WEBVTT - Bloomberg Daybreak Weekend: Banks, CPI, SCOTUS, Spain 0:00:02.520 --> 0:00:05.480 This is Bloomberg Daybreak Weekend, our global look at the 0:00:05.519 --> 0:00:08.320 top stories in the coming week from our Daybreak anchors 0:00:08.400 --> 0:00:11.400 all around the world. Straight ahead on the program, more 0:00:11.480 --> 0:00:14.000 bank earnings and there could be some surprises. 0:00:14.480 --> 0:00:18.160 I'm deg Chrisner. After three decades of deflation in Japan, 0:00:18.640 --> 0:00:20.720 we look at the flip side inflation. 0:00:21.040 --> 0:00:24.040 I'm Kaylee Lines in Washington, where the Senate Judiciary Committee 0:00:24.120 --> 0:00:26.759 is getting such a vote on a Supreme Court ethics bill. 0:00:26.960 --> 0:00:29.560 I'm Stephen Carolyn London. We're looking ahead to the general 0:00:29.600 --> 0:00:33.880 election in Spain and the challenges facing Prime Minister Pedro Sanchez. 0:00:35.440 --> 0:00:39.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:39.479 --> 0:00:42.959 Eleve them three on New York Bloomberg ninety nine to one, Washington, 0:00:43.040 --> 0:00:46.720 d C, Bloomberg one O six one, Boston, Bloomberg nine sixty, 0:00:46.840 --> 0:00:51.400 San Francisco, DAB Digital Radio, London, Sirius XM one nineteen 0:00:51.600 --> 0:00:54.360 and around the world on Bloomberg Radio, dot com and 0:00:54.480 --> 0:00:56.320 via the Bloomberg Business app. 0:01:00.120 --> 0:01:00.200 You. 0:01:00.240 --> 0:01:02.720 I'm Amy Morris in Washington. We spent most of the 0:01:02.760 --> 0:01:05.840 past week focusing on inflation and the economy, but now 0:01:05.880 --> 0:01:08.880 we're turning our attention to bank earnings with a kickoff 0:01:09.000 --> 0:01:11.920 of the second quarter reporting season. Joining me now to 0:01:11.959 --> 0:01:14.160 talk about all of this is Alison Williams. She's our 0:01:14.200 --> 0:01:17.959 global senior bank analyst for Bloomberg Intelligence and Alison, it 0:01:18.000 --> 0:01:20.520 has been quite a week. We had JP Morgan, Chase, 0:01:20.560 --> 0:01:24.080 Wells Fargo, City Group reporting, as we've been talking about, 0:01:24.440 --> 0:01:26.760 and there's a we have been waiting now on the 0:01:26.760 --> 0:01:30.119 next wave. Bank of America, Morgan Stanley, Charles Schwab will 0:01:30.120 --> 0:01:33.560 be reporting on Tuesday, Goldman Sachs, m and T Bank, 0:01:33.680 --> 0:01:37.560 US Bank Corporate others on Wednesday. Let's start with JP Morgan. 0:01:37.640 --> 0:01:40.480 That was some record revenue, just your initial reaction. 0:01:40.880 --> 0:01:43.840 So it was a very strong quarter at JP Morgan, 0:01:44.000 --> 0:01:47.760 especially the return on tangible equity of twenty five percent 0:01:48.600 --> 0:01:51.920 very impressive, and a few things happening there. First of all, 0:01:51.960 --> 0:01:55.160 the net interest income coming in much better than expected 0:01:55.760 --> 0:02:00.200 and the bank increasing their guidance for the year that 0:02:00.280 --> 0:02:04.520 we think that's going to fuel higher revenue and EPs estimates, 0:02:04.920 --> 0:02:08.800 and in fact we did get relatively resilient net interest 0:02:08.880 --> 0:02:13.320 income across JP Morgan, Wells Fargo and City Group. Wells 0:02:13.360 --> 0:02:17.840 Fargo also raising their net interest income guidance whereas City 0:02:17.880 --> 0:02:23.280 Group has some offsets from weaker fee income. But again 0:02:23.320 --> 0:02:27.520 focusing on JP Morgan, they are they have better than 0:02:27.560 --> 0:02:33.880 expected revenue they're trading and fees coming in a little 0:02:33.919 --> 0:02:41.680 bit better than expected, and also on the costs stable. Lastly, 0:02:41.840 --> 0:02:45.880 on the provision side of things, they are taking reserves. 0:02:45.880 --> 0:02:48.040 A lot of that has to do with car growth 0:02:48.120 --> 0:02:50.720 that's been a contributor to the net interest income line, 0:02:51.400 --> 0:02:54.280 and I get that's something that we're seeing across the bank. 0:02:55.200 --> 0:02:59.639 How much of this is impacted by those regional bank failures, 0:02:59.639 --> 0:03:02.720 and what I mean is the absorption or being able 0:03:02.720 --> 0:03:05.480 to merge with them. Has that proven to be a 0:03:05.480 --> 0:03:08.320 good deal, particularly I'm thinking with First Republic. 