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

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Dog Prisner. The

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Speaker 2: setup for today's session in the Asia Pacific was somewhat

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Speaker 2: negative after a mostly down arrow story in the US,

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Speaker 2: although to be fair, the major US indices did finish

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Speaker 2: off session lows on signs of progress in nuclear talks

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Speaker 2: with Iran. Lots of news after the bell. Netflix has

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Speaker 2: declined to raise its takeover offer for Warner Brothers Discovery.

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Speaker 2: It appears as though Paramount is set to take over Warner.

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Speaker 2: Dell Technologies issued an outlook for annual sales above estimates.

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Speaker 2: That's a sign of continued strong demand for those machines

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Speaker 2: central to building AI data centers, and the fintech firm

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Speaker 2: Block is cutting four thousand employees. These cuts will reduce

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Speaker 2: Block's workforce by nearly half. Block, you may know, was

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Speaker 2: founded by Jack Dorsey, and the company has been placing

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Speaker 2: bets on AI changing labor productivity. In Japan, tech shares

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Speaker 2: are week today, especially the semiconductors, and for a closer

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Speaker 2: look at japan stock market, I'm joined by Bloomberg's Alice French.

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Speaker 2: Alice covers Japanese equities and she joins us from our

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Speaker 2: studios in Tokyo. Thank you for being here. Talk to

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Speaker 2: me a little bit about what you're seeing, particularly with

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Speaker 2: the semiconductor stocks today.

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Speaker 3: Yeah, it's not looking great, right. It's the second day

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Speaker 3: of declines here. It's really weighing down that blue chip

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Speaker 3: NICK benchmark that we have here in Tokyo. Names like advan,

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Speaker 3: Test and Disco down this morning. Also, there's kind of

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Speaker 3: AI linked stocks, right, so SoftBank Group not having a

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Speaker 3: good day either, and you know, to an extent, it

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Speaker 3: is kind of just follow through from obviously what we

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Speaker 3: saw in the States overnight. I think you know people

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Speaker 3: here as well, just saying that investors expectations for them

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Speaker 3: video results were just way too high and really just

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Speaker 3: couldn't be met. And a lot of that kind of

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Speaker 3: anticipation was already factored into the share right. But also

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Speaker 3: more specifically here in Tokyo, we saw a really strong

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Speaker 3: rally for the NICK on Wednesday. It ended up around

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Speaker 3: two percent up, it reached a new high, and we're

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Speaker 3: kind of already starting to approach that sixty k mark,

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Speaker 3: which is actually pretty crazy because we only hit fifty

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Speaker 3: k in October, right, And I think there's a little

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Speaker 3: bit of caution setting in now about are things looking

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Speaker 3: over valued? Do things look overheated? And I think kind

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Speaker 3: of the first stocks to be hit are those chip

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Speaker 3: stocks and those tech stocks that obviously saw a huge

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Speaker 3: rally last year.

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Speaker 2: Sony Group seems to be bucking the weakness today. What's

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Speaker 2: going on with Sony.

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Speaker 3: Yeah, Sony's having a really nice rally this morning, was

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Speaker 3: up around seven percent earlier. This is so they've upsized

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Speaker 3: their share buyback program, so they're now planning to buy

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Speaker 3: around two hundred and fifty billion yen worth of their

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Speaker 3: own stock through May. And this is part of kind

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Speaker 3: of a broader move that they're making to kind of

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Speaker 3: improve their capital efficiency, which of course is part of

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Speaker 3: the kind of wider trend that we're seeing of better

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Speaker 3: qu governance and companies sort of trying to use their

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Speaker 3: cash holdings more productively. Right, And Sony I think one

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Speaker 3: of the companies that's starting to kind of lead the

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Speaker 3: way on that, and that's reflecting in the share price performance.

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Speaker 2: Alice, I'm hoping we can bring some of the economic

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Speaker 2: news of the day into the conversation. Industrial production for

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Speaker 2: the month of January rose two point two percent, much

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Speaker 2: above forecast, and I'm wondering whether or not this will

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Speaker 2: eventually feed into the corporate profit story. Yeah.

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Speaker 3: I mean, look, we just you know, ended obviously a

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Speaker 3: really nice earning season here, more than fifty percent of

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Speaker 3: companies beating expectations. I think that's kind of fueling a

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Speaker 3: lot of the international interest in Japanese stocks in particular.

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Speaker 3: I mean, you mentioned the output there. It is all

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Speaker 3: looking very positive. But at the same time, we do

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Speaker 3: have this backdrop of what's going to go on with

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Speaker 3: the Bank of Japan, right we know that obviously they

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Speaker 3: are on that rate hike path. But there's been a

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Speaker 3: lot of talk here in Tokyo this week about you know, Takaichi,

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Speaker 3: the new Prime Minister, obviously just won her landslide election victory.

