1 00:00:00,600 --> 00:00:08,320 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,960 --> 00:00:13,360 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:13,400 --> 00:00:15,480 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:15,480 --> 00:00:18,040 Speaker 2: anchors all around the world. Straight Ahead on the program, 5 00:00:18,079 --> 00:00:20,560 Speaker 2: we look ahead to some key inflation data in the 6 00:00:20,640 --> 00:00:24,360 Speaker 2: US and how it could impact FED policy. I'm Tom 7 00:00:24,400 --> 00:00:25,400 Speaker 2: Busby in New York. 8 00:00:25,680 --> 00:00:29,280 Speaker 3: I'm Caroline Hepgre in London. While we're examining the consequences 9 00:00:29,320 --> 00:00:31,360 Speaker 3: of Europe's sweltering summer. 10 00:00:31,720 --> 00:00:34,680 Speaker 1: I'm Dog Prisner looking at Japan's role in recent market 11 00:00:34,760 --> 00:00:37,240 Speaker 1: volatility and where things may go from here. 12 00:00:38,440 --> 00:00:42,440 Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:42,479 --> 00:00:46,280 Speaker 4: Eleve Them Free, Ow New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:46,600 --> 00:00:50,640 Speaker 4: Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 15 00:00:50,880 --> 00:00:55,080 Speaker 4: DAB Digital Radio, London, Sirius XM one nineteen and around 16 00:00:55,160 --> 00:00:57,760 Speaker 4: the world on Bloomberg Radio dot Com and via the 17 00:00:57,800 --> 00:00:59,040 Speaker 4: Bloomberg Business App. 18 00:01:03,080 --> 00:01:05,199 Speaker 2: Good day to you. I'm Tom Busby. We begin today's 19 00:01:05,240 --> 00:01:07,679 Speaker 2: program with some key economic data here in the US 20 00:01:08,080 --> 00:01:11,720 Speaker 2: out this week, including the July Consumer price Index on Wednesday, 21 00:01:12,160 --> 00:01:15,959 Speaker 2: retail sales for that same month on Thursday. Well, after 22 00:01:16,000 --> 00:01:19,600 Speaker 2: some incredible volatility in the markets last week, how might 23 00:01:19,720 --> 00:01:23,600 Speaker 2: this affect the next actions by the Federal Reserve, a 24 00:01:23,640 --> 00:01:27,000 Speaker 2: policy meeting less than five weeks away. Now for more, 25 00:01:27,360 --> 00:01:32,319 Speaker 2: we're joined by Stuart paul, Us, economist with Bloomberg Economics. Well, Stuart, 26 00:01:32,360 --> 00:01:35,800 Speaker 2: let's start with inflation. What that July CPI number may bring. 27 00:01:35,840 --> 00:01:36,960 Speaker 2: What do you expect to see. 28 00:01:37,160 --> 00:01:40,800 Speaker 5: We're expecting to see headline inflation slowing to an annual 29 00:01:40,840 --> 00:01:44,000 Speaker 5: pace of two point nine percent in July from three 30 00:01:44,080 --> 00:01:47,200 Speaker 5: percent in June. The core is going to slow a 31 00:01:47,240 --> 00:01:49,640 Speaker 5: little bit as well, to three point two percent from 32 00:01:49,680 --> 00:01:53,560 Speaker 5: three point three percent in June. Now, consumers are looking 33 00:01:53,560 --> 00:01:56,760 Speaker 5: for discounts, and they're finding them when they look online, 34 00:01:56,880 --> 00:01:59,200 Speaker 5: when they go to auto dealerships. But some of the 35 00:01:59,240 --> 00:02:01,920 Speaker 5: biggest ticket items, some of the items that take up 36 00:02:01,920 --> 00:02:05,360 Speaker 5: the most space in budgets, like shelter for example, it's 37 00:02:05,440 --> 00:02:08,120 Speaker 5: just going to be a slow disinflation process. And in fact, 38 00:02:08,360 --> 00:02:10,800 Speaker 5: we're expecting to see a little bit of an uptick 39 00:02:10,840 --> 00:02:13,760 Speaker 5: in the pace of rent and owner's equivalent of rent 40 00:02:13,840 --> 00:02:17,799 Speaker 5: inflation in the July data. And the big swing factor 41 00:02:17,840 --> 00:02:21,400 Speaker 5: when it comes to inflation has been hotels, surprisingly, which 42 00:02:21,480 --> 00:02:24,240 Speaker 5: created a lot of drag in June. We think it's 43 00:02:24,240 --> 00:02:26,600 Speaker 5: going to create a little bit less drag in the 44 00:02:26,680 --> 00:02:29,680 Speaker 5: July data, and that's going to booy the core just 45 00:02:29,720 --> 00:02:30,240 Speaker 5: a little bit. 46 00:02:30,520 --> 00:02:33,280 Speaker 2: Well, the housing market, I mean, what an uneven You 47 00:02:33,280 --> 00:02:35,200 Speaker 2: don't know what to expect month to month, but one 48 00:02:35,200 --> 00:02:38,760 Speaker 2: thing is certain, it's more expensive than it's ever been. 49 00:02:39,280 --> 00:02:41,680 Speaker 2: Rates are still elevated, although there's hope that they're going 50 00:02:41,760 --> 00:02:44,679 Speaker 2: to go down. So travel demand, which lays right into 51 00:02:44,840 --> 00:02:48,239 Speaker 2: what you said about hotels, I mean, we have seen 52 00:02:48,320 --> 00:02:52,359 Speaker 2: signs that people are pulling back now fewer trip Advisor 53 00:02:52,400 --> 00:02:56,200 Speaker 2: says fewer bookings, Airbnb says fewer bookings, so they're bracing 54 00:02:56,320 --> 00:02:57,520 Speaker 2: for a pullback. 55 00:02:57,320 --> 00:03:00,160 Speaker 5: That's right. So consumers are becoming quite a bit more 56 00:03:00,160 --> 00:03:03,239 Speaker 5: discerning in their spending habits. When we look at things 57 00:03:03,280 --> 00:03:05,880 Speaker 5: like you said Airbnb, or you look at some of 58 00:03:05,919 --> 00:03:09,040 Speaker 5: the online travel booking agencies, you're definitely seeing some of 59 00:03:09,040 --> 00:03:11,640 Speaker 5: the swings month to month. If you look at where 60 00:03:11,680 --> 00:03:15,160 Speaker 5: consumers are really starting to tighten their belt, it's in 61 00:03:15,240 --> 00:03:19,000 Speaker 5: things like food services also very similar to travel and accommodations. 62 00:03:19,240 --> 00:03:21,320 Speaker 5: Consumers are looking to rein in on some of those 63 00:03:21,360 --> 00:03:25,119 Speaker 5: discretionary services categories in addition to some of the more 64 00:03:25,200 --> 00:03:28,119 Speaker 5: interest sensitive spending categories like autos. 65 00:03:28,440 --> 00:03:31,600 Speaker 2: There's groceries, and there's food service, and there are all 66 00:03:31,680 --> 00:03:34,320 Speaker 2: kinds of restaurants from fast food, quick service, sit down, 67 00:03:34,320 --> 00:03:38,560 Speaker 2: white tablecloth. Where are you seeing the big changes in food? 68 00:03:38,920 --> 00:03:41,880 Speaker 5: It's interesting. So when we listen into earnings calls, when 69 00:03:41,920 --> 00:03:45,120 Speaker 5: we look at earnings reports, we see a lot of 70 00:03:45,160 --> 00:03:49,400 Speaker 5: reports of dining services companies that are starting to offer 71 00:03:49,480 --> 00:03:52,800 Speaker 5: discount meals and that are starting to order discount opportunities 72 00:03:52,800 --> 00:03:56,520 Speaker 5: and they're actually seeing some more traction with consumers. When 73 00:03:56,560 --> 00:03:59,840 Speaker 5: we look on the higher end, those sort of re 74 00:04:00,080 --> 00:04:02,480 Speaker 5: tailers and those chains are facing a little bit more 75 00:04:02,600 --> 00:04:06,000 Speaker 5: headwinds and consumers are rotating a bit more back to 76 00:04:06,160 --> 00:04:09,000 Speaker 5: cooking at home, dining at home. We're expecting to see 77 00:04:09,000 --> 00:04:11,840 Speaker 5: about zero point one percent inflation when it comes to 78 00:04:12,000 --> 00:04:14,880 Speaker 5: groceries during the month. That might not sound like a lot, 79 00:04:14,920 --> 00:04:17,880 Speaker 5: but when consumers are really pinching pennies and they're raining 80 00:04:17,920 --> 00:04:22,560 Speaker 5: and they're spending on food services, that inflation in groceries 81 00:04:23,000 --> 00:04:26,240 Speaker 5: is going to is going to weigh on consumers. 82 00:04:27,120 --> 00:04:29,080 Speaker 2: Well, I want to go back to something you mentioned before, 83 00:04:29,120 --> 00:04:32,320 Speaker 2: just briefly, and that is autos again very uneven what 84 00:04:32,360 --> 00:04:35,920 Speaker 2: we've seen with used car prices, new car prices. Now 85 00:04:36,000 --> 00:04:38,920 Speaker 2: we have all the ads are out there, it's August, now, 86 00:04:38,960 --> 00:04:41,200 Speaker 2: all the twenty five models are coming in the twenty four. 87 00:04:41,240 --> 00:04:44,360 Speaker 2: They want to get rid of what's different now on 88 00:04:44,520 --> 00:04:45,360 Speaker 2: auto pricing. 89 00:04:45,520 --> 00:04:47,599 Speaker 5: There are a few factors at play here, and one 90 00:04:47,600 --> 00:04:50,520 Speaker 5: of them is still the cyber attack on auto dealers 91 00:04:50,520 --> 00:04:53,719 Speaker 5: that we saw in June, and so far in July, 92 00:04:54,120 --> 00:04:56,039 Speaker 5: we've seen a bit of a rebound, about a three 93 00:04:56,080 --> 00:04:59,320 Speaker 5: point five percent rebound in the pace of auto sales 94 00:04:59,440 --> 00:05:02,880 Speaker 5: in July. So as those computers, those computer systems came 95 00:05:02,920 --> 00:05:07,040 Speaker 5: back online, we saw auto dealers starting to sell more vehicles. 