0:03:08.720 --> 0:03:13.399 So JP Morgan you certainly is seeing the benefit of 0:03:13.680 --> 0:03:17.160 that deal. But I would say that some of the 0:03:17.240 --> 0:03:23.440 industry dynamics that came into play in March and perhaps 0:03:23.520 --> 0:03:27.919 early April have really stabilized in terms of we are 0:03:27.960 --> 0:03:34.520 seeing deposits migrate into higher yielding alternatives, but I think 0:03:35.080 --> 0:03:40.600 not at a pace that investors had fears. So a 0:03:40.640 --> 0:03:43.640 migration and not a flight, I would say with regard 0:03:43.720 --> 0:03:47.760 to deposits, and so as the cost of those deposits 0:03:47.840 --> 0:03:51.240 are rising, but perhaps not as great as feirit. That's 0:03:51.280 --> 0:03:54.240 also aiding the interesting income line for these banks. 0:03:54.720 --> 0:03:57.440 Now, I was reading on the Bloomberg terminal about trading 0:03:57.440 --> 0:04:00.160 and investment banking had actually been down from a year go, 0:04:00.280 --> 0:04:03.920 but still came in ahead of analysts expectations. What would 0:04:03.960 --> 0:04:06.240 be driving all of this or is there any one 0:04:06.280 --> 0:04:06.920 thing driving it? 0:04:07.960 --> 0:04:11.400 So when you look at the trading and fees, they 0:04:11.440 --> 0:04:13.320 are both down, but it is a little bit of 0:04:13.360 --> 0:04:17.960 a tale of two cities because trading is normalizing in 0:04:18.000 --> 0:04:23.200 a historically higher range, whereas investment banking fees are normalizing 0:04:23.440 --> 0:04:28.120 in a weaker range, similar to pre pandemic levels. On 0:04:28.160 --> 0:04:32.720 the trading side of things, fixed income trading is really 0:04:33.240 --> 0:04:36.520 the story this year, but also last year as well. 0:04:36.800 --> 0:04:41.400 There's a benefit from interest rate volatility. What we're also 0:04:41.480 --> 0:04:47.719 seeing in this year is credit trading improving. Credit trading 0:04:47.760 --> 0:04:51.120 was very weak last year, so to some extent, you know, 0:04:51.160 --> 0:04:55.000 when we look at the comparisons, they are easier, but 0:04:55.040 --> 0:04:58.800 we also did have some pretty good high yield issuance 0:04:58.920 --> 0:05:03.919 growth that helps the secondary volumes a little bit. The 0:05:04.000 --> 0:05:06.599 other thing that we're seeing on the just moving to 0:05:06.640 --> 0:05:10.159 the f side of things, so high yield issuance growth 0:05:10.279 --> 0:05:14.880 is helpful. Equity undwriting also seeing some green shoots there, 0:05:14.960 --> 0:05:18.960 so some good growth off very weak levels, but the 0:05:19.120 --> 0:05:22.080 M and A headwind is really overwhelming there. M and 0:05:22.160 --> 0:05:24.960 A continue to be very strong last year, and now 0:05:24.960 --> 0:05:29.760 we're seeing that weakness and that turning to a headwind. 0:05:29.880 --> 0:05:32.040 And so the other trend we're seeing at banks is 0:05:32.120 --> 0:05:35.920 that they're starting to right size, they're staffing to these 0:05:35.960 --> 0:05:36.799 weaker levels. 0:05:36.880 --> 0:05:38.719 Yeah, I wanted to talk about that a little bit 0:05:38.760 --> 0:05:42.400 because when you talk about them right sizing their staffing, 0:05:42.920 --> 0:05:45.560 the flip side of that coin. Another way of interpreting 0:05:45.600 --> 0:05:49.240 that is they're letting people go, and maybe that bodes 0:05:49.360 --> 0:05:52.000 poorly for the future. But it sounds like just from 0:05:52.000 --> 0:05:54.719 what you've said, this is a trend that's a very 0:05:54.760 --> 0:05:57.400 strong trend and that we can expect more growth. 