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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.

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Speaker 2: On today's episode, we'll bring you our conversation with the

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Speaker 2: chairman and CEO of Suntori Holdings, Takashi Ni Nami. He

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Speaker 2: sat down with Bloomberg scherry On in Tokyo. But we

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Speaker 2: begin this morning here in the States. We saw heavy

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Speaker 2: selling in US markets today as President Trump continued to

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Speaker 2: verbally attack FED sha J. Powell on social media. Trump

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Speaker 2: called Powell a loser, and the President said that Powell

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Speaker 2: should cut interest rates, the president adding he favors preemptive cuts.

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Speaker 3: Now.

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Speaker 2: Markets have been rattled by the President's words and deeds.

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Speaker 2: His tariff policy clearly has been a major negative for markets,

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Speaker 2: so has his undermining of the Fed's independence. Here is

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Speaker 2: Bloomberg strategist Vince Signerella.

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Speaker 3: What basically traders are telling you is, look, you know,

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Speaker 3: regardless of the situation with the Federal Reserve and Trump

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Speaker 3: putting pressure, the FED has said they're going to stand

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Speaker 3: pat for a while. So we're not seeing anything where

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Speaker 3: there's an inclination that short term meals. You know, short

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Speaker 3: term meals are a little bit lower, but not on

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Speaker 3: the fact that I think Powell or the Fed is

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Speaker 3: going to cut although odds have increased that a cut

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Speaker 3: is coming in June.

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Speaker 2: That is Bloomberg's Vince Cignerella For a closer look at

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Speaker 2: what's going on these days in markets, I'm joined by

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Speaker 2: Joanne Bianco. She is partner also senior investment strategist at

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Speaker 2: Bond Blocks Investment Management. Joanne, thank you for making time

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Speaker 2: to chat with me. What did you make of today's

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Speaker 2: price action. We had yields to the long end of

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Speaker 2: the curve backing up, but at the short end we

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Speaker 2: were down about five basis points. I think in New

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Speaker 2: York trading on the two year makes sense of that

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Speaker 2: for me.

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Speaker 4: I think the sense of that is really that, you know,

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Speaker 4: marketing anxiety is persisting, and all the comments that are

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Speaker 4: being made are just just causing there to be more

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Speaker 4: worries about if you, if you, if the Fed does

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Speaker 4: cut rates right now, what would that do if inflation

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Speaker 4: re emerges.

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Speaker 5: It could be the wrong time to cut rates.

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Speaker 4: Yet, you know, our economy could be weakening from all

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Speaker 4: the tariff news and how that impacts the economy. So

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Speaker 4: there's just a lot of moving parts, and that's causing

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Speaker 4: investors to be very unsettled, and we're seeing that certainly

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Speaker 4: in equities as well.

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Speaker 2: So I'm wondering whether or not what we're seeing expressed

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Speaker 2: in markets is the question of whether or not America

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Speaker 2: is the pre eminent destination for global capital. Do you

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Speaker 2: think that's a little hyperbolic or do you think there's

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Speaker 2: some truth in that.

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Speaker 4: I think it's too certain to say that, you know,

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Speaker 4: we've lost our place here in America in that role.

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Speaker 4: You know, things can change, and obviously this is not

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Speaker 4: you know, this is this is not going in the

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Speaker 4: direction that I think a lot of people would like

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Speaker 4: to see it go, but that it can also can change.

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Speaker 2: Torsten Slock, who you know, is the chief economist over

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Speaker 2: at Apollo Global Management, was saying today there's a ninety

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Speaker 2: percent chance of recession. How does that square with your thinking?

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Speaker 4: I don't think we're that high in terms of our

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Speaker 4: view about a recession. You know, just remembered that, you know,

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Speaker 4: the economy is starting from a very strong place, historically strong,

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Speaker 4: and so you know we could have weakness without it

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Speaker 4: being I mean, yes, technically you go into a recession

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Speaker 4: this year, but you know the extent of that and

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Speaker 4: how deep it is is something that's still in question.

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Speaker 2: So maybe not outright contraction, Okay, we can put that

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Speaker 2: out there as a possibility, But what about something that

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Speaker 2: appears like stagflation?

