Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our Daybreak
Speaker 1: anchors all around the world, and straight ahead on the program.
Speaker 1: After this week's encouraging retail sales numbers, we check in
Speaker 1: on the health of the US consumer. I'm Tom Busby
Speaker 1: in New York.
Speaker 2: I'm callin Hedge here in London, where we're asking what's
Speaker 2: next for the UK retail center.
Speaker 3: I'm Derek Prisoner. We map out what comes next for
Speaker 3: the Bank of Japan.
Speaker 4: I'm Kabie Liones in Washington, where the SEC is in
Speaker 4: the spotlight as it soon may decide whether to approve
Speaker 4: a spotfit point ets.
Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend. The business
Speaker 5: news you need to wrap up your week, Available on
Speaker 5: Apple Spotify, The Bloomberg Business Happen everywhere you get your podcasts.
Speaker 1: Good day to you. I'm Tom Busby. It's the most
Speaker 1: wonderful time of the year for retailers anyway. So we
Speaker 1: begin today's program with a look at the US retail
Speaker 1: sector and the strength of the US consumer. Last week's
Speaker 1: unexpected rise in retail sales for November. I'll welcome sign
Speaker 1: as we enter the final shopping week of the holiday season,
Speaker 1: and for more we're joined by economists a Stelle Oh
Speaker 1: of Bloomberg Economics and Bloomberg Intelligence retail analyst Abigail gil Martin.
Speaker 1: Thank you both for being here. All right, is Stelle,
Speaker 1: We're going to start with you. After that early Christmas
Speaker 1: gift last week from the Fed signaling several interest rate
Speaker 1: cuts in the new year, solid jobs data, the unemployment
Speaker 1: rate down to three point seven percent last month, and
Speaker 1: retail sales in November up more than four percent year
Speaker 1: over year. How is the US consumer doing right now?
Speaker 6: Thanks Tom? Yeah, so, the US consumer right now is
Speaker 6: still continuing their spending moment from over the summer, but
Speaker 6: ver seeing that the consumer is still remaining under pressure
Speaker 6: even with this week's upbeat retail sales report. And that's
Speaker 6: because when we look under the hood of the retail
Speaker 6: sales report, we see that most of the strength is
Speaker 6: actually coming from non store retail sales and food services
Speaker 6: retail sales categories. What this means is that, you know,
Speaker 6: consumers are still very much bargain hunting online, where when
Speaker 6: you're online you can compare prices much more easily between stores.
Speaker 6: And also still not really purchasing big ticket items that
Speaker 6: are sensitive to interest rates right now, So they're not
Speaker 6: purchasing large home appliances that require more credit card spending,
Speaker 6: and they're also not purchasing more larger electronic products at
Speaker 6: this time of the year where you would expect more
Speaker 6: you know, big ticket discretionary purchases. So overall, Tom, we
Speaker 6: still think that the US consumer health is still more
Speaker 6: fragile than it was at the very beginning of the year.
Speaker 1: And could many consumers, especially younger ones, be kind of
Speaker 1: hurting themselves relying a little too much on credit cards,
Speaker 1: buy now, pay later plans for their spending habits.
Speaker 6: Absolutely, Tom. In fact, we actually think that with the
Speaker 6: increase in interest rates, there's a risk that you know,
Speaker 6: household debt servings cost debt servings costs as a ratio
Speaker 6: of income, that's, you know, the interest rate you would
Speaker 6: have to pay on your credit card balances could rise
Speaker 6: to at least you know, eleven or twelve percent by
Speaker 6: year end next year, even if the labor market stays
Speaker 6: cool and the Fed, as you know, cut may cut
Speaker 6: interest Even if the Fed cuts interest rates as they
Speaker 6: suggest that they might do earlier this week, and you know,
Speaker 6: with the household debt servicing cost ratio that is roughly
Speaker 6: eleven percent, that's the highest it's been since early twenty ten.
Speaker 6: So we really expect that, you know, if consumers continue
Speaker 6: to build up their credit card balances through purchases in
Speaker 6: the holiday season, that is just you know, more debt
Speaker 6: burden for the household ahead.
Speaker 1: Well, that does not paint a very good picture. Abigail,
Speaker 1: let's turn to you. How is that, you know, this
Speaker 1: uneven recovery in the consumer spending and how does that
Speaker 1: impact the retail sector.