0:05:58.600 --> 0:06:03.000 Well, the strength is really on the trading side of things, 0:06:03.080 --> 0:06:06.800 and again we're just looking at sort of historically high things, 0:06:07.080 --> 0:06:10.120 you know, normalizing in a historically high range there. So 0:06:10.800 --> 0:06:14.000 it is a little bit soft and down compared to 0:06:14.120 --> 0:06:16.400 last year, but it's not the same weakness that we're 0:06:16.400 --> 0:06:20.799 seeing on the investment banking fee side, and it perhaps 0:06:20.960 --> 0:06:24.960 isn't so much a statement about things getting worse on 0:06:25.040 --> 0:06:29.840 investment banking fees, but more that staffing levels are kind 0:06:29.839 --> 0:06:31.880 of coming to the reality that we've seen over the 0:06:31.960 --> 0:06:35.360 last several quarters. Keep in mind that twenty twenty one 0:06:35.760 --> 0:06:38.800 was a record year for equities for M and A. 0:06:38.880 --> 0:06:42.280 It was very strong. The banks were scrambling for headcount, 0:06:43.120 --> 0:06:46.039 especially the hiring of junior bankers, and you recall the 0:06:46.120 --> 0:06:50.599 stories about pay for junior bankers happening at that time. 0:06:50.760 --> 0:06:54.120 So when we saw fees basically get cut in half 0:06:54.360 --> 0:06:59.520 last year, the banks were really hesitant to reduce their 0:06:59.560 --> 0:07:02.960 staffing to meet those lower levels. They were holding out 0:07:02.960 --> 0:07:06.680 hope that things would really pick up in twenty twenty three, 0:07:07.440 --> 0:07:10.480 and as of the first half, that really has not happened. 0:07:10.520 --> 0:07:13.000 As I said, we saw some we've seen some green shoots, 0:07:13.920 --> 0:07:16.559 but not to the level of optimism that the banks 0:07:16.600 --> 0:07:19.360 have expected. And so it's really kind of coming to, 0:07:20.480 --> 0:07:24.320 as I said, the reality of those lower levels. And 0:07:25.160 --> 0:07:27.040 you know, there's some hope for the second half, but 0:07:27.160 --> 0:07:30.480 really banks and the M and A boutiques are really 0:07:30.480 --> 0:07:32.880 talking more about twenty twenty four at this point. 0:07:32.840 --> 0:07:35.800 And we are talking with Alison Williams with Bloomberg Intelligence 0:07:35.840 --> 0:07:38.680 about bank earnings. I want to shift gears just a 0:07:38.720 --> 0:07:41.560 little bit talking about Bank of America often seen as 0:07:41.560 --> 0:07:44.400 a bell Weather, partly because of who its clients are, 0:07:44.640 --> 0:07:47.400 small business accounts making up the backbone of the US 0:07:47.520 --> 0:07:51.720 economy and so many consumer clients as well. As we 0:07:51.800 --> 0:07:54.400 watch what that bank says, what should we be looking 0:07:54.480 --> 0:07:57.560 for if we are trying to gauge the direction of 0:07:57.600 --> 0:08:00.240 the economy or the health or the trends of the 0:08:00.280 --> 0:08:01.160 banking industry. 0:08:01.360 --> 0:08:04.360 So, as you said, they are Bellweather, and we will 0:08:04.360 --> 0:08:08.400 be looking across their businesses and their client base. But 0:08:08.480 --> 0:08:13.280 I think the commercial and industrial lending side we may 0:08:13.320 --> 0:08:17.240 see some weakness there. The bank has talked about the 0:08:17.280 --> 0:08:22.000 fact that utilization rates of their commercial lines had been improving. 0:08:22.800 --> 0:08:26.720 That means that companies are drawing down on those lines, 0:08:27.320 --> 0:08:30.400 but that has sort of stabilized. And if we look 0:08:30.440 --> 0:08:34.280 at the industry data, we did see that commercial industrial 0:08:34.320 --> 0:08:38.440 loans was the area of weakness, sort of flatish leans overall. 0:08:38.600 --> 0:08:42.320 So Bank of America will also benefit from the credit 0:08:42.360 --> 0:08:47.480 card side of things that we're seeing from JPMorgan City 0:08:47.520 --> 0:08:52.040 Group and Walls Bargo, but they will see that offset 0:08:52.440 --> 0:08:56.440 in terms of the commercial industrial loans. Will also be 0:08:56.520 --> 0:09:00.480 looking at the wealth business for Bank of America. That's 0:09:00.480 --> 0:09:04.400 a very significant business for them, and we're going to 0:09:04.440 --> 0:09:09.040 be watching for the deposit costs. The wealth business is 0:09:09.080 --> 0:09:11.559 one of the more sensitive businesses in terms of the 0:09:11.640 --> 0:09:15.400 rising cost of deposits. But there is a potential that 0:09:15.480 --> 0:09:19.880 we could see things again leveling out and perhaps those 0:09:19.920 --> 0:09:23.920 costs rising a little bit less than feared after some 0:09:24.000 --> 0:09:25.920 of the increases that we saw last quarter. 