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Speaker 3: She has spoken in the past about sort of being

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Speaker 3: perhaps not so in favor of rate hikes, and there

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Speaker 3: were some local media reports this week as well suggesting

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Speaker 3: that she's expressed caution and that has been good for

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Speaker 3: equities in the past. But I think, you know, the

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Speaker 3: sort of mixed reaction that we've seen in stocks over

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Speaker 3: the past couple of days sort of shows that, you know,

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Speaker 3: people aren't quite decided yet, you know, we do want

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Speaker 3: to see that kind of monetary policy normalization Japan obviously,

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Speaker 3: you know, getting on track for having kind of consistent

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Speaker 3: inflation and things. But at the same time, obviously rate hikes,

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Speaker 3: you know, traditionally not the best of the stock market,

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Speaker 3: not the best for kind of corporate borrowing, and so

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Speaker 3: it's interesting to kind of see those dynamics playing out

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Speaker 3: all at once.

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Speaker 2: And yeah, today we had a pretty cool reading on

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Speaker 2: core inflation in the Japanese capital Tokyo CPI rising at

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Speaker 2: a rate of one point eight percent from last year.

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Speaker 2: And from what I've read, some of this is due

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Speaker 2: to utility subsidies put in place by the Prime minister, right.

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Speaker 3: Yeah, and look, the Tokyo CPI is alway like a

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Speaker 3: little bit skewed because of those subsidies that you mentioned there,

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Speaker 3: But yeah, I mean the one point eight percent. Of course,

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Speaker 3: we know that the boj has historically been looking for

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Speaker 3: that two percent level. Now, whether or not this will

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Speaker 3: actually feed into sort of their next rate height decision,

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Speaker 3: we don't know, But I will say, you know, living

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Speaker 3: here on the ground in Tokyo, it definitely doesn't feel

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Speaker 3: like inflation is slowing down. Right, you go to the supermarket.

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Speaker 3: You know, food prices are definitely still up there. I

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Speaker 3: think we're definitely still feeling the impact of that that week. Again,

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Speaker 3: having said that, you know, wages are rising, and particularly

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Speaker 3: kind of big companies like car makers, they are on

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Speaker 3: track to keep raising wages. So yeah, it will be

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Speaker 3: interesting to see sort of when we have the next

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Speaker 3: BOJ decision, how much like you say that the inflation

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Speaker 3: numbers do come up, and what their views are.

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Speaker 2: And today's reading on retail sales for the month of

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Speaker 2: January we're quite strong. I think a month on month

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Speaker 2: increase of four point one percent, way above expectations. So

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Speaker 2: this also seems to suggest a fair amount of positivity

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Speaker 2: and consumer sentiment.

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Speaker 3: Yeah, absolutely, And you know what, that's actually nice to

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Speaker 3: hear that retail data because there have been some jitters

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Speaker 3: here in the past few months about tourist spending. Right,

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Speaker 3: of course, we know that we've seen record numbers of

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Speaker 3: tourists coming to Japan in the past couple of years,

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Speaker 3: partly because of the week, but this sort of ongoing

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Speaker 3: diplomatic spat that we've had with China for the past

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Speaker 3: few months has been weighing on those Chinese tourist numbers,

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Speaker 3: and we were seeing particular department stores and things that

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Speaker 3: starting to hit the actual retail numbers. But it seems

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Speaker 3: like those kind of initial worries and that caution has

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Speaker 3: come down, and like you say, the domestic local spending

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Speaker 3: does seem to be strong, which again I'm sure we'll

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Speaker 3: feed into into the BOJ discussion.

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Speaker 2: So before I let you go, Ellis, talk to me

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Speaker 2: a little bit about the price action in some of

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Speaker 2: the stocks that represent trading houses in Japan.

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Speaker 3: Yeah, it's interesting. I mean I said there that the

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Speaker 3: nick A is struggling a little bit today because of

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Speaker 3: tech stocks, but the broader Topics index is actually eking

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Speaker 3: out a small gain. And that's partly because, like you say,

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Speaker 3: those trading houses are trading stronger today. And now this

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Speaker 3: is partly because we know that for a good long

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Speaker 3: time now, Warren Buffett has been a fan of these

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Speaker 3: trading houses. Berkshire Hathaway holds around a ten percent stake

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Speaker 3: in a lot of these companies, and a lot of

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Speaker 3: investors hoping that Berkshire might mention them again in their

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Speaker 3: annual shareholder letter, which I believe we're expecting tomorrow. Out

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Speaker 3: of the US, I think it's going to be the

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Speaker 3: first one under Greg Abel, the new CEO, So there's

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Speaker 3: a lot of anticipation for those and we'll see on

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Speaker 3: Monday sort of how that plays out.