96 00:05:07,640 --> 00:05:11,480 Speaker 5: But it also looks like they are offering discounts in 97 00:05:11,600 --> 00:05:14,719 Speaker 5: part to offset the effect of higher interest expense for 98 00:05:14,800 --> 00:05:18,400 Speaker 5: folks who are financing their cars. So we are expecting 99 00:05:18,400 --> 00:05:21,159 Speaker 5: to see about one and a half percent decline in 100 00:05:21,200 --> 00:05:23,880 Speaker 5: the price of autos, in the price of used autos 101 00:05:23,880 --> 00:05:27,800 Speaker 5: in particular in the CPI report, But again the increase 102 00:05:28,000 --> 00:05:32,960 Speaker 5: in sales volumes will probably buoy retail sales. Headline retail 103 00:05:33,040 --> 00:05:35,440 Speaker 5: sales in the July report. 104 00:05:35,240 --> 00:05:38,240 Speaker 2: Also out this week. Retail sales for July, what do 105 00:05:38,279 --> 00:05:38,960 Speaker 2: you expect to see? 106 00:05:38,960 --> 00:05:39,400 Speaker 6: Overall? 107 00:05:39,560 --> 00:05:41,919 Speaker 5: The headline number is going to look pretty good again 108 00:05:41,960 --> 00:05:46,440 Speaker 5: because of that rebound in sales volumes of autos. We're 109 00:05:46,480 --> 00:05:50,760 Speaker 5: expecting to see zero point four percent increase in nominal 110 00:05:50,800 --> 00:05:55,320 Speaker 5: retail sales in July. That's up from zero growth in June. 111 00:05:55,400 --> 00:05:57,640 Speaker 5: So the headline's going to look pretty good. When you 112 00:05:57,680 --> 00:06:00,919 Speaker 5: strip out some of the more voluable categories though, like autos, 113 00:06:00,960 --> 00:06:04,360 Speaker 5: like gasoline, like building materials and food services, I think 114 00:06:04,360 --> 00:06:06,359 Speaker 5: we're actually going to see a decline. So that's what 115 00:06:06,400 --> 00:06:09,480 Speaker 5: we call the control group for retail sales, and it's 116 00:06:09,480 --> 00:06:12,760 Speaker 5: a pretty good indicator of consumer spending on goods within GDP. 117 00:06:12,920 --> 00:06:15,560 Speaker 5: So that control group for retail sales, we think is 118 00:06:15,800 --> 00:06:18,720 Speaker 5: going to decline about a quarter percentage point in the 119 00:06:18,800 --> 00:06:22,479 Speaker 5: July data. And that's a material decline when you consider 120 00:06:23,360 --> 00:06:27,480 Speaker 5: a June increase of nearly one percent. And that's because again, 121 00:06:27,600 --> 00:06:31,080 Speaker 5: people are relying on their credit cards a little bit less, 122 00:06:31,240 --> 00:06:34,200 Speaker 5: They have less access to credit. When they do look 123 00:06:34,440 --> 00:06:37,640 Speaker 5: to take out their credit card, they're starting to pinch 124 00:06:37,680 --> 00:06:40,560 Speaker 5: pennies quite a bit more, and again they're looking for 125 00:06:40,640 --> 00:06:43,000 Speaker 5: discounts where they can get it, So they're not going 126 00:06:43,040 --> 00:06:45,400 Speaker 5: to be spending lavishly on some big ticket items like 127 00:06:45,560 --> 00:06:48,960 Speaker 5: washing machines. Instead, they're going to be looking for discounts. 128 00:06:49,040 --> 00:06:51,240 Speaker 5: We think that'll show up in the control group sales 129 00:06:51,320 --> 00:06:51,680 Speaker 5: boy our. 130 00:06:51,800 --> 00:06:56,360 Speaker 2: Thanks to Stuart Paul, us economists with Bloomberg Economics. We 131 00:06:56,440 --> 00:06:58,960 Speaker 2: continue with that discussion about the health of the US 132 00:06:59,000 --> 00:07:01,600 Speaker 2: consumer with a look at head to some key earnings 133 00:07:01,640 --> 00:07:04,960 Speaker 2: this Tuesday, second quarter earnings from the nation's biggest home 134 00:07:05,040 --> 00:07:08,920 Speaker 2: improvement chain, home Depot. On Thursday, Q two earnings from 135 00:07:08,920 --> 00:07:12,240 Speaker 2: the world's biggest retailer, Walmart. To help us break down 136 00:07:12,240 --> 00:07:15,360 Speaker 2: what those results could tell us, we're joined by Bloomberg 137 00:07:15,400 --> 00:07:19,120 Speaker 2: retail reporter Jaywon Kong. Jaywan, thank you for joining us. 138 00:07:19,120 --> 00:07:22,280 Speaker 2: And Home Depot often seen as a proxy for the 139 00:07:22,360 --> 00:07:25,320 Speaker 2: US housing market. So what do you expect to see 140 00:07:25,520 --> 00:07:26,960 Speaker 2: from Home Depot's earnings. 141 00:07:27,600 --> 00:07:32,440 Speaker 7: Yeah, with Home Depot, consumers just aren't buying dick ticket 142 00:07:32,440 --> 00:07:35,840 Speaker 7: home products or projects right now, and we expect to 143 00:07:35,880 --> 00:07:41,720 Speaker 7: see another challenging quarter. We also anticipate to hear that 144 00:07:41,880 --> 00:07:45,400 Speaker 7: the business will remain challenging in the coming months, even 145 00:07:45,600 --> 00:07:48,280 Speaker 7: if there are rate cuts, because there's typically a lag 146 00:07:48,480 --> 00:07:52,880 Speaker 7: in consumer spending. You know, as you said, the housing 147 00:07:52,880 --> 00:07:56,600 Speaker 7: market remains tough and people are staying on the sidelines 148 00:07:56,680 --> 00:08:00,640 Speaker 7: because of you know, high interest rates. They're just spending 149 00:08:00,720 --> 00:08:05,520 Speaker 7: less on larger descriptionary projects and instead spending on things 150 00:08:05,560 --> 00:08:08,840 Speaker 7: that cost less, like you know, gardens, lawns. 151 00:08:08,960 --> 00:08:12,080 Speaker 2: All right, So inflation, high borrowing costs a lot of 152 00:08:12,560 --> 00:08:15,920 Speaker 2: economic uncertainty. Well, I guess when you're hiring a contractor, 153 00:08:16,240 --> 00:08:19,200 Speaker 2: it involves all of that, and so maybe you're not 154 00:08:19,200 --> 00:08:21,160 Speaker 2: going to redo the bathroom or the kitchen this year. 155 00:08:21,600 --> 00:08:24,760 Speaker 7: Yeah, it's you know, spending you know, tens of thousands 156 00:08:24,800 --> 00:08:28,680 Speaker 7: of dollars on a kitchen. People are either holding off 157 00:08:28,960 --> 00:08:31,920 Speaker 7: or you know, they're choosing to do smaller at the 158 00:08:31,960 --> 00:08:36,439 Speaker 7: II projects. And it's something that the company has talked 159 00:08:36,440 --> 00:08:40,560 Speaker 7: about in recent quarters, and you know, we anticipate to 160 00:08:40,600 --> 00:08:45,320 Speaker 7: hear that narrative again this quarter. You know, I think 161 00:08:45,400 --> 00:08:48,680 Speaker 7: investors expect that there could be a pop in the 162 00:08:48,760 --> 00:08:52,680 Speaker 7: stock whenever the said you know, decides to cut race. 163 00:08:52,920 --> 00:08:58,040 Speaker 7: But you know, it's not like people start spending immediately 164 00:08:58,240 --> 00:09:01,719 Speaker 7: after the rate cuts. So I think this quarter and 165 00:09:02,200 --> 00:09:04,360 Speaker 7: the rest of the year it'll be pretty challenging. 166 00:09:05,240 --> 00:09:09,160 Speaker 2: Now, combined with a lack of housing turnover. This you 167 00:09:09,200 --> 00:09:11,079 Speaker 2: expect to see a bit of a pullback in home 168 00:09:11,120 --> 00:09:14,400 Speaker 2: depot spending. What does it tell us about the housing market? 169 00:09:14,480 --> 00:09:16,640 Speaker 2: And I know you're not the housing expert, you're a 170 00:09:16,679 --> 00:09:20,440 Speaker 2: retail expert, but I mean with home depot with lows, 171 00:09:20,559 --> 00:09:23,480 Speaker 2: with target with you know, it's really got to impact 172 00:09:23,559 --> 00:09:24,880 Speaker 2: consumer spending overall. 173 00:09:25,520 --> 00:09:30,839 Speaker 7: Yeah, what we've heard in recent quarters is that consumers 174 00:09:30,880 --> 00:09:36,319 Speaker 7: are being selective. You know, they're choosing to prioritize what 175 00:09:36,360 --> 00:09:39,679 Speaker 7: they need versus what they want. So that's you know, 176 00:09:39,800 --> 00:09:46,360 Speaker 7: translated to pullback on discretionary you know, products projects, and 177 00:09:47,520 --> 00:09:51,040 Speaker 7: you know, generally low to middle income consumers have been 178 00:09:52,000 --> 00:09:55,040 Speaker 7: more stretched than under more pressure, and you know, upper 179 00:09:55,160 --> 00:09:59,560 Speaker 7: income consumers are still spending. So you know, that's sort 180 00:09:59,559 --> 00:10:04,600 Speaker 7: of the pick or that we've we've seen from these retailers, 181 00:10:04,640 --> 00:10:09,640 Speaker 7: and it'll be pretty similar this this quarter as well. 182 00:10:09,679 --> 00:10:11,559 Speaker 7: And you know, of course we'll be on the lookout 183 00:10:11,640 --> 00:10:16,120 Speaker 7: for any youth signals about how people are spending. You know, 184 00:10:16,160 --> 00:10:20,000 Speaker 7: what they're buying and you know how they're choosing to prioritize. 