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Speaker 5: And that's that's that's the worry, right, that's what the

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Speaker 5: markets are reacting to.

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Speaker 4: That's why markets are as volatile as we're seeing them be.

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Speaker 2: If you had to make a bet right now in

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Speaker 2: the treasure market, do you hide out at the short

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Speaker 2: end of the curve or is there simply too much

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Speaker 2: risk at the longer end these days?

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Speaker 4: So yeah, we just think that the short end of

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Speaker 4: the treasure curve, it still offers attractive yields and there's

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Speaker 4: just lower return volatility there the intermediate to long and

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Speaker 4: could provide the potential for price appreciation if economic conditions

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Speaker 4: weakened it that there's more volatility on the long end.

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Speaker 2: I was looking at a commentary coming out of Abu

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Speaker 2: Dhabi today Paul Singer, who you know to be the

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Speaker 2: founder of Elliott Investment Management. He was at a private

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Speaker 2: event and he issued a warning that the dollar might

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Speaker 2: lose its reserve currency status. We saw a little bit

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Speaker 2: of dollar weakness today. I think we fell to a

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Speaker 2: fifteen month low. If you look at the Bloomberg Dollar

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Speaker 2: Spot index, are you concerned about the effect of a

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Speaker 2: much weaker dollar on markets?

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Speaker 5: Yeah, that is a concern.

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Speaker 4: That's also there's also a lot of volatility there as

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Speaker 4: so that's another thing.

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Speaker 5: We just have to wait and see how it plays out.

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Speaker 2: So it's worth remembering that one half of the Fed's

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Speaker 2: dual mandata stable price. As many economists we have been

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Speaker 2: hearing from and their warnings about how tariffs will likely

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Speaker 2: produce higher inflation, that seems to be a real risk

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Speaker 2: even before the trade war. I think the last reading

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Speaker 2: on the Fed's preferred measure of inflation core PCE was

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Speaker 2: above that two percent target. How do you understand the

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Speaker 2: inflation story right now in the States?

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Speaker 4: I think the way that we understand it is that

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Speaker 4: we think there's a very good chance that it reaccelerates again,

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Speaker 4: and you know, we're further away from the feds two

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Speaker 4: percent target.

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Speaker 2: Where does that leave you then, in expectations for rate

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Speaker 2: cuts this year? Is the market right now in discounting

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Speaker 2: maybe three twenty five basis point rate cuts way off

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Speaker 2: the mark?

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Speaker 4: It seems that, you know, like when we're seeing the

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Speaker 4: maybe the first rate cut coming in June, according to

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Speaker 4: the expectations. But you know, a contrasting opinion is that

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Speaker 4: the Fed makes no moves at all in twenty twenty five.

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Speaker 4: If they don't cut rates by June, with the inflationary

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Speaker 4: nature of the tariffs happening in the second and third quarter,

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Speaker 4: it would be hard to see why they would cut

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Speaker 4: rates at all.

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Speaker 2: So I noted a little while ago when you and

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Speaker 2: I were talking before we actually began recording, that the

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Speaker 2: cost of protecting high grade credit in the CDs market

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Speaker 2: right now is the highest level that we've seen in

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Speaker 2: over a week, and obviously you take that kind of

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Speaker 2: protection against the possibility of default. The closer we get

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Speaker 2: to the end of the year, let's say, after the

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Speaker 2: FED begins cutting. If you're right, in midyear, we get

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Speaker 2: the first twenty five bass point rate cut. Do you

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Speaker 2: see building default risk right now?

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Speaker 4: Well, we're in such a good place in the investment

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Speaker 4: grade and even the high yield market in terms of

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Speaker 4: debt maturities that have been refinanced over the past several years,

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Speaker 4: that there's very there's very low level of debt coming

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Speaker 4: due for the remainder of this year. So from that perspective,

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Speaker 4: you know, we're not concerned that we're going to see

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Speaker 4: a huge spike in defaults this year, even if the

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Speaker 4: economy were to weaken.

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Speaker 2: Are you tempted to look at credit Are you tempted

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Speaker 2: to look at credit markets offshore right now? Particularly in Europe?