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Speaker 2: Alice will leave it there. Thank you so very much

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Speaker 2: for helping us understand a little bit about what's happening

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Speaker 2: in the price section today in the Japanese stock market.

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Speaker 2: Bloomberg's Alice French, she covers Japanese equities. Joining from our

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Speaker 2: studios in Tokyo here on the Daybreak Asia podcast. Welcome

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Speaker 2: back to the Daybreak Asia Podcast. I'm Doug Chrisner. The

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Speaker 2: US Andy Iron wrapped up another round of indirect talks

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Speaker 2: over Tehran's nuclear ambitions. However, the session ended without a deal,

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Speaker 2: even so Oman said there had been significant progress, and

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Speaker 2: according to Oman's Foreign Minister, negotiations will resume at a

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Speaker 2: technical level next week in Vienna. And that's where we

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Speaker 2: begin our conversation with Mara Rudman. Mara is a practitioner

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Speaker 2: Senior Fellow at the Miller Center at the University of Virginia.

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Speaker 2: She spoke with Bloomberg TV host Heidi Stroud Watson Sherry

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Speaker 2: on what's your sort.

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Speaker 4: Of best assessment as to what's happening at the moment,

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Speaker 4: and what level of negotiations, and I guess minutia might

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Speaker 4: actually be being discussed right now.

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Speaker 5: Thanks well, first of all, it's good to be back

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Speaker 5: with both of you, and I think it's I guess

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Speaker 5: the best thing I can say right now is that

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Speaker 5: it's a good thing to hear talks are continuing. In

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Speaker 5: other words, that next week, in the coming days, the

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Speaker 5: technical teams from both the United States and Iran of

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Speaker 5: course meeting Bioman, will be together and meeting on details.

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Speaker 5: So that's certainly more promising than hearing that things fall

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Speaker 5: apart today. That said, still a lot of opaqueness involved.

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Speaker 5: These are very high risk negotiations and with a very

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Speaker 5: much decimated US team of expertise to help to navigate this,

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Speaker 5: and a tremendous amount of US military resources out in

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Speaker 5: the region right now as these talks are going on,

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Speaker 5: So it's a challenging time.

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Speaker 4: And of course what we're hearing from these talks so

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Speaker 4: far in Geneva have been conflicting at times right positive,

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Speaker 4: very intense and serious. We've heard another report saying that

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Speaker 4: the US side has been disappointed. What do you make

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Speaker 4: of the expertise that's being brought to the table here,

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Speaker 4: particularly as leading up to this, there was a lot

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Speaker 4: of confusion even amongst the US lawmakers as to what

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Speaker 4: the administration wanted or what the President wanted from Iran.

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Speaker 6: Right, I think there's still.

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Speaker 5: Confusion about what the president's ultimate goals are. As we

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Speaker 5: know in his State of the Union address earlier this week,

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Speaker 5: he was not the paragon of clarity on this issue,

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Speaker 5: and I would say on other issues as well, but

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Speaker 5: with respect to Iran and why the United States is involved,

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Speaker 5: So it seems that the talks for reporting on the

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Speaker 5: talks have been primarily or exclusively on the nuclear issue,

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Speaker 5: which is clearly a key threat to the United States

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Speaker 5: to others in the region. But so is Iron's ballistic

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Speaker 5: missile ability and its support from malicious throughout the region.

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Speaker 5: And so difficult as it may be to get to

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Speaker 5: resolution on the nuclear issue, and I think there's some

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Speaker 5: framing out there that points to a possible pathway, it's

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Speaker 5: still highly problematic when the other two areas are not covered.

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Speaker 1: In the meantime, we continue to see the US building

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Speaker 1: up its military presence there were told as the largest

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Speaker 1: since before the Iraq War. We were just hearing from

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Speaker 1: analysts Pentaglond's first coming cosage Rone unit also being deployed.

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Speaker 1: How much does this threat of a military strike make

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Speaker 1: a difference to Iran when we have seen those targeted

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Speaker 1: at tax back in June. Didn't necessarily change the game, right, Well.

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Speaker 5: I think the Trump administration is clearly calculating that the

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Speaker 5: threat will impact Iran's behavior and increase their willingness to negotiate.

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Speaker 5: I'm not sure that I don't think that assessment is

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Speaker 5: shared by a number of other analysts. That said, reporting

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Speaker 5: from today's round of conversations makes it seem that Iran

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Speaker 5: is looking to make progress on these talks, is looking

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Speaker 5: at different formulas that may allow President Trump to declare

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Speaker 5: victory and yet still allow Iran to continue to function

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Speaker 5: both keeping the current regime in place, lifting sanctions and

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Speaker 5: having a very small, very low level of enrichment going

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Speaker 5: on with their nuclear activities.

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Speaker 6: Very unclear again, whether this will.

