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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Welcome to the Daybreak

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Speaker 1: Asia podcast. I'm Doug Christner. President Trump will refrain from

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Speaker 1: imposing tariffs on goods from European nations that are opposed

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Speaker 1: to his effort to take over Greenland. Earlier, in a

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Speaker 1: post on truth Social Trump cited a framework on a

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Speaker 1: future deal reached with NATO. This followed a meeting with

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Speaker 1: Secretary General Mark Ruta in Davos. Here is Trump speaking

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Speaker 1: earlier with reporters.

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Speaker 2: It looks like we have the concept of It gets

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Speaker 2: everything we wanted, including especially real national security.

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Speaker 3: Well, the dealer is going to be put out pretty soon.

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Speaker 4: We'll see.

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Speaker 2: It's right now, a little bit in progress, but pretty

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Speaker 2: far along.

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Speaker 3: It gets us everything we needed to get.

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Speaker 1: It's the ultimate.

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Speaker 2: Long term deal, and I think it puts everybody in

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Speaker 2: a really good position, especially as it pertains to security

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Speaker 2: and minerals are.

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Speaker 1: Everything else now. This decision marks a reversal for Trump,

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Speaker 1: who had repeatedly attempted to coerce European leaders over the

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Speaker 1: issue of Greenland. And that's where we begin our conversation

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Speaker 1: with George Friedman. He is founder and chairman of Geopolitical futures.

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Speaker 1: George spoke with Bloomberg TV host Paul Allen and Avril Holm.

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Speaker 2: In President Trump now saying that the US is going

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Speaker 2: to be involved in Greenland's mineral rights. We still don't

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Speaker 2: know what the content of this framework of a deal is.

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Speaker 2: But do you think we could have got to this

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Speaker 2: point without all the threats?

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Speaker 4: Probably, But at the same time, you have to understand

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Speaker 4: this stregio words of Greenland. This is not a minor

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Speaker 4: issue since the Cold War and today this is one

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Speaker 4: of the primary routes between Greenland and Iceland for Fressian

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Speaker 4: submarines to enter the Atlantic. Also, with the evolution of

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Speaker 4: warfare in the polar warfare, green is a very important place.

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Speaker 4: Why the President demanded to own it. I don't understand

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Speaker 4: we have full access to it. I don't know what

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Speaker 4: kind of deal was made. But this is not trivial.

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Speaker 4: This is not a random thing about Greenland.

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Speaker 2: It matters no And to your point, it is effectively

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Speaker 2: NATO territory being controlled by Denmark. So one assumes the

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Speaker 2: US could pursue whatever military aims it had in the

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Speaker 2: region without resorting to threats of tariffs, etc. But what

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Speaker 2: do you think has caused the change in the president's

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Speaker 2: rhetoric here because it seems the messaging out of Europe

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Speaker 2: didn't get any softer. If anything, it got more stern.

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Speaker 4: The president has a tendency, as in business, to make

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Speaker 4: the first demand and make it absolutely unnegotiable, and then

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Speaker 4: to negotiate. So if if you've ever involved yourself in

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Speaker 4: business negotiations or a poker game, you understand that it's

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Speaker 4: a head game. You want to get ahead of it.

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Speaker 4: It's not normal in diplomacy. It's not the way it's

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Speaker 4: usually done, but it's the way he does it.

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Speaker 3: We all know how mercurial the president can be. On

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Speaker 3: that note, perhaps if you could give us a sense

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Speaker 3: of your judgment in why he backed down in such

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Speaker 3: a manner, could it perhaps be the market reaction that

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Speaker 3: we saw earlier in the week.

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Speaker 4: I don't think it was random. I don't think he's unpredictable.

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Speaker 4: He frequently makes very aggressive statements that he then backs

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Speaker 4: off on. That's how he opens negotiations. He's done it

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Speaker 4: many times in many ways. If you've been watching him

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Speaker 4: very closely, this is not out of the norm. At

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Speaker 4: the same time, it was extreme because it expected markets

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Speaker 4: and other things very gravely for this day, and he

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Speaker 4: then backed off. So his making an outrageous demand and

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Speaker 4: then backing off is his style and it's unnerving it times,

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Speaker 4: but he's the president.