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Speaker 4: I mean, you know, we look at all opportunities, you know,

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Speaker 4: and it's just in terms of seeing if we think

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Speaker 4: that you're being paid for the risks that you're taking.

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Speaker 2: So where are you finding opportunity?

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Speaker 4: Well, we think there's a lot of opportunity in the

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Speaker 4: in the US markets in fixed income, you know, primarily

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Speaker 4: there's you know, you have to pick your spots. But

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Speaker 4: the reason that fixed income is like a good place

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Speaker 4: to be in volatile markets like this is because of

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Speaker 4: the coupon or the income component. It cushions volatility, and

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Speaker 4: more cushions volatility.

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Speaker 5: More than stocks or other assets.

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Speaker 4: So you know, specifically, that's why areas of the US

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Speaker 4: treasury market also investment grade and how your bonds have

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Speaker 4: value in our opinion because of the coupon income component

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Speaker 4: and how attractive yields are at this point.

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Speaker 2: So that seems to me when I hear that like

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Speaker 2: a buy and hold strategy rather than playing the bond

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Speaker 2: market for capital gains. Do I have that right?

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Speaker 4: I mean it's a combination of strategies. But you know,

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Speaker 4: certainly stay invested in this market environment is what we

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Speaker 4: are talking to clients about.

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Speaker 2: We'll leave it there. Thank you so much, Johanne for

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Speaker 2: joining us. Joann Bianco partner, senior investment strategist at Bond

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Speaker 2: Blocks Investment Management, joining us here on the Daybreak As podcast.

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Speaker 2: Welcome back to the Daybreak Asia podcast. I'm dek Krisner.

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Speaker 2: Late Monday, Japanese Prime Minister Shigurro Ishiba said Japan will

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Speaker 2: not concede to all the US demands and trade talks.

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Speaker 2: He cited the need to protect national interest now. Those

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Speaker 2: remarks come as a second round of trade negotiations between

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Speaker 2: Tokyo and Washington are expected to get underway in the

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Speaker 2: coming days. Santori Holding's chairman and CEO, Takashi Ninami said,

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Speaker 2: the current situation regarding you as tariffs is really concerning.

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Speaker 3: Here.

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Speaker 2: He is speaking exclusively to Bloomberg sharry On in Tokyo.

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Speaker 1: He is also a senior economic advisor to Japan's Prime

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Speaker 1: Minister and chairperson of the Japan Association of Corporate Executives.

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Speaker 1: Always great to see you, tak You wear so many

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Speaker 1: different hats that it's such a good time to speak

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Speaker 1: to you.

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Speaker 6: Thank you, Thank you having.

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Speaker 7: Me tell me. How concerning is a business environment right now?

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Speaker 6: Very much concerning. The reason is if the current tariff

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Speaker 6: and negotiation contines as it is, we will be perhaps

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Speaker 6: impacted the negatively, perhaps from one percent to one point

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Speaker 6: two percent against GDP negative. That's for Japan, right, So

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Speaker 6: that's really concerning, especially like Hiroshima awherea Mazda is operating,

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Speaker 6: they would lose lots of jobs. So we have to

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Speaker 6: be really anxious, and we are.

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Speaker 1: And we're not even talking about the US economy, which

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Speaker 1: could also obviously face inflation.

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Speaker 7: Are you seeing any changes in your business?

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Speaker 6: Yes, I think definitely. Consumer confidence has been waning tremendously

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Speaker 6: and they consumers are not spending willingly now this so

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Speaker 6: they go to the economy instead of the premium products.

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Speaker 6: So that's really concerning too.

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Speaker 1: You're already seeing the shift in consumption exact product, right,

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Speaker 1: that's right. The thing right now is a and Trump

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Speaker 1: really wants these tariffs in order to bring investments back

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Speaker 1: to the United States in order to bring supposedly jobs

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Speaker 1: back to the US. How difficult is it for businesses

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Speaker 1: to make those commitments in the US market when it's

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Speaker 1: still uncertain.