185 00:10:20,160 --> 00:10:22,800 Speaker 2: Well, then let's move on because that's a great segue 186 00:10:22,960 --> 00:10:26,360 Speaker 2: into Walmart, where it looks like it is all about 187 00:10:26,520 --> 00:10:30,080 Speaker 2: value for customers and Walmart is providing it. So what 188 00:10:30,120 --> 00:10:32,120 Speaker 2: do you expect to see from Walmart? 189 00:10:32,559 --> 00:10:36,080 Speaker 7: Yeah? With Walmart, you know right now is sort of 190 00:10:36,120 --> 00:10:38,200 Speaker 7: you know, their time, it's you know, most of their 191 00:10:38,200 --> 00:10:43,320 Speaker 7: business is in essentials. You know, they are super focused 192 00:10:43,320 --> 00:10:48,040 Speaker 7: on low prices, and we expect them to deliver another good, 193 00:10:48,400 --> 00:10:53,880 Speaker 7: good quarter because of this. And with grocery at Walmart, 194 00:10:54,000 --> 00:10:55,960 Speaker 7: you know, it goes back to what we were talking 195 00:10:56,000 --> 00:10:59,240 Speaker 7: about a bit ago, which is that people are prioritizing 196 00:10:59,520 --> 00:11:03,440 Speaker 7: what they needed. So grocery has been a bright spot 197 00:11:03,559 --> 00:11:07,559 Speaker 7: for for Walmart on and you know in other categories, 198 00:11:09,080 --> 00:11:12,800 Speaker 7: you know, like general merchandise have been have been softer, 199 00:11:13,840 --> 00:11:18,400 Speaker 7: and you know, we're seeing consumers search for value, you know, 200 00:11:18,480 --> 00:11:21,200 Speaker 7: buying things that are on sale or buying things that 201 00:11:21,240 --> 00:11:24,240 Speaker 7: they think are you know, good deal. 202 00:11:25,360 --> 00:11:28,160 Speaker 2: Who is raining and their spending and what do we 203 00:11:28,200 --> 00:11:29,480 Speaker 2: continue to spend money on? 204 00:11:30,040 --> 00:11:35,040 Speaker 7: Yeah, so with consumers, you know, they have been resilient 205 00:11:35,280 --> 00:11:39,640 Speaker 7: in that they are still spending, you know, even with 206 00:11:39,800 --> 00:11:45,120 Speaker 7: years of inflation. That being said, you know, they are 207 00:11:45,360 --> 00:11:48,360 Speaker 7: being what a lot of these companies have called choiceful. 208 00:11:49,080 --> 00:11:52,640 Speaker 7: You know, they are being selective. You know they're looking 209 00:11:52,679 --> 00:11:56,680 Speaker 7: for areas to trade down, so to speak. So you know, 210 00:11:56,720 --> 00:12:00,200 Speaker 7: instead of buying if you buy chicken or you know 211 00:12:00,320 --> 00:12:04,240 Speaker 7: inspetifying name brands, you buy straw brands. So I think 212 00:12:04,240 --> 00:12:09,520 Speaker 7: consumers are looking for areas to save money. And you know, 213 00:12:09,559 --> 00:12:14,040 Speaker 7: we're seeing that comes through in grocery shopping and you 214 00:12:14,040 --> 00:12:16,600 Speaker 7: know in other areas of merchandise. 215 00:12:17,240 --> 00:12:19,480 Speaker 2: Well, we should learn a lot earnings this week from 216 00:12:19,480 --> 00:12:22,679 Speaker 2: two of the biggies Home Depot and Walmart Our thanks 217 00:12:22,679 --> 00:12:26,679 Speaker 2: to Jaywan Kong, Bloomberg retail reporter. Coming up on Bloomberg 218 00:12:26,720 --> 00:12:30,640 Speaker 2: day Break weekend, we'll examine the consequences of Europe's sweltering summer. 219 00:12:31,200 --> 00:12:44,840 Speaker 2: I'm Tom Busby, and this is Bloomberg. This is Bloomberg 220 00:12:44,880 --> 00:12:46,960 Speaker 2: day Break Weekend, our global look ahead at the top 221 00:12:46,960 --> 00:12:49,840 Speaker 2: stories for investors in the coming week. I'm Tom Busby 222 00:12:49,840 --> 00:12:52,120 Speaker 2: in New York. Up later in our program, we'll look 223 00:12:52,160 --> 00:12:55,840 Speaker 2: ahead to the latest reading of Japan's GDP. But first, 224 00:12:56,200 --> 00:12:58,560 Speaker 2: Europe is heating up with high tempts and excess of 225 00:12:58,640 --> 00:13:02,440 Speaker 2: forty degrees celsius this summer, a huge uptick from the norm, 226 00:13:02,800 --> 00:13:06,439 Speaker 2: with climate chains a likely culprit of the Mediterranean's tropical makeover. 227 00:13:06,600 --> 00:13:09,600 Speaker 2: Can the insurance industry keep up for more? Let's go 228 00:13:09,640 --> 00:13:12,960 Speaker 2: to London and bring in Bloomberg daybreak, europe banker Caroline 229 00:13:12,960 --> 00:13:14,160 Speaker 2: hepgar Tom. 230 00:13:14,400 --> 00:13:19,160 Speaker 3: Climate change is increasing the frequency and intensity of heat waves, 231 00:13:19,200 --> 00:13:24,520 Speaker 3: bringing extreme weather events from flooding to wildfires across Europe. 232 00:13:24,720 --> 00:13:28,800 Speaker 3: Just last month, in Greece, wildfires were found by strong winds. 233 00:13:28,880 --> 00:13:32,800 Speaker 3: In the Balkans, you saw burning forests and homes, which 234 00:13:32,840 --> 00:13:36,720 Speaker 3: also forced the evacuation of a resort town in Albania. 235 00:13:37,000 --> 00:13:40,360 Speaker 3: In North Macedonia, a blaze near the Greek border burned 236 00:13:40,440 --> 00:13:44,280 Speaker 3: five houses and led to evacuations, and the damage spread 237 00:13:44,320 --> 00:13:49,760 Speaker 3: to Croatia, a popular holiday destination, whilst in Bulgaria firefighters 238 00:13:49,800 --> 00:13:52,920 Speaker 3: had to stop fighting a wildfire in the mountains near 239 00:13:52,960 --> 00:13:56,520 Speaker 3: the Greek border because of land mines dating back to 240 00:13:56,559 --> 00:14:00,800 Speaker 3: the Cold War era. The volatile weather condition in Europe 241 00:14:00,880 --> 00:14:04,600 Speaker 3: really show no sign of abating in the northwest of Europe, 242 00:14:04,600 --> 00:14:08,640 Speaker 3: in France, in Germany, in the UK we're expected to 243 00:14:08,679 --> 00:14:12,240 Speaker 3: see the hottest temperatures of the summer in the next 244 00:14:12,280 --> 00:14:17,480 Speaker 3: few days. Popular tourist destinations are on high alert for fires. 245 00:14:17,880 --> 00:14:21,840 Speaker 3: The growing prevalence of extreme weather conditions is weighing heavily 246 00:14:21,880 --> 00:14:26,360 Speaker 3: also on the insurance sector, often charged with the clear up. 247 00:14:26,800 --> 00:14:30,400 Speaker 3: Navigating the consequences is something that we've been discussing with 248 00:14:30,520 --> 00:14:35,880 Speaker 3: the Munich RECFO Christophe Jureka. He says that the unexpected 249 00:14:35,960 --> 00:14:39,440 Speaker 3: conditions in Europe are affecting his company's bottom line. 250 00:14:39,560 --> 00:14:42,640 Speaker 8: Indeed, we have very pleasing results again this quarter, and 251 00:14:42,840 --> 00:14:45,200 Speaker 8: after six months we are now already at three point 252 00:14:45,240 --> 00:14:47,680 Speaker 8: eight billion euros of a net result, by the way, 253 00:14:47,720 --> 00:14:50,440 Speaker 8: the highest net result ever we had after six months, 254 00:14:50,480 --> 00:14:53,920 Speaker 8: so very well on twek to achieve all for your guidance. Indeed, 255 00:14:54,600 --> 00:14:58,240 Speaker 8: now the question is why didn't be increase it? Probably well, 256 00:14:58,400 --> 00:15:01,400 Speaker 8: I would say that's the typical Munich conservativism. We are 257 00:15:01,440 --> 00:15:05,720 Speaker 8: cautious until the very end, and you know, the third 258 00:15:05,760 --> 00:15:09,160 Speaker 8: and the fourth quarter are very cut heavy in our planning. 259 00:15:09,600 --> 00:15:12,120 Speaker 8: So therefore we thought, let's give it another quarter and 260 00:15:12,320 --> 00:15:16,040 Speaker 8: see how the development goes and keep the guidance unchanged 261 00:15:16,040 --> 00:15:19,280 Speaker 8: for now. But what is very clear, were likely good 262 00:15:19,280 --> 00:15:22,600 Speaker 8: of it of overachieving our target has significantly increased? 263 00:15:24,160 --> 00:15:26,520 Speaker 9: Okay, Well that's what it sounds like. Okay, so that's important. 264 00:15:26,560 --> 00:15:30,480 Speaker 9: The likelihood of overachieving on that five billion europrofits target 265 00:15:30,800 --> 00:15:33,400 Speaker 9: has increased. That's an important line I think for investors 266 00:15:33,520 --> 00:15:35,960 Speaker 9: and talk to us about some of these extreme weather events. 267 00:15:36,000 --> 00:15:39,360 Speaker 9: Then there are higher payment claims coming through for insurers 268 00:15:39,600 --> 00:15:43,720 Speaker 9: and reinsurers. Are there some regions now that are becoming uninsurable? 