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Speaker 3: With that in mind, how much damage would you say

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Speaker 3: has been caused with a relationship with Europe.

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Speaker 4: I don't think the Europeans have much of a choice

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Speaker 4: in having a relationship with the United States. Many times

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Speaker 4: they have resented the United States or felt the United

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Speaker 4: States babing improperly. They got over it. It's not a

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Speaker 4: question of their mood, it's what they need and NATO

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Speaker 4: needs the United States to be part of it. The

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Speaker 4: United States needs NATO to protect against Russia and so on.

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Speaker 4: So therefore the reality is what the reality is, and

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Speaker 4: whatever the talk is is not that important.

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Speaker 2: Yeah, you point out that this is not usually how

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Speaker 2: diplomacy is normally done, but you know, these diplomatic protocols

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Speaker 2: are in place for a reason. I mean, we heard

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Speaker 2: from Canada's Prime Minister Mike Connie saying this is the

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Speaker 2: end of the rules based order. So how does NATO

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Speaker 2: move forward from here? What does the alliance look like

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Speaker 2: in the remaining three years of Trump's tim.

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Speaker 4: Well, in many ways. Diplomacy is a slow moving thing

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Speaker 4: where propriety is very important. Sometimes it gets in the

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Speaker 4: way of getting things done. Trump is not a diplomat.

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Speaker 4: Trump is a president of the United States. He comes

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Speaker 4: to the business world, he treats it that way. Each

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Speaker 4: time it does something that appears outrageous, it turns out

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Speaker 4: some sort of sense. And therefore it should be understood

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Speaker 4: that the norms that if visited for eighty years since

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Speaker 4: nineteen forty five are falling away, partly because of Russia's problems,

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Speaker 4: problem because of relation with the US in China. These

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Speaker 4: are all evolving, and at this point the norm that's

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Speaker 4: been in place for the past eighty years is no

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Speaker 4: longer the norm. As for his choice of doing it

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Speaker 4: this way, well, he is an elected president of the

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Speaker 4: United States. He gets to do it. But I don't

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Speaker 4: think he meant what's.

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Speaker 2: Your analysis of how this would have been received in Moscow,

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Speaker 2: in Beijing, the drama of the past couple of weeks, Well.

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Speaker 4: The United States can't make out Putin and why he

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Speaker 4: can't reach it understanding. I don't think the Russians understand

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Speaker 4: the Americans under these circumstances. This is a very different

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Speaker 4: president and they're used to presidents who operate in the

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Speaker 4: framework that we cannot have tensions between the United States

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Speaker 4: and Europe. This is a president who sees Russia is

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Speaker 4: basically having failed in Ukraine and not being a threat.

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Speaker 4: And this is a president who therefore sees the relationship

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Speaker 4: with NATO evolving. NATO may not want that relationship to evolve,

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Speaker 4: he does want it. So if you understand that, then

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Speaker 4: it doesn't seem so odd that he's breaking norms.

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Speaker 1: That was George Friedman, founder and chairman of Geopolitical Futures,

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Speaker 1: speaking with Bloomberg TV host Paul Allen and April honk

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Speaker 1: Here on the Daybreak Asia podcast. Welcome back to the

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Speaker 1: Daybreak Asia podcast. I'm Doug Chrisner. The Japanese equity market

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Speaker 1: is pushing higher after a rally in US stocks. All

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Speaker 1: of this is in reaction to President Trump reaching a

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Speaker 1: framework with NATO on a future deal on Greenland and

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Speaker 1: the entire Arctic region, and it means that Trump will

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Speaker 1: not resort to the use of tariffs on goods from

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Speaker 1: some European countries. For a closer look at some of

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Speaker 1: the price section, I'm joined now by Bloomberg's Alice French

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Speaker 1: Alice covers the Japanese equity space. She joins us from Tokyo.

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Speaker 1: Thank you so much for being here. This has been

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Speaker 1: a week of tremendous volatility in Japanese assets, whether you're

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Speaker 1: talking about stocks or even the bond market. Can you

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Speaker 1: supply some context here for all of the commotion that

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Speaker 1: we have seen.