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Speaker 6: Well, under the current situation where this economy might go

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Speaker 6: into the recession, it's hard and harder. Right. If the

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Speaker 6: economy is good, just like before around the time, the

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Speaker 6: US productivity is pretty high about two percent. That's why

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Speaker 6: US attracted investments from the world. If the situation continued,

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Speaker 6: we would have a strong appetite to keep investing in

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Speaker 6: the United States. So current tariff situation is losing the

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Speaker 6: appetite from other countries to the United States. So this

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Speaker 6: is really killing the appetite from the world to the

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Speaker 6: United States. So we using the appetite to invest in

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Speaker 6: the United States. As a matter of fact, if the

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Speaker 6: economy goes into the recession, right, basically, what's happening is

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Speaker 6: that at least for now, these hares could be backfiring

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Speaker 6: on the health.

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Speaker 7: Of the economy exactly.

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Speaker 1: The logic from the Trump administration is that he wants

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Speaker 1: to change what they call unfair trading practices.

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Speaker 7: Are you concerned long term that.

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Speaker 1: This might be an end to rule based globalization, free trade.

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Speaker 6: Not really, because the Japan and other countries are promoting

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Speaker 6: CPTPP for example, and our set and China is another

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Speaker 6: locomotive to promote the free trade. So whether it's a

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Speaker 6: good thing or not, I think we will promoting We

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Speaker 6: will be promoting the free trade in for example, a

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Speaker 6: pack including perhaps eventually India. So with that, the US

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Speaker 6: some countries, including Japan and China, we want to promote

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Speaker 6: free trade.

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Speaker 1: Can the rest of the world carry the global economy

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Speaker 1: without the world's biggest economy?

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Speaker 6: I think so. I think so. This time a lot

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Speaker 6: of countries got understood that the US is not the

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Speaker 6: country to support the free trade. In the day, US

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Speaker 6: denounces the free trade, I mean bringing the bad situation

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Speaker 6: to the United States. But the free trade creates the

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Speaker 6: you know, good job creations and uh, you know world

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Speaker 6: of trade. You know, in history, lots of innovation happens.

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Speaker 6: So I think Japan should be a flag bearer of

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Speaker 6: free trade and that we will.

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Speaker 1: Does this make you more skeptical about long term business

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Speaker 1: in the United States or is this just a blip

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Speaker 1: because of the Trump administration.

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Speaker 6: Well depends on how President will cruise US economy. And

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Speaker 6: I still believe that you is the center of innovation,

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Speaker 6: so very attractive for us to invest. But at this moment,

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Speaker 6: if this continues, I don't think are very attractive. So

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Speaker 6: we have to find other places, other countries like India,

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Speaker 6: like you know, Indonesia, so we have to have the

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Speaker 6: you know, bigger Portofolio of investment. But US is one

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Speaker 6: of them and the key country still, but we have

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Speaker 6: to have the Portofolio.

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Speaker 1: Interesting that you're not mentioning China is that because they

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Speaker 1: will take a hit from this trade more.

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Speaker 6: I think my worry is because of the current the

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Speaker 6: tariff policy, tariff policy of the US, China will change

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Speaker 6: the direction of their goods to other countries. That will

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Speaker 6: create perhaps the disputes with those countries who will receive

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Speaker 6: lots of goods. So because anyway, China has to export,

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Speaker 6: so I like to ask China to maintain current you know,

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Speaker 6: free trade because of their leadership. But they have a

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Speaker 6: huge you know, excess products in the country and that

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Speaker 6: they have to explore the otherwise they can't keep hiring people.

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Speaker 6: So that's what they are weakness at this moment to

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Speaker 6: lead the world. But I hope China will understand about

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Speaker 6: their position to keep the free trade. They have to

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Speaker 6: be another flag bearer of the free trade in the world, the.

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Speaker 7: Trading balances that can get worse because.

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Speaker 6: Of the didn't join the URSEN.

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Speaker 1: When it comes to the negotiations themselves, we know that

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Speaker 1: Japan and the United States are talking right now. What

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Speaker 1: should be on the table for discussion. What can Japan

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Speaker 1: offer in this transactional arrangement.