0:09:27.120 --> 0:09:30.679 Let's shift gears again. Morgan Stanley, Goldman Sachs. Those are 0:09:30.679 --> 0:09:33.040 going to be coming up deal making important for them. 0:09:33.080 --> 0:09:35.720 There have been those job cuts that we've already touched 0:09:35.720 --> 0:09:38.760 on anything particular that you're going to be watching for 0:09:38.840 --> 0:09:40.600 what we may be expecting from them. 0:09:41.400 --> 0:09:45.880 So for Goldman Sacks, they as you point out that 0:09:45.960 --> 0:09:50.480 the fees are weak M and A fees on the 0:09:50.640 --> 0:09:53.840 M and A side of things, they are always by 0:09:53.960 --> 0:09:58.200 far the revenue leader, and so that represents not just 0:09:58.240 --> 0:10:02.400 their ranking within the M and A league tables, but 0:10:02.440 --> 0:10:04.800 also the fact that they tend to be the lead 0:10:05.600 --> 0:10:08.880 advisor and more profitable deals. As I said, that's a headwind. 0:10:08.960 --> 0:10:13.319 So they will be feeling that headwind they are also 0:10:13.400 --> 0:10:15.240 likely to see some of the some of the benefit 0:10:15.280 --> 0:10:17.760 of the green shoots on the equity side of things. 0:10:18.440 --> 0:10:22.160 But I think that the bank has definitely flagged a 0:10:22.200 --> 0:10:24.920 few things to watch out for. We are going to 0:10:25.160 --> 0:10:29.960 likely see more impairments on some of their real estate. 0:10:30.679 --> 0:10:32.600 That was that was a drag last quarter. We're going 0:10:32.679 --> 0:10:34.640 to continue to see that a drag this quarter. 0:10:35.000 --> 0:10:36.960 We're going to watch it with you. Alison, Thank you 0:10:37.040 --> 0:10:39.319 so much for this insight. We are looking forward to 0:10:39.360 --> 0:10:42.720 those earnings coming up in the week ahead. Alison Williams 0:10:42.720 --> 0:10:46.360 a Global senior bank analyst for Bloomberg Intelligence. Now coming 0:10:46.440 --> 0:10:49.040 up on Bloomberg day Break weekend, we are on inflation 0:10:49.160 --> 0:10:51.880 watch when it comes to Japan. I'm Amy Morris and 0:10:52.000 --> 0:11:06.560 this is Bloomberg. This is Bloomberg Daybreak weekend, our global 0:11:06.600 --> 0:11:09.240 look ahead at the top stories for investors in the 0:11:09.240 --> 0:11:12.800 coming week. I'm Amy Morris in Washington. Up later in 0:11:12.840 --> 0:11:16.320 our program, lawmakers are considering new ethics rules for the 0:11:16.360 --> 0:11:21.120 Supreme Court. But how much authority does Congress have? But first, 0:11:21.200 --> 0:11:25.040 investors are watching for more signs of inflation in Asia. 0:11:25.160 --> 0:11:27.880 We're watching for key data from Japan this coming week 0:11:28.240 --> 0:11:30.880 and for more we go to Bloomberg Daybreak Asia host 0:11:31.040 --> 0:11:32.800 Doug Krisner Doug Amy. 0:11:32.840 --> 0:11:35.640 Perhaps no other major economy in the world has had 0:11:35.679 --> 0:11:39.559 to deal with the deflation problem like Japan. It's persisted 0:11:39.920 --> 0:11:43.520 for three decades, but within the last year, price pressures 0:11:43.559 --> 0:11:45.959 have been building and it's creating a unique challenge for 0:11:46.040 --> 0:11:48.520 the Bank of Japan. Joining me now for a closer 0:11:48.520 --> 0:11:51.400 look is Bloomberg's Paul Jackson. He is based in Tokyo 0:11:51.520 --> 0:11:55.120 and he covers the governments and economies of both Japan 0:11:55.160 --> 0:11:57.959 and South Korea. Paul, it's a pleasure to have you here, 0:11:58.040 --> 0:12:00.439 and I'm going to begin with the inflation data that 0:12:00.480 --> 0:12:03.040 we are expecting in the coming week. Just fill us 0:12:03.080 --> 0:12:06.000 in on what the markets are forecasting right now and 0:12:06.000 --> 0:12:07.199 what economist's saying. 