Speaker 7: You know, we weren't too surprised so that we've been
Speaker 7: kind of saying all November we've been seeing strong holiday momentum,
Speaker 7: as it was evident in Cyber Week numbers. You know,
Speaker 7: we saw sales beating or in line with forecasts all
Speaker 7: week and what we've heard from companies and retailers after
Speaker 7: reporting three key results, you know, going into four Q
Speaker 7: this holiday quarter, inventory is our leaner, which is going
Speaker 7: to bode well for you know, margins because there won't
Speaker 7: be discounts. What we've seen so far are similar to
Speaker 7: last year, but nowhere near you know, as steep as
Speaker 7: a few years prior. So that's really great, and retailers
Speaker 7: are encouraged with the strong start and also the fact
Speaker 7: that there's an extra shopping day between Thanksgiving and Christmas
Speaker 7: this year, with Christmas actually falling on a Monday, it's
Speaker 7: giving consumers at one extra weekend day, which is going
Speaker 7: to be pretty important and probably also help retailer sales
Speaker 7: kind of going into the holidays.
Speaker 1: So well, one thing is still mentioned. I want to
Speaker 1: go back to and Abigail, you would know this encouraging
Speaker 1: retail sales figures for online retailers, they are getting the
Speaker 1: bulk of this, you know, largest and spending. What can
Speaker 1: you tell me about Amazon, which started it's holiday sales
Speaker 1: back in October, maybe even before.
Speaker 7: Yeah, it did, and I'm pretty sure they actually had
Speaker 7: a couple extra days for their Black Friday sales event
Speaker 7: this year as well, so they actually extended their deals.
Speaker 7: But at the same time, their deals were in line
Speaker 7: or even you know, less than last year. And we
Speaker 7: think that's because they were spread out over a longer time.
Speaker 7: So they're just trying to draw those sales on earlier
Speaker 7: in the month first, you know, later now where things
Speaker 7: are about to get congested. But yeah, the shift online
Speaker 7: it's persisting from COVID, and we're seeing consumers really value
Speaker 7: convenience and speed, and those are two big things that
Speaker 7: are going to be driving holiday spending this year, and
Speaker 7: Amazon really hits both of those on the head and
Speaker 7: it provides that to customers, so we're not surprised. We
Speaker 7: saw that online retailers were doing strong over Cyber Week,
Speaker 7: and even on Thanksgiving and Black Friday, we saw stores
Speaker 7: were strong, but online was just as strong on Black Friday,
Speaker 7: So I think it goes well for Amazon. But yeah,
Speaker 7: I think it's really that value and convenience that's helping there.
Speaker 6: Now.
Speaker 1: Conversely, one big name, Etsy, the craft retailer, not doing
Speaker 1: as well, just announce some layoffs.
Speaker 7: Yeah, they announced some layoffs. You know, they're going back
Speaker 7: to their staffing back in twenty twenty two, similar Earth levels.
Speaker 7: But they did, you know, they raised guidance. They raised
Speaker 7: GMB guidance and profit guidance, which I think went a
Speaker 7: little unnoticed just due to the you know, the cost
Speaker 7: cuts as well as they still see two to three
Speaker 7: percent sales revenue gains in four Q. So some good
Speaker 7: and bad things there, but we think in the long run,
Speaker 7: it's what they need at drive profitable growth going forward.
Speaker 1: Estella, I want to go back to you and the
Speaker 1: impact of lower gasoline prices and how that has helped retailers.
Speaker 1: Maybe consumers feeling a little more impoltant to spend more,
Speaker 1: they're spending a lot less at the gas pump. Now,
Speaker 1: we we.
Speaker 6: Did some estimates on our team of how much of
Speaker 6: a contribution the recent decline and oil prices may have
Speaker 6: boosted spending space and consumer's wallet and estimate that, you know,
Speaker 6: depending on how long lower gas prices last and how
Speaker 6: much further they dropped, they could potentially see savings that
Speaker 6: range from you know, twenty dollars per month to almost
Speaker 6: one hundred dollars per month per household. And that's quite
Speaker 6: a bit of stimulus that's been provided to consumers during
Speaker 6: the holiday season.
Speaker 1: And another sector that did well and these are in
Speaker 1: the numbers for November, bars and restaurants. People are they
Speaker 1: want to get out, they want to eat, they want
Speaker 1: to drink, they want to see other people.