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Speaker 5: Yeah, I mean, what a week, right, And I think

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Speaker 5: it's kind of been a culmination, really this week of

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Speaker 5: nerves that have been brewing for kind of the last

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Speaker 5: couple of months really. So most of this caution basically

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Speaker 5: comes from the new Prime Minister, Sanai Takaichi, who who

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Speaker 5: came out on Monday and announced this snap election that

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Speaker 5: we're expecting for February eighth, And along with that announcement,

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Speaker 5: she said that she's going to plan this temporary, temporary

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Speaker 5: tax cut on on food purchases, right, which, of course

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Speaker 5: is you know, I suppose great, great news for consumers,

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Speaker 5: and at the time, particularly kind of food related stocks

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Speaker 5: like supermarkets, etc. They enjoyed quite a nice rally. But

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Speaker 5: in the background, of course, there are questions about how

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Speaker 5: will this be funded?

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Speaker 4: Right?

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Speaker 5: She hasn't come out with any kind of specific explanation

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Speaker 5: about how this, you know, will this require things like

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Speaker 5: extra bond issuance, How is she going to make up

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Speaker 5: for this in terms of kind of government finances. And

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Speaker 5: there's already been so many worries about Japan's fiscal burdens

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Speaker 5: since she came into power in October, I mean, partly

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Speaker 5: because of her kind of pro fiscal expansionary policies. She's

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Speaker 5: already come out with kind of the the biggest extra

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Speaker 5: budget since COVID, you know, plowing money into things like

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Speaker 5: AI and frastructure defense, et cetera. And again, you know,

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Speaker 5: that's that's pretty good for the nick. That's pretty good

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Speaker 5: if you're a stock in and you're going to kind

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Speaker 5: of benefit from this this expenditure. But if you're in

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Speaker 5: the bond market, obviously it's quite worrying. And it's happening

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Speaker 5: against a backdrop of you know, yields rising worldwide.

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Speaker 1: Right, So we had the meltdown in the Japanese bond

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Speaker 1: market on Tuesday, and then repercussions kind of happening across

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Speaker 1: global bond markets. It also raised some alarm, I think

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Speaker 1: in Tokyo about potential losses for some of the Japanese

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Speaker 1: banks and brokerages at least at the time, has any

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Speaker 1: of that subsided at all. How are the banks faring?

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Speaker 5: Yeah, it's a good question. I mean, as you say,

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Speaker 5: kind of midweek, we saw a couple of days of

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Speaker 5: declins there, particularly for regional banks that are perhaps slightly

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Speaker 5: less able to control those risks and may have had

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Speaker 5: to take some impairment losses on those bond losses. But

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Speaker 5: you know, the banks that you know, they're recovering, they're

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Speaker 5: having an okay day today on Thursday. And you know,

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Speaker 5: there's still so many tailwinds right for the Japanese financial

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Speaker 5: sector from the boj's rate hikes and kind of expectations

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Speaker 5: that they will get more revenue from from you know,

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Speaker 5: from higher interest rates. So I think there's still you know,

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Speaker 5: a rally story for the banks there in the background,

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Speaker 5: but certainly short term they saw some pressure because of

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Speaker 5: all of this bond drama.

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Speaker 1: So help me understand the degree to which the Japanese

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Speaker 1: equity market can benefit from some of the enthusiasm that

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Speaker 1: we're still seeing around artificial intelligence.

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Speaker 5: Well, this is all kind of part of the takaichi trade, right,

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Speaker 5: which is essentially the idea that you buy into equities

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Speaker 5: on the expectations of more spending, and I mean Takaichi

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Speaker 5: in her policies is outlined you know, things like quantum

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Speaker 5: computing chips and of course anything kind of AI and

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Speaker 5: data center related for more funding, which which you know

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Speaker 5: people are expecting are going to benefit those companies that

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Speaker 5: make those products. You know, we know of course worldwide

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Speaker 5: that the AI stocks are really up there at kind

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Speaker 5: of close to record highs, and so there are a

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Speaker 5: little bit of a little bit of jitters I guess

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Speaker 5: around potential over valuations, especially for the big names like

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Speaker 5: soft Bank, Tokyo, etc. But in general, the mood here

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Speaker 5: is that, you know, the rally is going to keep going.