0:12:08.320 --> 0:12:12.439 Well, I think we're expecting CPI to stay firm around 0:12:12.559 --> 0:12:16.600 three point two percent for June. Now, that might not 0:12:16.760 --> 0:12:20.600 sound that high by international standards, but for Japan, after 0:12:20.640 --> 0:12:24.360 all these decades of deflation, that is high. And it's 0:12:24.400 --> 0:12:29.439 been above two percent since April twenty twenty two. So 0:12:29.520 --> 0:12:32.719 people are asking, you know, just when is the BOCHA 0:12:33.679 --> 0:12:36.000 going to change policy? You know, we see a lot 0:12:36.000 --> 0:12:39.600 of data that suggests that finally we are close to 0:12:39.840 --> 0:12:43.920 some kind of movement in this price trend that has 0:12:43.960 --> 0:12:48.600 been so sluggish over the years. We've seen, you know 0:12:48.679 --> 0:12:54.079 BOJ survey on household expectations, that households are expecting prices 0:12:54.120 --> 0:12:57.800 to go up at a faster rate. We saw wage growth, 0:12:57.840 --> 0:12:59.839 which the Bank of Japan has been saying is the 0:13:00.080 --> 0:13:04.640 very important to ensure that price is continueizing. We saw 0:13:04.720 --> 0:13:08.160 gains of two point five percent in the most recent data. 0:13:08.440 --> 0:13:11.600 Although you know, there's lots of complications to unpick that 0:13:11.760 --> 0:13:15.319 data and suggest it's volatile and can't be totally relied upon, 0:13:15.760 --> 0:13:20.040 but still it's a sign that things are bubbling up 0:13:20.640 --> 0:13:24.600 and that the time for the BOJ to consider policy 0:13:24.679 --> 0:13:29.560 change is coming upon us. And we do have a 0:13:29.679 --> 0:13:34.760 meeting coming up later this month, which economists surveyed by 0:13:34.760 --> 0:13:38.680 Bloomberg last month said was the most likely meeting for 0:13:38.920 --> 0:13:43.200 any near term tweaks to BOJ policy. 0:13:43.440 --> 0:13:46.360 I'm wondering whether there is anyone that is concerned about 0:13:46.360 --> 0:13:49.040 the time that the BOJ is taking. I mean, you 0:13:49.080 --> 0:13:52.400 can understand from Uwaita's point of view or any other 0:13:52.400 --> 0:13:56.680 BOJ governor, if you've been in a deflationary environment for 0:13:56.720 --> 0:14:00.679 three decades. You want to be very confident that inflation 0:14:00.800 --> 0:14:03.680 has re emerged. But I'm wondering whether or not anyone 0:14:03.800 --> 0:14:07.319 is saying this is a dangerous exercise to keep monetary 0:14:07.440 --> 0:14:09.880 policy so accommodated for so long. 0:14:11.080 --> 0:14:14.560 Well, of course, there's been a lot of criticism of 0:14:14.840 --> 0:14:19.840 Japan's addiction to keeping stimulus rolling when the rest of 0:14:19.840 --> 0:14:23.480 the world is raising rates and trying to really tackle inflation. 0:14:23.760 --> 0:14:26.280 But I think, Doug Ive, you've honed in on the point. 0:14:26.320 --> 0:14:28.840 You know, Japan has been in deflation for decades, so 0:14:29.600 --> 0:14:32.640 you know Japan doesn't want to stuff it up under 0:14:32.680 --> 0:14:37.840 the new governor Huada. Remember that Huaida was on the 0:14:37.960 --> 0:14:42.680 board back in the early two thousands when Japan prematurely 0:14:42.840 --> 0:14:47.320 raised interest rates and then fell back into deflation shortly afterwards, 0:14:47.600 --> 0:14:52.080 And at that time Uada dissented from that decision. He said, 0:14:52.120 --> 0:14:54.880 we are moving too early. So this is a guy 0:14:54.920 --> 0:14:58.240 who does not want to see that happen again under 0:14:58.280 --> 0:15:00.720 his watch. So he's turned out to be a little 0:15:00.760 --> 0:15:04.440 bit more cautious than we expected. So that points to 0:15:04.920 --> 0:15:09.600 a big change in BOJ policy coming later. The question 0:15:10.120 --> 0:15:13.360 is will the BOJ do some kind of stop gap 0:15:13.520 --> 0:15:18.480 measure to make its stimulus more sustainable in the meantime, 0:15:18.800 --> 0:15:22.320 and that takes us to its control of the yield 0:15:22.440 --> 0:15:25.240 curve and potential change for that in July. 0:15:25.480 --> 0:15:29.200 What about changing the inflation forecast? Is that something that 0:15:29.240 --> 0:15:31.960 the BOJ could use also to kind of help the 0:15:31.960 --> 0:15:33.960 market understand what its intentions are. 0:15:34.800 --> 0:15:39.640 Well, that's a very good point because Casuwdo is an economist, 0:15:39.720 --> 0:15:43.800 spent all his career as an economist, so he wants 0:15:43.840 --> 0:15:48.800 to have you know, data evidence to draw upon for change. Now, 0:15:48.880 --> 0:15:53.400 I think everyone is expecting the BOJ to raise its 0:15:53.760 --> 0:15:58.080 inflation forecast for this year because currently it says it's 0:15:58.120 --> 0:16:01.000 only going to average one point eight percent. Now, how 0:16:01.040 --> 0:16:04.080 is that possible when we're already you know, we're still 0:16:04.120 --> 0:16:07.320 at three point two percent. So I think everyone thinks 0:16:07.320 --> 0:16:10.000 he's going to go above two percent for this year. 0:16:10.200 --> 0:16:13.520 But the thing is is the BOJ needs to see 0:16:13.560 --> 0:16:18.120 inflation staying above two percent for a period of time, 0:16:18.240 --> 0:16:20.480 like you know, the next two or three years. That's 0:16:20.640 --> 0:16:23.640 when the stars are aligned for big change. 0:16:23.720 --> 0:16:25.840 The other thing that I'm wondering about is I look 0:16:25.880 --> 0:16:29.840 at the yen over the last week strengthened tremendously against 0:16:29.840 --> 0:16:34.160 the dollar. How this would affect the boj's thinking, What 0:16:34.280 --> 0:16:35.640 do you what do you think about that? 0:16:36.280 --> 0:16:38.320 Well, of course there's been a lot of you know, 0:16:39.440 --> 0:16:43.480 worrying concern about the end going two week and the 0:16:43.480 --> 0:16:46.880 possibility of intervention, and then since we've seen this strengthening. 0:16:47.160 --> 0:16:52.640 Obviously the us CPI figures, cooling has helped that. But 0:16:52.720 --> 0:16:56.160 if you look at the differentials between ten year yields 0:16:56.520 --> 0:17:00.560 and put that against whether dollar yen is that the 0:17:00.680 --> 0:17:03.920 yen is definitely out of sync with where it should 0:17:03.960 --> 0:17:07.200 be on that chart. It is a little bit stronger 0:17:07.760 --> 0:17:10.600 than it should be. So that suggests in markets there's 0:17:10.640 --> 0:17:14.239 a little bit of uneasiness about this July meeting, and 0:17:14.920 --> 0:17:17.600 they're not wanting to bet that the BOJ will just 0:17:17.800 --> 0:17:20.199 do nothing. They want to be in a better position 0:17:20.280 --> 0:17:24.520 in case there is change. I would just caution that 0:17:24.600 --> 0:17:28.960 if we really had people betting on change happening, we 0:17:29.040 --> 0:17:32.639 would be seeing the BOJ having to buy bonds at 0:17:32.720 --> 0:17:36.440 its fixed rate operations each day. We're still not quite 0:17:36.480 --> 0:17:40.280 there yet. Although yields are very close to its zero 0:17:40.320 --> 0:17:42.240 point five percent cap. 0:17:42.400 --> 0:17:45.959 Isn't the BOJ somewhat trapped by the current structure of 0:17:46.000 --> 0:17:49.160 the economy in Japan, and I'm kind of opening up 0:17:49.480 --> 0:17:53.640 the conversation to include declining birth rates and aging populations. 0:17:53.640 --> 0:17:57.600 So there are certain structural variables that really have not 0:17:57.800 --> 0:18:01.240 shifted and that's only made the job a lot more difficult. 0:18:01.480 --> 0:18:05.560 Well, it's true, I mean, in terms of the demographics 0:18:05.920 --> 0:18:10.160 of Japan, things are not working in favor of like 0:18:10.640 --> 0:18:16.280 a very vigorous, aggressively growing economy. Maybe at some point 0:18:16.480 --> 0:18:21.879 Japanese policymakers just have to understand and accept that Japan's economy, 0:18:22.600 --> 0:18:25.399 like you know, mature economies across the world, has to 0:18:25.480 --> 0:18:29.639 accept lower levels of growth, and that Japan's levels of 0:18:29.680 --> 0:18:32.679 growth maybe need to be at the lower end of 0:18:32.720 --> 0:18:33.240 the scale. 