269 00:15:45,640 --> 00:15:45,920 Speaker 6: Well. 270 00:15:45,960 --> 00:15:48,720 Speaker 8: Indeed, in the second quarter again we had a relatively 271 00:15:48,800 --> 00:15:52,560 Speaker 8: high share of cut losses, slightly above our budget or 272 00:15:52,600 --> 00:15:55,680 Speaker 8: average budget is fourteen percent per quarter this time, whilst 273 00:15:55,680 --> 00:15:59,160 Speaker 8: it was fourteen point four, so slightly higher. And what 274 00:15:59,360 --> 00:16:02,440 Speaker 8: actually happened was that there was not this one single 275 00:16:02,440 --> 00:16:06,000 Speaker 8: headline event, you know, affecting us to that extent, but 276 00:16:06,080 --> 00:16:09,280 Speaker 8: it was a number of smaller, mid sized events which 277 00:16:09,320 --> 00:16:12,680 Speaker 8: then added up to that overall amount. The most significant 278 00:16:12,680 --> 00:16:17,040 Speaker 8: fast disc quarter was a flood in southern Germany which 279 00:16:17,080 --> 00:16:20,240 Speaker 8: which all together cost us in reinsurance around two hundred 280 00:16:20,280 --> 00:16:23,760 Speaker 8: million euros. But then there were other events across the globe, 281 00:16:23,760 --> 00:16:27,000 Speaker 8: all of them rather mid sized, which then finally added 282 00:16:27,080 --> 00:16:28,520 Speaker 8: up to the to the number. So in a way 283 00:16:28,640 --> 00:16:32,040 Speaker 8: busy quarter with with not this single so significant event 284 00:16:32,120 --> 00:16:34,760 Speaker 8: that it would have made headline headlines in the in 285 00:16:34,800 --> 00:16:35,440 Speaker 8: the neuse. 286 00:16:36,640 --> 00:16:39,400 Speaker 9: Is it is it your assessment there is sufficient capacity 287 00:16:39,680 --> 00:16:43,040 Speaker 9: within the insurance sector to be able to make up 288 00:16:43,080 --> 00:16:45,600 Speaker 9: for what is expected to be the increased claims around 289 00:16:45,960 --> 00:16:46,760 Speaker 9: climate change. 290 00:16:48,280 --> 00:16:51,400 Speaker 8: So our clear answer is yes, there is enough capacity, 291 00:16:51,480 --> 00:16:55,080 Speaker 8: So we are very happy to deploy capacity into cut risks, 292 00:16:56,120 --> 00:16:58,880 Speaker 8: always under the precondition, of course that the prices in 293 00:16:58,920 --> 00:17:01,680 Speaker 8: the terms and conditions have to have to be reasonable 294 00:17:01,720 --> 00:17:05,119 Speaker 8: also from a rene insurance perspective. But under that precondition, 295 00:17:05,359 --> 00:17:08,359 Speaker 8: absolutely there is that there's sufficient capacity in the market 296 00:17:08,560 --> 00:17:11,879 Speaker 8: and and and we are very happy to deploying more cognacity. 297 00:17:12,560 --> 00:17:14,600 Speaker 9: Your business men, Ray has been a leader in terms 298 00:17:14,640 --> 00:17:17,640 Speaker 9: of cybersecurity solutions within the insurance space. How how big 299 00:17:17,640 --> 00:17:21,280 Speaker 9: an impact was the crowd strike event within the industry 300 00:17:21,280 --> 00:17:21,600 Speaker 9: and for. 301 00:17:21,600 --> 00:17:24,919 Speaker 8: You, that's a very good question. I would very I 302 00:17:24,920 --> 00:17:27,920 Speaker 8: would love to know myself, but it's very early days, 303 00:17:28,560 --> 00:17:31,560 Speaker 8: so I cannot give you any any internal insights in 304 00:17:31,640 --> 00:17:34,840 Speaker 8: any internal numbers. Yet we're still assessing what's was going on. 305 00:17:35,840 --> 00:17:39,280 Speaker 8: I think the the the the industry estimates as for 306 00:17:39,400 --> 00:17:42,760 Speaker 8: example just shown in the media, they have come down 307 00:17:42,880 --> 00:17:46,720 Speaker 8: a bit recently. But any anyways, it's early days. We 308 00:17:46,840 --> 00:17:49,879 Speaker 8: have to you know, really assess it, wait for the 309 00:17:49,920 --> 00:17:53,080 Speaker 8: collect claim stotifications and from from our clients. And then 310 00:17:53,119 --> 00:17:54,560 Speaker 8: we'll see that was. 311 00:17:54,560 --> 00:18:00,000 Speaker 3: The munich ree CFO Christopherjureka. So are Europe's soaring temperature 312 00:18:00,160 --> 00:18:03,760 Speaker 3: is here to stay? What does it mean for insurers 313 00:18:03,800 --> 00:18:07,399 Speaker 3: on the one hand, but also for local people, for businesses, 314 00:18:07,400 --> 00:18:10,879 Speaker 3: for holidaymakers, and so much more. I've been talking about 315 00:18:10,920 --> 00:18:14,840 Speaker 3: that question with Bloomberg's energy reporter Aiman Farhat. 316 00:18:15,280 --> 00:18:17,200 Speaker 6: I mean in the last few years, I mean definitely 317 00:18:17,240 --> 00:18:19,280 Speaker 6: last summer and the summer before, we've been seeing these 318 00:18:19,320 --> 00:18:22,000 Speaker 6: increasingly record temperatures. I mean, you know you talked about 319 00:18:22,000 --> 00:18:24,000 Speaker 6: in excess of foy degrees. We actually reached even forty 320 00:18:24,000 --> 00:18:26,639 Speaker 6: six degrees celsius in Spain. I think that was last week. 321 00:18:26,920 --> 00:18:28,399 Speaker 6: And I think the important thing is it's not just 322 00:18:28,480 --> 00:18:32,280 Speaker 6: the high temperatures, it's also the intense heat for longer periods, 323 00:18:32,480 --> 00:18:36,400 Speaker 6: affecting people's health, as you said, affecting wildfires. So it's 324 00:18:36,400 --> 00:18:39,080 Speaker 6: definitely getting more extreme, and we're seeing that that's kind 325 00:18:39,080 --> 00:18:41,560 Speaker 6: of summer period. Start earlier. We were already seeing heat 326 00:18:41,560 --> 00:18:44,000 Speaker 6: waves in Spain in April and finish even later. We're 327 00:18:44,040 --> 00:18:47,480 Speaker 6: expecting this heat evening continue into October for some places. 328 00:18:48,160 --> 00:18:52,360 Speaker 3: Okay, so the scorching weather is back then for another summer. 329 00:18:52,600 --> 00:18:55,920 Speaker 3: How prepared are parts of Europe for this? I mean, 330 00:18:56,000 --> 00:19:00,960 Speaker 3: some places in Europe are fairly accustomed to wildfires, but 331 00:19:01,280 --> 00:19:03,280 Speaker 3: how ready are Greece and other places? 332 00:19:04,200 --> 00:19:05,960 Speaker 6: Yeah, I mean Greece has definitely been the center of 333 00:19:06,040 --> 00:19:08,160 Speaker 6: kind of our wildfire coverage this summer. You know, every 334 00:19:08,160 --> 00:19:10,680 Speaker 6: single day we have new blazers, you know, on very 335 00:19:10,720 --> 00:19:14,120 Speaker 6: popular tourist spots of popular islands as well, but also 336 00:19:14,280 --> 00:19:17,040 Speaker 6: on the mainland. I mean, on the worst days in 337 00:19:17,040 --> 00:19:19,200 Speaker 6: Greece you will have you know, maybe sixty new blazers, 338 00:19:19,560 --> 00:19:21,679 Speaker 6: but they are quite responsive. One thing that's quite interesting 339 00:19:21,720 --> 00:19:23,399 Speaker 6: is there's much more of a kind of shared approach 340 00:19:23,400 --> 00:19:25,600 Speaker 6: in Europe, where you know, planes will be sent from 341 00:19:26,200 --> 00:19:29,040 Speaker 6: France or Italy to Greece to help out with wildfires. 342 00:19:29,400 --> 00:19:31,080 Speaker 6: But at the same time, you know, it is quite 343 00:19:31,080 --> 00:19:33,600 Speaker 6: worrying when lots of countries in that area are under 344 00:19:33,640 --> 00:19:36,160 Speaker 6: extreme risk of wildfire. Says, you know, something very small 345 00:19:36,160 --> 00:19:37,560 Speaker 6: could tip it all over to the edge. 346 00:19:38,160 --> 00:19:40,919 Speaker 3: Okay, So if it's a difficult wildfast season, then what 347 00:19:40,960 --> 00:19:44,480 Speaker 3: sort of tactics have been developed? You say, sharing equipment 348 00:19:44,560 --> 00:19:48,879 Speaker 3: is one. How else can countries in Europe try to 349 00:19:48,880 --> 00:19:50,760 Speaker 3: curb the damage? 350 00:19:51,080 --> 00:19:52,800 Speaker 6: Yeah, I mean I think it's definitely though the shard 351 00:19:52,840 --> 00:19:54,680 Speaker 6: its equipment is a big factor, but also there's a 352 00:19:54,720 --> 00:19:57,200 Speaker 6: lot more monitoring now. I mean, we have very advanced forecasts, 353 00:19:57,240 --> 00:19:58,879 Speaker 6: you know. The one thing is that wildfires are kind 354 00:19:58,880 --> 00:20:02,359 Speaker 6: of driven by dry conditions, by specific kinds of wind, 355 00:20:02,640 --> 00:20:04,920 Speaker 6: and by quite advanced marching technique. You can really tell 356 00:20:04,960 --> 00:20:07,119 Speaker 6: almost exactly where they're going to take place, and then 357 00:20:07,160 --> 00:20:09,919 Speaker 6: using southline imagery, European kind of forecasters can also tell 358 00:20:09,960 --> 00:20:12,520 Speaker 6: where the wildfires actually are, how they're doing with kind 359 00:20:12,520 --> 00:20:15,320 Speaker 6: of controlling blazers, and especially for the bigger, bigger issues, 360 00:20:15,359 --> 00:20:17,520 Speaker 6: that can really help to just a market situation and 361 00:20:17,560 --> 00:20:20,159 Speaker 6: to make sure that races are being used efficiently. 