36:45,200 --> 00:36:48,080 Speaker 10: Well, he's got some shoring up to do of support. 672 00:36:48,600 --> 00:36:53,120 Speaker 10: He's had this minority government. He's been kind of, you know, 673 00:36:54,280 --> 00:36:59,439 Speaker 10: walking a very difficult tight rope since that election last 674 00:36:59,520 --> 00:37:04,920 Speaker 10: year where the general election where the results lost stripped 675 00:37:04,960 --> 00:37:08,680 Speaker 10: him of a majority in parliament. He's been having to 676 00:37:08,719 --> 00:37:15,160 Speaker 10: cooperate with the opposition parties to get legislation over the line. 677 00:37:15,520 --> 00:37:19,440 Speaker 10: So he's really in need of at least a better 678 00:37:19,640 --> 00:37:23,799 Speaker 10: outcome than he had last autumn in this election, and 679 00:37:23,960 --> 00:37:28,400 Speaker 10: this inflation dynamic that we've been talking about is you know, 680 00:37:29,719 --> 00:37:33,160 Speaker 10: acting against him in his face. We've also seen a 681 00:37:33,200 --> 00:37:37,520 Speaker 10: hot topic of the rice prices. Rice prices have pretty 682 00:37:37,560 --> 00:37:42,880 Speaker 10: much doubled in recent months, and for consumers this has 683 00:37:43,000 --> 00:37:48,799 Speaker 10: really been like your staple for meals every day is 684 00:37:48,880 --> 00:37:53,120 Speaker 10: twice the price. Are you kidding, mister Ishuiba. We want 685 00:37:53,160 --> 00:37:55,520 Speaker 10: to vote for you, Are you sure? So he's got 686 00:37:55,520 --> 00:37:59,760 Speaker 10: a somehow in the intervening month before that election convinced 687 00:37:59,800 --> 00:38:03,920 Speaker 10: vote is that they are getting assistance from the government. 688 00:38:04,239 --> 00:38:07,200 Speaker 10: The government does have a plan for growth. I've how 689 00:38:07,280 --> 00:38:10,759 Speaker 10: to deal with Donald Trump and they will bring rice 690 00:38:10,880 --> 00:38:11,680 Speaker 10: prices down. 691 00:38:11,880 --> 00:38:13,879 Speaker 4: We'll leave it there, Paul, it's always a pleasure. Thank 692 00:38:13,920 --> 00:38:15,640 Speaker 4: you so much for taking the time to help us 693 00:38:15,719 --> 00:38:18,280 Speaker 4: understand the macro view of what's going on in Japan 694 00:38:18,320 --> 00:38:20,640 Speaker 4: as we look ahead to this meeting in the coming 695 00:38:20,640 --> 00:38:23,719 Speaker 4: week of the Bank of Japan. He's Paul Jackson, Bloomberg 696 00:38:23,760 --> 00:38:27,520 Speaker 4: Asia Economy Editor joining us from Tokyo, and I'm Doug Christner. 697 00:38:27,560 --> 00:38:30,960 Speaker 4: You can catch us weekdays for the Daybreak Asia podcast. 698 00:38:31,320 --> 00:38:35,319 Speaker 4: It's available wherever you get your podcast. Tom, thank you Doug. 699 00:38:35,520 --> 00:38:37,560 Speaker 2: And that does it for this edition of Bloomberg day 700 00:38:37,600 --> 00:38:40,200 Speaker 2: Break Weekend. Join us again Monday morning at five am 701 00:38:40,239 --> 00:38:42,719 Speaker 2: Wall Street Time for the latest on markets overseas and 702 00:38:42,760 --> 00:38:45,920 Speaker 2: the news you need to start your day. I'm Tom Busby. 703 00:38:46,200 --> 00:38:48,799 Speaker 2: Stay with us. Top stories in global business. Headlines are 704 00:38:48,840 --> 00:38:51,040 Speaker 2: coming up right now