0:18:33.359 --> 0:18:36.119 In the G seven, one of the things that I 0:18:36.200 --> 0:18:40.159 think has been critical for igniting or let's say reigniting 0:18:40.320 --> 0:18:43.639 inflation in Japan has been the wage component that was 0:18:43.680 --> 0:18:47.680 a long time coming. Is this being celebrated now as 0:18:47.720 --> 0:18:49.720 a major pivotal point. 0:18:50.480 --> 0:18:53.800 Well, I think there's still a little bit of doubt 0:18:53.920 --> 0:18:58.320 and suspicion as to whether this will continue now. Obviously, 0:18:58.400 --> 0:19:01.760 if you've got prices going up, it's a lot easier 0:19:01.800 --> 0:19:05.199 for unions and workers to demand more pay and a 0:19:05.200 --> 0:19:10.160 lot easier for executives to offer more pay and explain 0:19:10.200 --> 0:19:13.359 it to their shareholders. So we've got a bit of 0:19:13.359 --> 0:19:15.760 a chicken and an egg thing here. We need the 0:19:15.800 --> 0:19:18.720 prices to go up to justify the wages, but then 0:19:18.760 --> 0:19:20.920 the Bank of Japan saying you need the wages going 0:19:21.000 --> 0:19:22.560 up to push up the prices. 0:19:22.640 --> 0:19:25.520 So we've talked a lot about the macro in Japan. 0:19:25.960 --> 0:19:29.560 Tell me how this intersects with the current political environment. 0:19:30.400 --> 0:19:32.960 Well, in terms of the current political environment, we were 0:19:33.080 --> 0:19:39.040 expecting an early election, with Prime Minister Fum taking advantage 0:19:39.080 --> 0:19:44.400 of up to in popularity ratings. However, things have turned 0:19:44.440 --> 0:19:48.520 in the other direction in the last few weeks. He's 0:19:48.520 --> 0:19:53.520 got a problem with an identification number scheme that the 0:19:53.600 --> 0:19:55.920 government's been trying to roll out. It's got all kinds 0:19:55.920 --> 0:20:00.320 of technical problems and this has led to a in 0:20:00.400 --> 0:20:04.639 his popularity. And so this means the likelihood of an 0:20:04.640 --> 0:20:08.159 early election, certainly over the summer, has totally gone. Even 0:20:08.359 --> 0:20:12.240 in the autumn it's looking far more doubtful. And what 0:20:12.320 --> 0:20:16.720 this means is the boj doesn't have to worry about 0:20:16.960 --> 0:20:20.760 getting in the way of election or ruffling markets, because 0:20:20.800 --> 0:20:23.720 as an election going away, that factor is now taken 0:20:23.720 --> 0:20:27.000 out of the equation, and so investors I think should 0:20:27.080 --> 0:20:29.960 be a little bit more on guard for some kind 0:20:30.000 --> 0:20:34.120 of stopgap measure for the boj at this coming meeting. 0:20:33.880 --> 0:20:36.080 Paul, thank you so much for being with us. Bloomberg's 0:20:36.080 --> 0:20:40.080 Paul Jackson. He covers the government's and economies of Japan 0:20:40.280 --> 0:20:43.280 and South Korea. I'm Doug Prisoner. You can join Brian 0:20:43.320 --> 0:20:47.000 Curtison and myself weekdays from Bloomberg Daybreak Asia beginning at 0:20:47.000 --> 0:20:51.359 six am in Hong Kong, six pm on Wall Street Amy. 0:20:51.680 --> 0:20:54.600 Thank you, Doug, and coming up on Bloomberg day Break weekend. 0:20:54.920 --> 0:20:57.760 Senate Democrats are pushing for a set of ethics rules 0:20:57.800 --> 0:21:02.440 for Supreme Court justices. Morris. This is Bloomberg. 0:21:12.000 --> 0:21:15.760 Broadcasting live from the Bloomberg It a active Brokers studio 0:21:15.880 --> 0:21:19.040 in New York. Bloomberg Elemon three oh to Washington, d C, 0:21:19.200 --> 0:21:22.600 Bloomberg ninety nine one to Boston, Bloomberg one oh six 0:21:22.720 --> 0:21:26.000 one to San Francisco, Bloomberg nine sixteen to the country, 0:21:26.080 --> 0:21:30.359 Serrius XM Channel one nineteen to London DAB Digital Radio, 0:21:30.440 --> 0:21:33.560 and around the globe the Bloomberg Business app in Bloomberg 0:21:33.640 --> 0:21:37.200 Radio dot Com. This is Bloomberg Date Break weekend. 