Speaker 6: Absolutely right. That's actually a continuation from what we've been
Speaker 6: seeing throughout the most of the year, where you know, service,
Speaker 6: the services sector has been quite the pillar of strength
Speaker 6: for the US economy, but we do expect that to
Speaker 6: slow down as again, you know, households see increase debt
Speaker 6: burdens and higher interest recosts.
Speaker 1: Abigail, I want to go back to you. I want
Speaker 1: to talk about some of the retailers that are doing well,
Speaker 1: maybe some aren't. And we can start with some of
Speaker 1: the biggest like Walmart, Target, some other discount and then
Speaker 1: also the traditional department stores. So one week left of shopping,
Speaker 1: how are these retailers doing.
Speaker 7: You know, they're doing good. I think they retailers are
Speaker 7: going out to you know, mass margins. Like she said,
Speaker 7: people consumers are still looking to buy you know, the necessities,
Speaker 7: and I think that's where Walmart will continue to benefit
Speaker 7: as well as with this value proposition. I think department
Speaker 7: stores are coming out, you know, they're really going strong
Speaker 7: for the holiday with experiences as well, which you know,
Speaker 7: back to kind of what you mentioned with restaurants and services.
Speaker 7: Consumers are still seeking those experiences this holiday season, and
Speaker 7: the more that those retailers can start to provide them,
Speaker 7: you know, we think that that'll bide really well. But
Speaker 7: I think what's really going to be driving any kind
Speaker 7: of winners or losers this year is going to be
Speaker 7: the value proposition that they're offering shoppers. Like you know,
Speaker 7: she mentioned, they're under pressure. We're still seeing some strong
Speaker 7: sales results, but it's where the deals are. Where are
Speaker 7: they going to get the best staying for their buck.
Speaker 7: So the more that they can kind of provide that,
Speaker 7: the more that we think they'll do well.
Speaker 1: And do you think some of the smaller retailers, the
Speaker 1: mom and pop stores, how are they faring against the
Speaker 1: big names?
Speaker 7: Yeah, I think, you know, I think with the younger generations,
Speaker 7: you know, they're actually doing well. They're going younger generations
Speaker 7: are looking for those kind of one off shop so
Speaker 7: they can find something unique, which is always good for
Speaker 7: those mom and pop retailers. But they're going to be
Speaker 7: having to compete with these larger retailers for the price,
Speaker 7: and it's going to be a little harder for them
Speaker 7: to kind of have that discount down compared to some
Speaker 7: other retailers that have the scale and are able to
Speaker 7: drive that more. So they'll definitely be pressured going forward.
Speaker 7: But the more they can leverage Amazon with Amazon Amazon
Speaker 7: today kind of in that sense that they're kind of
Speaker 7: still getting some of that online sales.
Speaker 1: Well with one week left a lot to look forward to.
Speaker 1: Our thanks to economists To stell Oh of Bloomberg Economics
Speaker 1: and Bloomberg Intelligence, retail analyst Abigail gil Martin. Coming up
Speaker 1: on Bloomberg day Break weekend, we continue looking at the
Speaker 1: retail sector and get a view from the perspective of
Speaker 1: European shoppers. I'm Tom Busby, and this is Bloomberg. This
Speaker 1: is Bloomberg Daybreak weekend, our global look ahead at the
Speaker 1: top stories for investors in the coming week. I'm Tom
Speaker 1: Busby in New York. Up later in our program, after
Speaker 1: the FED, the BOE, and the ECB all holding rates steady,
Speaker 1: we get a preview of what we can expect from
Speaker 1: the Bank of Japan. But first in the UK, we'll
Speaker 1: get new consumer and retail price data in the coming days.
Speaker 1: Despite falling inflation, festive shopping might still be held back
Speaker 1: by slowing wage growth as COVID piggybank savings run dry.
Speaker 1: For more, Let's go to London and bring in Bloomberg
Speaker 1: Daybreak europe banker Caroline Hepger.
Speaker 2: Tom, It's crunch time for last minute shoppers ahead of
Speaker 2: the holidays here in London, with retailers hoping for a
Speaker 2: last minute surge in spending despite the general economic gloom.
Speaker 2: The latest growth data for the UK showed that consumer
Speaker 2: facing services contracted for a fourth month in a row,
Speaker 2: while the economy overall contracted more than had been expected.