362 00:20:20,920 --> 00:20:23,440 Speaker 3: Do you think that there's a risk that wildfires could 363 00:20:23,480 --> 00:20:25,800 Speaker 3: spread further north? I mean, let's say to the UK. 364 00:20:26,200 --> 00:20:28,160 Speaker 3: Would we be equipped to deal with them, and would 365 00:20:28,200 --> 00:20:31,200 Speaker 3: it get hot enough dry enough here for that to happen? 366 00:20:32,320 --> 00:20:34,080 Speaker 6: Yeah, So, I mean I'm kind of checking these wildfire 367 00:20:34,080 --> 00:20:35,720 Speaker 6: maps almost every single day to see what it's going 368 00:20:35,760 --> 00:20:37,560 Speaker 6: to look like, and actually into next week there was 369 00:20:37,560 --> 00:20:39,280 Speaker 6: an increased risk in the UK. We've seen that a 370 00:20:39,280 --> 00:20:40,840 Speaker 6: few times a season where you kind of have this 371 00:20:40,960 --> 00:20:42,600 Speaker 6: high or very high wildfire risk. 372 00:20:42,880 --> 00:20:43,040 Speaker 9: Now. 373 00:20:43,040 --> 00:20:44,480 Speaker 6: Back in twenty twenty two, you know, we had the 374 00:20:44,480 --> 00:20:46,480 Speaker 6: hotest day ever and on that day we had some 375 00:20:46,560 --> 00:20:49,360 Speaker 6: wildfires in London. About twenty homes are destroyed. And since 376 00:20:49,400 --> 00:20:52,199 Speaker 6: then there's definitely been a much bigger concern about wildfires 377 00:20:52,240 --> 00:20:54,560 Speaker 6: in London and in the UK, and there's been lots 378 00:20:54,600 --> 00:20:56,920 Speaker 6: of consultations. There was kind of a whole kind of 379 00:20:56,920 --> 00:20:58,520 Speaker 6: period this year where there was people from you know, 380 00:20:58,640 --> 00:21:01,480 Speaker 6: from fire agencies and Spain, in France and Greece coming 381 00:21:01,520 --> 00:21:03,320 Speaker 6: to London and giving their advice. In the end that 382 00:21:03,359 --> 00:21:06,080 Speaker 6: did lead to some changes, you know, lots of the 383 00:21:06,119 --> 00:21:08,560 Speaker 6: staff in ord and now being traded specifically for wildfires. 384 00:21:09,080 --> 00:21:11,719 Speaker 6: They're even giving recommendations to local council to really reduce 385 00:21:11,760 --> 00:21:14,000 Speaker 6: that kind of risk of you know, of having barbecues 386 00:21:14,000 --> 00:21:15,879 Speaker 6: and parks and trying to reduce all those things that 387 00:21:15,920 --> 00:21:18,800 Speaker 6: could create wildfires because it is increasingly becoming a problem 388 00:21:18,880 --> 00:21:20,639 Speaker 6: in the UK. We are seeing hot of summers. We 389 00:21:20,680 --> 00:21:22,159 Speaker 6: are seeing it's not just about hot of summer, it's 390 00:21:22,160 --> 00:21:24,560 Speaker 6: about having those specific days where the heat really spiked. 391 00:21:24,600 --> 00:21:26,120 Speaker 6: As you said, you know into next week there will 392 00:21:26,119 --> 00:21:28,080 Speaker 6: be some days where it could reach thirty three degrees 393 00:21:28,080 --> 00:21:30,080 Speaker 6: and although that doesn't seem too hot, that can be 394 00:21:30,200 --> 00:21:32,040 Speaker 6: enough to course some wildfires. 395 00:21:32,720 --> 00:21:37,520 Speaker 3: So then also the other big market that is involved 396 00:21:37,520 --> 00:21:39,720 Speaker 3: in this is insurance in you know, the homes you 397 00:21:39,760 --> 00:21:42,080 Speaker 3: talk about being destroyed, I mean, that's all of that 398 00:21:42,119 --> 00:21:46,359 Speaker 3: has huge insurance implications. How are they dealing with the 399 00:21:46,400 --> 00:21:49,000 Speaker 3: optic and the issues around climate change? 400 00:21:49,520 --> 00:21:51,240 Speaker 6: Yeah, I mean definitely when when you take a step back, 401 00:21:51,280 --> 00:21:54,160 Speaker 6: all of these kind of extreme weather events sometimes seem isolated, 402 00:21:54,200 --> 00:21:56,040 Speaker 6: but as you said, there is a general trend about 403 00:21:56,040 --> 00:21:58,639 Speaker 6: climate change making them more and more frequent, and insurers 404 00:21:58,640 --> 00:22:00,840 Speaker 6: are definitely very aware of this, definitely warned about the 405 00:22:00,880 --> 00:22:02,960 Speaker 6: risks of climate change. And although they're not kind of 406 00:22:02,960 --> 00:22:05,199 Speaker 6: there yet, there are many insurances have said that some regions, 407 00:22:05,200 --> 00:22:08,080 Speaker 6: some places will become unensurable in the future as these 408 00:22:08,080 --> 00:22:10,560 Speaker 6: claims are getting bigger and more frequent. I mean this 409 00:22:10,680 --> 00:22:12,200 Speaker 6: year that you know, the Costes event in Europe was 410 00:22:12,240 --> 00:22:14,480 Speaker 6: actually a flooding event in southern Germany which kind of 411 00:22:14,520 --> 00:22:16,639 Speaker 6: came to about five billion, of which two point two 412 00:22:16,640 --> 00:22:19,520 Speaker 6: billion the US dollars was an insured loss. But you know, 413 00:22:19,720 --> 00:22:21,960 Speaker 6: whether it's kind of you know, the rain, the fires, 414 00:22:22,080 --> 00:22:24,520 Speaker 6: or just the extreme temperatures, those losses are becoming more 415 00:22:24,520 --> 00:22:26,640 Speaker 6: and more and I said more and more frequent every year. 416 00:22:26,840 --> 00:22:29,000 Speaker 6: So insurers are definitely kind of very aware of this 417 00:22:29,000 --> 00:22:29,840 Speaker 6: this trend. 418 00:22:30,359 --> 00:22:34,040 Speaker 3: And we have had warnings in recent years and numerous 419 00:22:34,040 --> 00:22:38,480 Speaker 3: warnings of the risks of under insuring for climate change. 420 00:22:38,520 --> 00:22:40,359 Speaker 3: That's been a real worry of the industry. I mean, 421 00:22:40,400 --> 00:22:42,359 Speaker 3: why do you think aiming in particular the fars A 422 00:22:42,440 --> 00:22:45,080 Speaker 3: spreading to such an extent this summer. 423 00:22:45,680 --> 00:22:47,240 Speaker 6: The thing that the kind of fires is that it 424 00:22:47,280 --> 00:22:48,760 Speaker 6: can even be a hangover from last year. You know, 425 00:22:48,800 --> 00:22:51,199 Speaker 6: it's about drying us and the soil, It's about different winds, 426 00:22:51,240 --> 00:22:53,480 Speaker 6: and you know, if you have multiple years of pretty 427 00:22:53,520 --> 00:22:55,800 Speaker 6: extreme temperatures that can kind of compound that effect. You know, 428 00:22:55,840 --> 00:22:58,200 Speaker 6: we've had about two three years of pretty hot summers, 429 00:22:58,560 --> 00:23:01,520 Speaker 6: so in Greece that's really a problem. And it's also 430 00:23:01,560 --> 00:23:03,600 Speaker 6: the fact that this can extend much later into the 431 00:23:03,640 --> 00:23:05,440 Speaker 6: year than it would have. Otherwise we'd have seen a 432 00:23:05,480 --> 00:23:08,360 Speaker 6: wildfire season really focused on July August this year, Earlie 433 00:23:08,440 --> 00:23:11,600 Speaker 6: Junior are already seeing those wildfires expanding in parts of Europe, 434 00:23:11,800 --> 00:23:13,520 Speaker 6: and it also puts countries on edge. I mean, Spain 435 00:23:13,520 --> 00:23:15,080 Speaker 6: has been the focus of it For the last few weeks. 436 00:23:15,080 --> 00:23:17,720 Speaker 6: There haven't been any major places, but you know, everyone's 437 00:23:17,800 --> 00:23:20,119 Speaker 6: kind of unread alad it kind of causes some disruption 438 00:23:20,160 --> 00:23:22,359 Speaker 6: as locally, and yeah, we have to be ready because 439 00:23:22,359 --> 00:23:24,760 Speaker 6: it can expand. As I said, wildfires just in nature 440 00:23:24,760 --> 00:23:26,439 Speaker 6: of them can mean that very quickly they can just 441 00:23:26,560 --> 00:23:28,600 Speaker 6: kind of flare up and become a huge problem. 442 00:23:28,760 --> 00:23:32,880 Speaker 3: Are the far authorities in various countries are they concerned 443 00:23:32,880 --> 00:23:35,359 Speaker 3: about what may happen next summer? I mean, we have 444 00:23:35,520 --> 00:23:39,439 Speaker 3: had kind of an optic and more close monitoring of 445 00:23:39,480 --> 00:23:44,160 Speaker 3: these peak temperatures across different European countries over successive summers. 