0:21:43.359 --> 0:21:46.439 I'm Ammy Morris in Washington with your global look ahead 0:21:46.440 --> 0:21:49.080 at the top stories for investors in the coming week. 0:21:49.480 --> 0:21:52.440 Senate Democrats are pushing for a law that would essentially 0:21:52.480 --> 0:21:54.920 set a new code of conduct for the Supreme Court. 0:21:55.240 --> 0:21:58.440 That's after a string of controversies related to the High Court. 0:21:58.800 --> 0:22:00.960 For more, let's head to our Bloomberg ninety nine to 0:22:01.000 --> 0:22:04.320 one newsroom in Washington and Bloomberg Sound On co host 0:22:04.400 --> 0:22:06.160 Kaylee Lines, Kaylee. 0:22:05.840 --> 0:22:09.200 That's right, Amy. The Senate Judiciary Committee, led by Democratic 0:22:09.280 --> 0:22:12.480 chairman Senator Dick Durbin, will vote this coming Thursday on 0:22:12.560 --> 0:22:16.080 a bill that would require Supreme Court justices to adopt 0:22:16.119 --> 0:22:19.879 a code of conduct. Let's first remind ourselves of the 0:22:19.920 --> 0:22:24.400 reason why this push is happening, or reasons. Perhaps. Joining 0:22:24.440 --> 0:22:26.680 me now is Greg Store, who covers the High Court 0:22:26.760 --> 0:22:29.840 for us here at Bloomberg. So, Greg, just to start, 0:22:29.880 --> 0:22:32.479 can you just give us a brief recap about all 0:22:32.480 --> 0:22:35.840 of the perhaps ethically questionable information that has come to 0:22:35.920 --> 0:22:38.639 light about certain justices in recent months. 0:22:38.840 --> 0:22:40.800 Yeah, there's a growing list, and for all we know, 0:22:40.880 --> 0:22:43.480 the let's make get longer by the time that they 0:22:43.480 --> 0:22:46.480 hold this vote. The biggest stories had to do with 0:22:46.640 --> 0:22:50.040 Justice Clarence Thomas accepting luxury travel over the course of 0:22:50.040 --> 0:22:52.640 a couple decades from a Republican mega donor, a guy 0:22:52.720 --> 0:22:56.720 named Harlan Crowe. There's been another revelation that Justice sam 0:22:56.720 --> 0:23:02.000 Alito took a trip that was also funded by Republican donors. 0:23:02.440 --> 0:23:06.480 A new story out by the Associated Press involving Justice 0:23:06.600 --> 0:23:11.200 Sonya Sodomayor using her staff members to when she would 0:23:11.200 --> 0:23:16.400 go out on speeches to encourage the venues to acquire 0:23:16.400 --> 0:23:18.680 her book books so that people she could sign them 0:23:18.680 --> 0:23:21.560 for people. So there's a kind of a panoply of 0:23:21.600 --> 0:23:24.760 things and I'm really just kind of scraping the surface here. 0:23:25.119 --> 0:23:27.360 Well, and that of course is on both sides, right 0:23:27.400 --> 0:23:30.720 conservative leaning justices as well as those on the other end, 0:23:30.920 --> 0:23:34.280 which raises the question about what ethics checks really exist 0:23:34.400 --> 0:23:36.399 for the court. Now we've kind of learned that there 0:23:36.440 --> 0:23:37.400 aren't many, right. 0:23:37.920 --> 0:23:40.720 Yeah, they are not bound by any code of conduct. 0:23:40.880 --> 0:23:44.160 They say they follow the code of conduct that applies 0:23:44.240 --> 0:23:48.000 to lower court judges, but there's really no mechanism for 0:23:48.280 --> 0:23:51.080 enforcing it. And that is part of the problem here 0:23:51.200 --> 0:23:55.159 that when there are these stories that come out and 0:23:55.400 --> 0:23:58.119 you know, people are complaining about them. There's no place 0:23:58.160 --> 0:24:02.400 for them really to turn where an independent entity will 0:24:02.400 --> 0:24:04.680 look at them and say either you did or did 0:24:04.680 --> 0:24:06.760 not violate the ethics rules. 0:24:07.119 --> 0:24:10.040 So that brings us to this legislations bill that the 0:24:10.119 --> 0:24:12.719 Judiciary Committee is set to vote on this coming week. 0:24:13.080 --> 0:24:15.000 What is it trying to accomplish. 0:24:15.800 --> 0:24:19.240 It's trying to require the Court, as you said at 0:24:19.240 --> 0:24:22.760 the beginning, to put in place a code. It's not 0:24:23.160 --> 0:24:26.680 imposing one from the outside, because it is the idea 0:24:27.200 --> 0:24:29.560