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Speaker 6: Well, first of all, we have to definitely think about

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Speaker 6: how we can bring the US automobile, I mean with

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Speaker 6: the Japanese consumers buy or not, but we have to

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Speaker 6: perhaps deregulate the safety standards to fit the US automobiles

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Speaker 6: if it's really safe. And second thing is that we

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Speaker 6: need a race for example now so we can import

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Speaker 6: the extent like minimum axis not so that that will

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Speaker 6: not ruin the current rice production system in this country,

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Speaker 6: which is the foundation of the policy makers you know. Anyway,

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Speaker 6: So and the package of the weaponry purchase from the US. Anyway,

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Speaker 6: we have to buy weapons from the US so that

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Speaker 6: we can upgrade the talents capabilities, So that is so important.

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Speaker 6: And finally, we should have the adjointed projects in the

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Speaker 6: US U Alaska gas and the ship building I think

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Speaker 6: we can talk about lots of the joint projects in

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Speaker 6: the US.

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Speaker 7: What about treasury holdings.

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Speaker 1: The government says that they're not going to use that

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Speaker 1: as a negotiating too.

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Speaker 6: I don't think so, because Japan doesn't want to retaliate

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Speaker 6: at all to any kind of action from the US,

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Speaker 6: because we like to keep the alliance with the US,

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Speaker 6: and Japan is always showing their faith, always being with

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Speaker 6: the United States in terms of security, but in terms

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Speaker 6: of trade, we like to work with China as well,

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Speaker 6: so we have to draw a line between economic security

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Speaker 6: and regular trade. Regular trade, we should promote the relation

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Speaker 6: with the United I mean with China.

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Speaker 1: We should promote the relationship between Japan and China for benefits.

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Speaker 6: I mean in terms of free trade, except security issues.

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Speaker 1: Because Washington right now, what we're hearing from the government

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Speaker 1: is that perhaps they will try to incorporate some clauses

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Speaker 1: where training partners of the United States are also limiting

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Speaker 1: and pushing back on Beijing.

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Speaker 7: You don't think that that should happen.

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Speaker 6: Well, it's a matter of the economic security. Semi are conductors,

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Speaker 6: those which are related to the security itself. But other

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Speaker 6: than the security issues, we should have promoted the relation

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Speaker 6: because China is about neighbor and the world is intertwined,

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Speaker 6: so China is a key part, and we can't forget

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Speaker 6: the fact.

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Speaker 7: The Japanese yen could also be on the table.

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Speaker 1: President Trump doesn't like weaker currencies visa vise the US dollar.

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Speaker 7: What will that mean to your business? If we see

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Speaker 7: more appreciation from here?

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Speaker 6: It's another headache too. We can change the landscape of

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Speaker 6: Japan's economy right away by reducing the interest rate for example.

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Speaker 6: That effects in definitely yandalla value. But we have to

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Speaker 6: be resilient to be able to respond to that kind

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Speaker 6: of strong request. Because real interest rate is negative about

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Speaker 6: one percent. We are not manipulating, but they might say, hey,

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Speaker 6: Japan is maniplating, so we have to be ready for that.

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Speaker 6: In that sense, we have to leverage these external pressures

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Speaker 6: so that we can reform Japan by I think definitely

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Speaker 6: we have to reduce it a number of companies because

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Speaker 6: we have too many, so I think consolidation and metabolization.

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Speaker 6: I think we have to proceed by leveraging this strong

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Speaker 6: pressure from the US.

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Speaker 1: Do other Japanese CEOs share that vision of potentially using

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Speaker 1: this as a catalyst to bring more corporate reforms and

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Speaker 1: changes to Japan and is the government doing.

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Speaker 6: And some know that we make use of the external

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Speaker 6: pressure and in history of the Japan the economy, this worked,

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Speaker 6: so we have to have the courselesly optimism to change

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Speaker 6: Japan to the better landscape from a thirty year sleep.

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Speaker 2: That was Chairman and CEO of Santori Holdings Takashin Ninami

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Speaker 2: in a conversation with Bloomberg scherry On here on the

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Speaker 2: Daybreak Asia podcast. Thanks for listening to today's episode of

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Speaker 2: the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look

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Speaker 2: at the story shaping markets, finance, and geopolitics in the

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Speaker 2: Bloomberg Podcast YouTube channel, or anywhere else you listen. Join

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Speaker 2: us again tomorrow for insight on the market moves from

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Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Prisoner and

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Speaker 2: this is Bloomberg