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Speaker 5: Satisfy the Trump administration or all of the different players

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Speaker 5: the Trump administration, particularly when a subject like ballistic missiles

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Speaker 5: maybe off the table. Secretary Rubio, for example, has indicated

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Speaker 5: that's highly problematic.

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Speaker 1: What's the state of the Ranian regime now, especially after

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Speaker 1: the serious unrest, or the most serious in decades that

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Speaker 1: we've seen within the country.

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Speaker 5: So the regime is clearly clinging to power, has tremendous

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Speaker 5: the population is under tremendous economic duress, in part because

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Speaker 5: of the large part because of the sanctioned regime it's

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Speaker 5: in place. And as clearly as the protest indicated, there's

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Speaker 5: a high degree of dissatisfaction with the regime.

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Speaker 6: But the regimes.

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Speaker 5: Response to these protests was so draconian on tens of

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Speaker 5: thousands of people have been killed, and.

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Speaker 6: So they are I believe what they.

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Speaker 5: Were trying to do is show very clearly that they

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Speaker 5: will not easily be removed. And I think one of

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Speaker 5: the calculations and negotiations, such as those that are ongoing

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Speaker 5: now with the Trump team is if this regime is

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Speaker 5: about its own preservation above all else, what levers do

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Speaker 5: you have in terms of what you want to try

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Speaker 5: to accomplish and how.

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Speaker 1: Why is the Trump administration focusing on the Iran now?

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Speaker 1: I mean, we do have an ongoing war with Ukraine,

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Speaker 1: we do have the tariff wars ongoing as well.

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Speaker 6: Why now, what's changed? It is unclear?

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Speaker 5: Certainly the threat that Iran poses has been consistent, and

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Speaker 5: as President Trump himself said as recently as his State

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Speaker 5: of the Union address, he repeated that the United States

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Speaker 5: had played a major role in obliterating all of Iran's

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Speaker 5: nuclear capacity. That clearly wasn't the case, though they were

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Speaker 5: around was significantly set back, and they have repeatedly shown

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Speaker 5: their ability to send forward ballistic missiles that have great

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Speaker 5: regional that are tremendous regional threat.

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Speaker 6: And they're also continuing to support their.

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Speaker 5: Albeit at a reduced level, militia activity in the region,

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Speaker 5: for example, the huties in Yemen.

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Speaker 6: So there are very real threats there.

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Speaker 5: But why now with President Trump is much harder to calculate.

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Speaker 5: And some of the concern, certainly that those outside the

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Speaker 5: administration have is that he may be drawing the wrong

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Speaker 5: conclusions from his activities with respect to Venezuela and removing

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Speaker 5: the Venezuelan leader Maduro in what was a very successful

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Speaker 5: military action, very risky but successful in terms of getting

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Speaker 5: Maduro out and in terms of how the Trump team

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Speaker 5: negotiated who's in control in Venezuela and that would it

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Speaker 5: would not be wise to assume that same approach would

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Speaker 5: work in the same ways with respect to Iran.

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Speaker 4: How much of a stronghand do you think the Trump

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Speaker 4: administration the president has when it comes to foreign polos

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Speaker 4: see strategy At the moment, we know that he's facing

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Speaker 4: lower approvals and ratings and some issues back home. What

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Speaker 4: sort of picture do you think would be being painted

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Speaker 4: from the round side as they go into further negotiations.

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Speaker 6: So I believe President Trump.

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Speaker 5: Has not shown signs of modulating his actions based on

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Speaker 5: what popular opinion following shows in the United States about

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Speaker 5: what he is doing. He puts himself and his own interests,

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Speaker 5: and I believe probably in his mind somehow the interests

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Speaker 5: of the United States front and center. And so it's

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Speaker 5: very hard for an outsider to get into that mindset

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Speaker 5: and understand exactly what he's doing and why he's doing it.

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Speaker 6: But I would not I think it would be.

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Speaker 5: Not a wise assumption to believe that President Trump is

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Speaker 5: somehow going to pull back from the international space because

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Speaker 5: domestically he's facing a high degree of unpopularity.

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Speaker 2: That's Maral Rudman from the Miller Center and speaking with

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Speaker 2: Bloomberg TV host Heidi Stroud, Watts and Sherry on bringing

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Speaker 2: you their conversation here on the Daybreak Asia podcast. Thanks

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Speaker 2: for listening to today's episode of the Bloomberg Daybreak Asia

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Speaker 2: Edition podcast. Each weekday, we look at the story shaping markets, finance,

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Speaker 2: and geopolitics in the Asia Pacific. You can find us

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Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 2: else you listen. Join us again tomorrow for insight on

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Speaker 2: the market moves from Hong Kong to Singapore and Australia.

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Speaker 2: I'm Doug Chrisner, and this is Bloomberg