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Speaker 5: Of course it's boosted by Takaichi, But underlying, of course

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Speaker 5: is this continuing demand for AI data centers, memory chips.

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Speaker 5: In particular. We have Kyoxia here that makes those those

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Speaker 5: memory semiconductors that's really been enjoying a nice run. And

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Speaker 5: you know, overall, I mean some people here predicting that

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Speaker 5: the nick A could even make it to sixty thousand

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Speaker 5: this year, helped by the Takayishi trade. So the optimism

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Speaker 5: is definitely still there.

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Speaker 1: When we talk about the AI trade in places like

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Speaker 1: Hong Kong or even on the Chinese mainland, the conversation

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Speaker 1: quickly turns into a conversation or a chat about initial

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Speaker 1: public offerings. So is that something that's happening a great

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Speaker 1: deal in Japan right now IPOs?

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Speaker 5: That's a good question. I mean, the IPO market here

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Speaker 5: was pretty good, pretty good last year. We had some

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Speaker 5: pretty nice ones JX Advanced Metals, for example, which you

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Speaker 5: know is linked to data centers, or a pretty nice IPO.

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Speaker 5: Of course, Kyoxia, which came to market right at the

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Speaker 5: end of twenty twenty four, has seen at a brilliant

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Speaker 5: rally and was actually one of the best performing stocks

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Speaker 5: in the whole world last year. And I think that's

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Speaker 5: really driven kind of a lot of optimism around IPOs

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Speaker 5: in Japan. And actually we're seeing kind of a push

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Speaker 5: from across Asia among kind of startups looking at Japan

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Speaker 5: potentially listing here because of some of the success that

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Speaker 5: we've seen in the past few years.

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Speaker 1: So I mentioned the push high for Japanese equities Visa

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Speaker 1: Vida ni K and I'm wondering whether or not this

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Speaker 1: is also an illustration that no one, at least right now,

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Speaker 1: given the calm that's taken place in the bond market.

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Speaker 1: No one is expecting any drastic movement in policy from

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Speaker 1: the Bank of Japan on Friday, are they.

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Speaker 5: That's the sense, Yeah, I mean, I think a lot

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Speaker 5: of people would be very shocked if they do anything

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Speaker 5: but hold because of kind of the chaos that we've

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Speaker 5: seen this week. But also we know that the boj

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Speaker 5: you know, it is expected to continue on this kind

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Speaker 5: of steady but gradual rate hike path, right and obviously

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Speaker 5: there was there was a hike in December, So the

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Speaker 5: expectation is that, you know, they'll hold stick and I

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Speaker 5: think as long as they do, we shouldn't see too

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Speaker 5: much upset in the markets. But let's wait and see.

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Speaker 1: Have things calmed down in the bond market to a

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Speaker 1: great degree relative to what we saw on Tuesday?

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Speaker 5: They have, I mean, there was quite a nice rebound

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Speaker 5: on Wednesday, and since then, you know, the calm has

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Speaker 5: has kind of come back. The Finance Minister did come

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Speaker 5: out this week and sort of ask people to calm down,

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Speaker 5: which seems to have helped a little bit. But having

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Speaker 5: said that, you know, the kind of mood here is

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Speaker 5: that they're asked that, you know, there's still worries. There's

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Speaker 5: still a little caution. We don't know what Takaichi and

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Speaker 5: opposition parties are going to ultimately come out and say

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Speaker 5: in their election campaigns about the spending and you know,

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Speaker 5: tax cut plan. So the worries are still there in

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Speaker 5: the background, but at least for the time being, there's

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Speaker 5: there's a little bit of calm.

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Speaker 1: I think, all right, Alice, we'll leave it there on

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Speaker 1: that calm note. Bloomberg Salas French. She covers the Japanese

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Speaker 1: equity market for us here joining on the Daybreak Asia podcast.

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Speaker 1: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 1: Asia Edition podcast. Each weekday, we look at the story

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Speaker 1: aping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 1: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 1: or anywhere else you listen. Join us again tomorrow for

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Speaker 1: insight on the market moves from Hong Kong to Singapore

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Speaker 1: and Australia. I'm Doug Prisoner and this is Bloomberg