446 00:23:44,520 --> 00:23:46,480 Speaker 3: Is a concern that this going to get worse next year? 447 00:23:47,520 --> 00:23:49,440 Speaker 6: Yeah, I mean when it comes to extreme summers, I 448 00:23:49,440 --> 00:23:52,240 Speaker 6: think it seems that different forecasters always say that you know, 449 00:23:52,400 --> 00:23:53,760 Speaker 6: you know, they can't really tell the weather will be 450 00:23:53,760 --> 00:23:55,480 Speaker 6: like next summer. It's obviously a long way away, but 451 00:23:55,760 --> 00:23:58,120 Speaker 6: you know, more and more likely each summer we'll see 452 00:23:58,400 --> 00:24:01,560 Speaker 6: records broken extreme heat and more and more kind of 453 00:24:01,560 --> 00:24:04,280 Speaker 6: heat waves, which then leads to those fires. So that's 454 00:24:04,359 --> 00:24:05,920 Speaker 6: kind of the general trend. I mean, we are having 455 00:24:05,960 --> 00:24:08,119 Speaker 6: kind of an El Nino La Nina effect. You know, 456 00:24:08,160 --> 00:24:10,080 Speaker 6: the Elino is kind of ending and Latini is coming in, 457 00:24:10,080 --> 00:24:12,439 Speaker 6: which actually kind of reverses like that trend slightly and 458 00:24:12,480 --> 00:24:15,560 Speaker 6: actually causes more increased risk of hurricanes in the Atlantic, 459 00:24:15,600 --> 00:24:18,119 Speaker 6: which is a whole other, you know, other issue for insurers. 460 00:24:18,440 --> 00:24:21,359 Speaker 6: But as far as temperatures go, you know, records are 461 00:24:21,480 --> 00:24:22,959 Speaker 6: going to continue to be broken. I mean, that's one thing. 462 00:24:22,960 --> 00:24:24,880 Speaker 6: We're kind of sure. We got the hottest day ever 463 00:24:25,000 --> 00:24:27,199 Speaker 6: globally in July. That was two days in a row 464 00:24:27,240 --> 00:24:30,119 Speaker 6: we got that. We've been having, you know, consecutive months 465 00:24:30,119 --> 00:24:32,879 Speaker 6: of record temperatures every on Earth, so it just seems 466 00:24:32,880 --> 00:24:34,280 Speaker 6: like things getting hot everywhere. 467 00:24:34,400 --> 00:24:37,600 Speaker 3: That was Bloomberg's aim and far hat there as London, 468 00:24:37,760 --> 00:24:42,000 Speaker 3: Paris and Berlin our brace to see yet more soaring 469 00:24:42,080 --> 00:24:47,480 Speaker 3: temperatures and another summer of climate change impact. I'm Caroline 470 00:24:47,480 --> 00:24:49,840 Speaker 3: Hepge here in London. You can catch us every weekday 471 00:24:49,880 --> 00:24:52,520 Speaker 3: morning for Bloomberg Daybreak you at beginning at six am 472 00:24:52,560 --> 00:24:55,680 Speaker 3: in London. That's one am on war Street, Tom. 473 00:24:55,800 --> 00:24:58,679 Speaker 2: Thank you, Caroline, And coming up on Bloomberg day Break weekend, 474 00:24:58,680 --> 00:25:01,600 Speaker 2: we'll look ahead to the latest reading on GDP from 475 00:25:01,600 --> 00:25:05,359 Speaker 2: the world's third largest economy. I'm Tom Busby and this 476 00:25:05,560 --> 00:25:19,679 Speaker 2: is Bloomberg. This is Bloomberg day Break weekend, our global 477 00:25:19,680 --> 00:25:21,720 Speaker 2: look ahead at the top stories for investors in the 478 00:25:21,760 --> 00:25:24,960 Speaker 2: coming week. I'm Tom Busby in New York. Last week, 479 00:25:25,000 --> 00:25:28,600 Speaker 2: global expectations for the Japanese economy and its markets were 480 00:25:28,640 --> 00:25:32,160 Speaker 2: completely upended, making the path for the Bank of Japan's 481 00:25:32,200 --> 00:25:35,760 Speaker 2: monetary policy less clear. Ahead of the latest reading of 482 00:25:35,840 --> 00:25:39,439 Speaker 2: Japan's GDP out this week, let's get to Bloomberg Daybreak 483 00:25:39,440 --> 00:25:42,640 Speaker 2: Asia co host Doug Krisner for a closer look Tom. 484 00:25:42,680 --> 00:25:45,800 Speaker 1: Before last week, the consensus view on Japan was that 485 00:25:45,840 --> 00:25:49,560 Speaker 1: the economy was on the end. Wages were rising, prices 486 00:25:49,560 --> 00:25:53,959 Speaker 1: were up, inflation had returned and was proving sustainable, and 487 00:25:54,040 --> 00:25:57,679 Speaker 1: after many months of being above its two percent inflation target, 488 00:25:58,080 --> 00:26:01,520 Speaker 1: the Bank of Japan tightened at its aligned meeting. BOJ 489 00:26:01,680 --> 00:26:04,920 Speaker 1: Governor Kazuo Uwaita said the decision was based on data 490 00:26:04,960 --> 00:26:08,600 Speaker 1: showing developments on the economy and inflation were in line 491 00:26:08,640 --> 00:26:13,320 Speaker 1: with previous expectations. Earlier, I spoke with Stephanie Leung, chief 492 00:26:13,359 --> 00:26:17,080 Speaker 1: investment officer at Stashaway based in Hong Kong, and I 493 00:26:17,160 --> 00:26:20,000 Speaker 1: asked for her view on the boj's recent move. 494 00:26:20,280 --> 00:26:23,800 Speaker 10: Given that Japan has gone through a deflation for the 495 00:26:23,880 --> 00:26:26,679 Speaker 10: last thirty years, it is prudent for the BOJ to 496 00:26:26,760 --> 00:26:29,720 Speaker 10: kind of be a bit more conservative in that move. 497 00:26:30,080 --> 00:26:33,480 Speaker 10: I think the problem with the recent move is perhaps 498 00:26:33,720 --> 00:26:36,879 Speaker 10: more in the timing of things. So they picked the summer. 499 00:26:37,480 --> 00:26:40,679 Speaker 10: I think when liquidity is actually quite thin and a 500 00:26:40,680 --> 00:26:43,240 Speaker 10: lot of people are on leave, they kind of wish 501 00:26:43,400 --> 00:26:45,639 Speaker 10: that they could move the currency with this kind of 502 00:26:45,680 --> 00:26:48,280 Speaker 10: thinner liquidity, and perhaps they got much more than what 503 00:26:48,320 --> 00:26:50,280 Speaker 10: they wished for, and it says that it moved the 504 00:26:50,359 --> 00:26:53,120 Speaker 10: currency in a very very valid way. At the same time, 505 00:26:53,160 --> 00:26:55,880 Speaker 10: they stopped ETF purchases as well, and that I mean, 506 00:26:56,080 --> 00:26:59,560 Speaker 10: let's remember the reason why BOJ is hiking is because, 507 00:26:59,680 --> 00:27:03,000 Speaker 10: I mean, they are actually quite confident of the way 508 00:27:03,000 --> 00:27:05,040 Speaker 10: the economy is going. So I think in terms of 509 00:27:05,080 --> 00:27:07,879 Speaker 10: fundamental story, there's still a lot of progress, but I 510 00:27:07,920 --> 00:27:09,440 Speaker 10: mean a lot of this is technical. 511 00:27:09,600 --> 00:27:12,760 Speaker 1: Stephanie Leung there from Stashuay, Now, the point she made 512 00:27:12,800 --> 00:27:16,800 Speaker 1: about Japan being in deflation for thirty years is important 513 00:27:17,000 --> 00:27:19,720 Speaker 1: and not to be underestimated. You know, there's an entire 514 00:27:19,840 --> 00:27:24,280 Speaker 1: generation in Japan that's known only deflation. Now, the other 515 00:27:24,280 --> 00:27:26,280 Speaker 1: thing to consider in all of this, especially in the 516 00:27:26,320 --> 00:27:29,440 Speaker 1: last several years, is the strength of the US dollar 517 00:27:29,800 --> 00:27:33,960 Speaker 1: that has added to Japan's inflationary pressures. I also spoke 518 00:27:34,000 --> 00:27:38,120 Speaker 1: earlier with Carlos Casanova, he is senior Asia economist at UBP. 519 00:27:38,520 --> 00:27:42,520 Speaker 11: First half week yen triggering important inflation. As a result 520 00:27:42,600 --> 00:27:46,920 Speaker 11: of that, you instigate changes in corporate behavior, including increasing wages. 521 00:27:47,080 --> 00:27:49,400 Speaker 11: That increase was the highest than thirty years, So definitely 522 00:27:49,400 --> 00:27:52,760 Speaker 11: that part of the cycle has materialized, and then down 523 00:27:52,800 --> 00:27:55,520 Speaker 11: the line that should translate into stronger domestic consumption and 524 00:27:55,680 --> 00:27:59,080 Speaker 11: endogenous inflation. The third part of that puzzle is what 525 00:27:59,119 --> 00:28:02,760 Speaker 11: we haven't quite seni yet. Although data did show real 526 00:28:02,840 --> 00:28:05,400 Speaker 11: wages increasing by one point one percent for the first 527 00:28:05,400 --> 00:28:07,800 Speaker 11: time since twenty twenty one, but in none of itself, 528 00:28:07,840 --> 00:28:11,040 Speaker 11: that is not sufficient to justify the hawkish piper. 529 00:28:11,160 --> 00:28:12,320 Speaker 9: So I think. 530 00:28:12,160 --> 00:28:15,280 Speaker 11: Inflation has been high, but it's predominantly driven by US 531 00:28:15,320 --> 00:28:18,400 Speaker 11: dollar strength. And so Bank of Japan really really has 532 00:28:18,440 --> 00:28:21,680 Speaker 11: taken a gamble here because the preliminary data does point 533 00:28:21,800 --> 00:28:24,520 Speaker 11: towards this virtual cycle sort of taking hold in the 534 00:28:24,520 --> 00:28:26,959 Speaker 11: second half of the year, but they moved ahead of 535 00:28:27,040 --> 00:28:29,160 Speaker 11: having visibility on that front. 536 00:28:29,400 --> 00:28:34,240 Speaker 1: Is Carlos Casanova, senior economist at UBP. Joining us now 537 00:28:34,320 --> 00:28:37,280 Speaker 1: for some discussion on the Japanese economy and the BOJ 538 00:28:37,880 --> 00:28:41,840 Speaker 1: is our own Paul Dobson. Paul is Bloomberg Executive editor 539 00:28:41,880 --> 00:28:45,840 Speaker 1: for Asia Markets. He joins us from Singapore. Paul, the 540 00:28:45,920 --> 00:28:48,960 Speaker 1: reaction in markets to the boj's tightening should really come 541 00:28:49,200 --> 00:28:54,160 Speaker 1: as no surprise, especially directionally in terms of yen strengthening. 542 00:28:54,480 --> 00:28:56,480 Speaker 1: I think it's fair to say that it was magnified 543 00:28:56,520 --> 00:28:58,840 Speaker 1: by that unwinding of the carry trade. To be sure, 544 00:28:59,080 --> 00:29:02,120 Speaker 1: how are you making sense of the ripple effects that 545 00:29:02,160 --> 00:29:03,320 Speaker 1: we have seen in markets? 546 00:29:03,760 --> 00:29:06,400 Speaker 12: So I think that the starting point has to be 547 00:29:06,560 --> 00:29:09,360 Speaker 12: to think about that carry trade and how much of 548 00:29:09,400 --> 00:29:14,160 Speaker 12: the world has been taking on these leveraged bets based 549 00:29:14,200 --> 00:29:18,160 Speaker 12: on the yen being the last kind of funding currency 550 00:29:18,360 --> 00:29:22,240 Speaker 12: at particularly low interest rates that's out there, and so 551 00:29:22,400 --> 00:29:25,920 Speaker 12: that really has snowballed in recent years and become a 552 00:29:26,120 --> 00:29:29,840 Speaker 12: very important theme. Now, on top of that, you've had 553 00:29:29,880 --> 00:29:33,160 Speaker 12: further depreciation in the end for much of this year, 554 00:29:33,680 --> 00:29:36,760 Speaker 12: and that's partly the boj's fault. So listening to some 555 00:29:36,840 --> 00:29:39,800 Speaker 12: of what you've been saying already, just now, you know 556 00:29:39,880 --> 00:29:43,040 Speaker 12: the Bank of Japan was very very slow and very 557 00:29:43,160 --> 00:29:47,080 Speaker 12: very careful about when it's going to choose to raise 558 00:29:47,080 --> 00:29:49,600 Speaker 12: interest rates. The market had been expecting it to come, 559 00:29:50,080 --> 00:29:52,840 Speaker 12: you know, earlier in the year, and the BOJ chose 560 00:29:52,920 --> 00:29:54,800 Speaker 12: not to move on a couple of occasions when the 561 00:29:54,800 --> 00:30:00,000 Speaker 12: window was already open. It had kind of nurtured the market, 562 00:30:00,240 --> 00:30:03,160 Speaker 12: but to such an extent that people had gotten very 563 00:30:03,160 --> 00:30:06,360 Speaker 12: complacent about the idea that the BOJ wasn't going to 564 00:30:06,800 --> 00:30:11,000 Speaker 12: move aggressively. So for them then to do this hike 565 00:30:11,040 --> 00:30:13,160 Speaker 12: at a time when maybe the market wasn't quite so 566 00:30:13,280 --> 00:30:16,800 Speaker 12: well prepared, did really cause something of a shock and 567 00:30:17,120 --> 00:30:19,680 Speaker 12: start the sort of snowball rolling down the hill in 568 00:30:19,760 --> 00:30:24,760 Speaker 12: terms of yen appreciation. What they couldn't have foreseen, and 569 00:30:24,800 --> 00:30:27,240 Speaker 12: what was particularly bad luck was that two days later 570 00:30:27,280 --> 00:30:31,360 Speaker 12: we'd have that really weak payrolls data out of the US, 571 00:30:31,480 --> 00:30:34,480 Speaker 12: which led to a weaker dollar and increase beats that 572 00:30:34,520 --> 00:30:37,320 Speaker 12: the Federal Reserve will need to start cutting interest rates soon. 573 00:30:37,360 --> 00:30:41,560 Speaker 12: And that really was the second kind of push that 574 00:30:41,720 --> 00:30:45,320 Speaker 12: really ignited that big unwind in the carry trade and 575 00:30:45,360 --> 00:30:47,520 Speaker 12: then sent those ripples across the rest of the world's 576 00:30:47,520 --> 00:30:48,480 Speaker 12: financial markets. 577 00:30:48,600 --> 00:30:51,440 Speaker 1: So what have these developments done to the thinking on 578 00:30:51,600 --> 00:30:54,440 Speaker 1: what the Bank of Japan may do next. Do you 579 00:30:54,520 --> 00:30:57,280 Speaker 1: think they're going to be much more cautious now that 580 00:30:57,360 --> 00:31:00,560 Speaker 1: they've become I don't want to say scared, but very 581 00:31:00,600 --> 00:31:04,440 Speaker 1: concerned about the way in which markets have been trading 582 00:31:04,480 --> 00:31:07,480 Speaker 1: in this volatile fashion. Or are they going to lean 583 00:31:07,520 --> 00:31:10,959 Speaker 1: into solving the inflation problem in Japan? Which is it? 584 00:31:11,080 --> 00:31:14,680 Speaker 12: So after two days are very volatile moves in financial markets. 585 00:31:14,720 --> 00:31:17,560 Speaker 12: We heard from the Deputy Governor ochidah and he seemed 586 00:31:17,760 --> 00:31:21,560 Speaker 12: to seek to calm those expectations somewhat. You might call 587 00:31:21,600 --> 00:31:24,840 Speaker 12: it activating the BOJ put He said, hey, you know, 588 00:31:24,880 --> 00:31:28,120 Speaker 12: if markets are very volatile like this, this isn't when 589 00:31:28,320 --> 00:31:31,360 Speaker 12: the BOJ is going to continue to be hiking interest rates. 590 00:31:31,880 --> 00:31:35,120 Speaker 12: That would be kind of counter productive. So he stilled 591 00:31:35,200 --> 00:31:37,400 Speaker 12: some of the worst fears in the market about how 592 00:31:37,440 --> 00:31:40,400 Speaker 12: fast the BOJ may move and what sort of circumstances 593 00:31:40,400 --> 00:31:43,760 Speaker 12: it would be looking at for those moves, and that 594 00:31:43,840 --> 00:31:47,240 Speaker 12: did do something to settle things down. The longer term 595 00:31:47,360 --> 00:31:52,280 Speaker 12: expectations aren't exactly for the BOJ to be moving aggressively. 596 00:31:52,320 --> 00:31:55,720 Speaker 12: A lot of the analysts are talking about December or 597 00:31:55,840 --> 00:31:58,360 Speaker 12: January for the next hike, and the market is not 598 00:31:58,480 --> 00:32:01,960 Speaker 12: pricing in a very aggressive part. What we'd had from 599 00:32:02,000 --> 00:32:06,360 Speaker 12: the BOJ when it raised interest rates was a discourse 600 00:32:06,400 --> 00:32:08,600 Speaker 12: that seemed to suggest that it could be moving much 601 00:32:08,640 --> 00:32:11,480 Speaker 12: more quickly than that. Now the market is back to 602 00:32:11,520 --> 00:32:14,560 Speaker 12: pricing a more gradual pace, and maybe there will be 603 00:32:14,680 --> 00:32:17,240 Speaker 12: enough to help to assuage some of the worst fears 604 00:32:17,240 --> 00:32:19,000 Speaker 12: in the market. But what we do know is that 605 00:32:19,040 --> 00:32:22,640 Speaker 12: the BOJ is determined to continue with its hiking path 606 00:32:22,840 --> 00:32:25,320 Speaker 12: or other things being equal, and so long the term, 607 00:32:25,800 --> 00:32:29,600 Speaker 12: those people that have those long leverage positions based on 608 00:32:29,640 --> 00:32:31,960 Speaker 12: the premise of very low interest rates in Japan will 609 00:32:32,000 --> 00:32:34,040 Speaker 12: need to think twice about whether they want to hold 610 00:32:34,080 --> 00:32:34,600 Speaker 12: onto them. 611 00:32:34,760 --> 00:32:36,920 Speaker 1: As I mentioned earlier in the week ahead, we'll be 612 00:32:36,960 --> 00:32:41,080 Speaker 1: getting the Japanese second quarter GDP print again. Here is 613 00:32:41,240 --> 00:32:45,520 Speaker 1: Carlos Casanova, Senior Asia economist at UBP on what we 614 00:32:45,600 --> 00:32:46,680 Speaker 1: are likely to see. 615 00:32:47,080 --> 00:32:50,040 Speaker 11: It's a backward looking indicator, so I think it's going 616 00:32:50,040 --> 00:32:53,400 Speaker 11: to disappoint. And remember that the economy was in a 617 00:32:53,440 --> 00:32:58,280 Speaker 11: recession in the first quarter. Consumption and capital expenditure was 618 00:32:58,760 --> 00:33:04,000 Speaker 11: contraction ay as a result of high inflation, squeezing purchasing 619 00:33:04,000 --> 00:33:06,960 Speaker 11: power of households in Japan. Because all of their imports 620 00:33:07,040 --> 00:33:09,240 Speaker 11: net importer and all of their imports are more expensive. 621 00:33:09,880 --> 00:33:12,959 Speaker 11: But also companies have been adjusting to higher nominal wages 622 00:33:13,160 --> 00:33:17,000 Speaker 11: by reducing the amount of that they spend on capital expenditures. 623 00:33:17,480 --> 00:33:20,120 Speaker 11: So I think that trend is going to continue into 624 00:33:20,160 --> 00:33:22,360 Speaker 11: the second quarter, and of course, if we see a 625 00:33:22,400 --> 00:33:25,400 Speaker 11: disappointing GDP reading, that is going to be quite negative 626 00:33:25,680 --> 00:33:26,320 Speaker 11: for markets. 627 00:33:26,480 --> 00:33:30,280 Speaker 1: That is Carlos Casanova from UBP back to my colleague 628 00:33:30,360 --> 00:33:34,160 Speaker 1: Paul Dobson in Singapore. What are we expecting here in 629 00:33:34,400 --> 00:33:37,560 Speaker 1: quantitative terms on the GDP print? Do we have a number? 630 00:33:37,680 --> 00:33:40,480 Speaker 12: We do, and it's not an unfavorable number based on 631 00:33:40,520 --> 00:33:46,400 Speaker 12: analyst estimates. Expectations are the quarter on quarter GDP will 632 00:33:46,440 --> 00:33:51,320 Speaker 12: increase point six percent. That's after minus point seven percent 633 00:33:51,400 --> 00:33:55,240 Speaker 12: the previous quarter. So finally, some growth at least is 634 00:33:55,240 --> 00:33:59,680 Speaker 12: what the street is looking for. I think it's interesting 635 00:33:59,760 --> 00:34:02,400 Speaker 12: what what Carlos Ksenova was saying that I don't know 636 00:34:02,400 --> 00:34:05,600 Speaker 12: whether good news or bad news is worse for the 637 00:34:05,640 --> 00:34:08,319 Speaker 12: market right now. If the growth is too strong, then 638 00:34:08,400 --> 00:34:11,400 Speaker 12: you know, the market might start to reprice the BHA 639 00:34:11,600 --> 00:34:15,439 Speaker 12: expectations again for a more aggressive stance, and that might 640 00:34:15,480 --> 00:34:20,160 Speaker 12: whip up the volatility that we've been seeing in recent days. Again, 641 00:34:20,680 --> 00:34:23,680 Speaker 12: whereas you know, obviously two weaker number and people will 642 00:34:23,719 --> 00:34:25,680 Speaker 12: be worried about the growth outlook and whether the BOJ 643 00:34:25,840 --> 00:34:28,560 Speaker 12: will be able to hike at all from here, So 644 00:34:29,760 --> 00:34:31,840 Speaker 12: you know, it will certainly be a number that there 645 00:34:31,840 --> 00:34:33,479 Speaker 12: will be a lot of focus on and could cause 646 00:34:33,520 --> 00:34:35,000 Speaker 12: quite a lot of volatility as well. 647 00:34:35,040 --> 00:34:37,440 Speaker 1: I want to take a brief look at household spending 648 00:34:37,520 --> 00:34:39,640 Speaker 1: in Japan because data that I looked at in the 649 00:34:39,719 --> 00:34:43,800 Speaker 1: most recent week indicated a second month of decline during 650 00:34:43,800 --> 00:34:46,400 Speaker 1: the month of June. And as I understand it, Paul, 651 00:34:47,560 --> 00:34:50,680 Speaker 1: household spending in Japan accounts for more than half of 652 00:34:50,800 --> 00:34:55,000 Speaker 1: overall domestic GDP. When you look at the state of 653 00:34:55,040 --> 00:34:57,320 Speaker 1: the consumer in Japan, what do we see? 654 00:34:57,640 --> 00:34:59,400 Speaker 12: So I think you know what we want to do 655 00:34:59,440 --> 00:35:01,319 Speaker 12: is go right back to the start what you were 656 00:35:01,360 --> 00:35:06,399 Speaker 12: saying earlier about how a whole generation has lived through 657 00:35:06,400 --> 00:35:10,399 Speaker 12: this kind of deflationary environment and how we're finally at 658 00:35:10,400 --> 00:35:13,239 Speaker 12: a point where we've got some wage growth coming through 659 00:35:13,280 --> 00:35:16,600 Speaker 12: the economy, We've got companies feeling like they do have 660 00:35:16,719 --> 00:35:21,200 Speaker 12: some ability to raise prices. We're getting back into an 661 00:35:21,200 --> 00:35:24,680 Speaker 12: inflationary mindset. That's really what the BOJ wants. It's what 662 00:35:24,960 --> 00:35:27,480 Speaker 12: the government has been pushing for as well for a 663 00:35:27,560 --> 00:35:30,040 Speaker 12: long time, and that's why they've been so very careful 664 00:35:30,280 --> 00:35:33,200 Speaker 12: to try to not disrupt things, to try to be 665 00:35:33,320 --> 00:35:36,640 Speaker 12: able to raise interest rates without causing too much disruption, 666 00:35:36,719 --> 00:35:40,160 Speaker 12: and probably why they're alarmed by what we've seen in 667 00:35:40,200 --> 00:35:43,839 Speaker 12: the markets in reaction to that rate hike. So they 668 00:35:43,840 --> 00:35:46,680 Speaker 12: will want to see continuing wage growth, and they will 669 00:35:46,719 --> 00:35:50,920 Speaker 12: want to see continuing confidence among consumers to keep on spending, 670 00:35:50,920 --> 00:35:53,080 Speaker 12: and they will want companies to be able to continue 671 00:35:53,120 --> 00:35:55,840 Speaker 12: to raise prices as well, to have that pricing power 672 00:35:55,880 --> 00:35:57,960 Speaker 12: which we hadn't seen for so long, and we have 673 00:35:58,080 --> 00:36:01,680 Speaker 12: been seeing in Japan in recent years. That said, you know, 674 00:36:01,719 --> 00:36:03,319 Speaker 12: we are seeing a little bit of a slow down, 675 00:36:03,360 --> 00:36:06,200 Speaker 12: a little bit less confidence among consumers at this moment 676 00:36:06,239 --> 00:36:08,800 Speaker 12: in time, and that will be troublesome for the BOJ, 677 00:36:09,120 --> 00:36:11,799 Speaker 12: you know. So what I think the next really big 678 00:36:11,880 --> 00:36:14,800 Speaker 12: kind of talking point will be for the policymakers comes 679 00:36:14,840 --> 00:36:19,160 Speaker 12: around October time, when we'll get more wage negotiations, when 680 00:36:19,200 --> 00:36:22,520 Speaker 12: we'll be able to see if pay growth continues, and 681 00:36:22,560 --> 00:36:24,880 Speaker 12: if that does, then hopefully that will give the consumer 682 00:36:24,960 --> 00:36:28,239 Speaker 12: the confidence to continue spending, and that will continue that 683 00:36:28,320 --> 00:36:31,480 Speaker 12: inflationary cycle that has just about kind of been established, 684 00:36:31,520 --> 00:36:32,760 Speaker 12: but it's still very fragile. 685 00:36:33,040 --> 00:36:34,799 Speaker 1: I think it's important to point out at the same 686 00:36:34,880 --> 00:36:37,879 Speaker 1: time that the week Japanese currency has played a very 687 00:36:37,920 --> 00:36:42,480 Speaker 1: crucial role in supporting many major companies in Japan, especially 688 00:36:42,560 --> 00:36:46,920 Speaker 1: those exporters. The value of their earnings overseas is boosted 689 00:36:46,960 --> 00:36:49,000 Speaker 1: by that weakness. And if you look at a company, 690 00:36:49,080 --> 00:36:53,800 Speaker 1: let's say Toyota recently reporting record profits. So this cuts 691 00:36:53,840 --> 00:36:54,840 Speaker 1: both ways, does it not? 692 00:36:55,480 --> 00:36:58,520 Speaker 12: Yeah? Absolutely, I mean so on the one hand, you 693 00:36:58,560 --> 00:37:01,680 Speaker 12: do have the benefits for those exporters of a week yen. 694 00:37:01,800 --> 00:37:04,319 Speaker 12: On the other hand, if the end does strengthen, then 695 00:37:04,360 --> 00:37:06,919 Speaker 12: it should make things a little bit better for importers 696 00:37:06,920 --> 00:37:09,239 Speaker 12: and therefore should make it a little bit easier for 697 00:37:09,280 --> 00:37:12,160 Speaker 12: the consumer as well. So it does cut both ways. 698 00:37:12,280 --> 00:37:14,640 Speaker 12: I think what we saw is that the yen weakness 699 00:37:14,719 --> 00:37:17,279 Speaker 12: was just so pronounced that even those companies that have 700 00:37:18,239 --> 00:37:22,160 Speaker 12: benefited from exporting in the past, even they were complaining 701 00:37:22,320 --> 00:37:24,200 Speaker 12: the yen was too weak and that they would rather 702 00:37:24,280 --> 00:37:27,399 Speaker 12: see it stabilize or strengthen a little bit. So from 703 00:37:27,400 --> 00:37:30,319 Speaker 12: that perspective, at least, you know behind the idea that 704 00:37:30,320 --> 00:37:32,320 Speaker 12: the boj should be hiking and should be pushing the 705 00:37:32,360 --> 00:37:36,640 Speaker 12: currency stronger again, just not please very add these humongous 706 00:37:36,719 --> 00:37:39,680 Speaker 12: the aggressive pace of change that we've seen over the 707 00:37:39,719 --> 00:37:40,520 Speaker 12: past few days. 708 00:37:40,680 --> 00:37:42,920 Speaker 1: Paul, thank you so much for joining us and helping 709 00:37:43,000 --> 00:37:45,360 Speaker 1: us understand a little bit better what's been happening in 710 00:37:45,440 --> 00:37:48,600 Speaker 1: Japan and where things may go from here. Paul Dobson 711 00:37:49,120 --> 00:37:52,920 Speaker 1: is Bloomberg Executive Editor for Asia Markets. I'm Doug Prisner, 712 00:37:52,960 --> 00:37:55,960 Speaker 1: and you can join Brian Curtis and myself weekdays here 713 00:37:55,960 --> 00:37:59,120 Speaker 1: for Bloomberg Daybreak Asia, beginning at eight a m. In 714 00:37:59,239 --> 00:38:01,600 Speaker 1: Hong Kong eight pm on Wall Street. 715 00:38:01,640 --> 00:38:04,279 Speaker 2: Tom our thanks to Doug, and that does it for 716 00:38:04,320 --> 00:38:07,080 Speaker 2: this edition of Bloomberg day Break Weekend. Join us again 717 00:38:07,120 --> 00:38:09,080 Speaker 2: Monday morning at five am Wall Street Time for the 718 00:38:09,160 --> 00:38:11,799 Speaker 2: latest on markets overseas and the news you need to 719 00:38:11,800 --> 00:38:15,120 Speaker 2: start your day. I'm Tom Buzzby. Stay with us. Top 720 00:38:15,160 --> 00:38:18,160 Speaker 2: stories and global business headlines are coming up right now.