Speaker 2: Now Here is what Dan Hanson of Bloomberg Economics told
Speaker 2: us about the outlook for the coming months.
Speaker 8: This line between contraction and stagnation is going to be
Speaker 8: a fine one, and it remains a fine one. It
Speaker 8: has been a fine one for the past eighteen months,
Speaker 8: is probably going to be the same for the next
Speaker 8: nine months. But I think you know, it was worse
Speaker 8: than expected, and you know, it looks like the fourth
Speaker 8: quarter there'll probably be a contraction. I think everyone's understanding
Speaker 8: is that the goal to grow the economy was to
Speaker 8: get quarterly growth in the final quarter of the year,
Speaker 8: and it looks like it's based on this data. It's
Speaker 8: going to be a tough ask.
Speaker 2: Is there anything in the data or in the stance
Speaker 2: at the moment that proves that next year could be
Speaker 2: better than expected?
Speaker 5: Yeah?
Speaker 8: Absolutely. So you can look at the sort of data
Speaker 8: in two ways, can't You can always be like, oh, well,
Speaker 8: the economy contracted and it contracted by a bit, but
Speaker 8: it's still contracted and that's not very good. But if
Speaker 8: you compare that to the reality or sort of what
Speaker 8: you would have expected if you were told eighteen months
Speaker 8: ago or two years ago that the Bank of England
Speaker 8: was about to jack up interest rates by five hundred
Speaker 8: bases points, you know, most of us would have fallen
Speaker 8: off chair and said there'd be a deep recession, and
Speaker 8: we just haven't had that. So this sort of upside
Speaker 8: or the sort of better news story that's there is
Speaker 8: that the economy has almost consistently outperformed expectations and the
Speaker 8: hit from interest rates has been far, far less than
Speaker 8: anyone would have expected if you'd sort of been given
Speaker 8: this scenario and said, how will this play out over
Speaker 8: the next two years or so. And you know, the
Speaker 8: other thing, the other very important point for consumers is
Speaker 8: that there's real wage growth has returned, and that is
Speaker 8: that's a really positive thing. Nominal wages are growing faster
Speaker 8: than prices, and that that is a really positive story,
Speaker 8: and that could be a reason why again the economy
Speaker 8: does hold up over the course of twenty twenty four.
Speaker 2: So that was Dan Hanson with his view from Bloomberg
Speaker 2: Economics after those GDP figures. Well, inflation in the UK
Speaker 2: is slowing. That's one bit of good news. In October
Speaker 2: the headline print was at four point six percent. The
Speaker 2: CPI released you in the coming few days will also
Speaker 2: tell us just how far it remains above the Bank
Speaker 2: of England's goal.
Speaker 6: Now.
Speaker 2: Ahead of that, we've been thinking about the outlook for
Speaker 2: the UK consumer, hit hard by price rises over the
Speaker 2: past year. I've been discussing this with Bloomberg opinion columnist
Speaker 2: Andrea Felsted and our UK retail reporter Katie linsel. I
Speaker 2: started by asking Andrew what the mindset of British consumers
Speaker 2: is right now.
Speaker 9: I think it really depends where you are. You know,
Speaker 9: older people they don't have mortgages. They're finally getting some
Speaker 9: return on their savings, their pensions of one up. They're
Speaker 9: doing very nicely and are spending well on holidays, eating out.
Speaker 9: Midlife families much more difficult. They've got mortgage. You know,
Speaker 9: inflation hasn't gone away. You know, we think about things
Speaker 9: like school fees they've been going up for years, and
Speaker 9: then you've got you know, unfortunately, those who are really
Speaker 9: struggling in the economy, who spend a lot more on
Speaker 9: essential so they're still having to pay more for food
Speaker 9: even though inflation is easing, more for heating, and we're
Speaker 9: not getting the help that we got for the government
Speaker 9: on heating last year, so they are really struggling. It
Speaker 9: really depends where you are on how you are looking
Speaker 9: forward to Christmas and next year.
Speaker 2: Yeah, really a segmentation the issue or issues around inequality
Speaker 2: and what your pay pack. It looks like Katie, the
Speaker 2: UK consumer having said that, has been quite broadly resilient.
Speaker 2: What's the outlook for the coming months as far as
Speaker 2: you're concerned.
Speaker 10: I think exactly as Andrew said, you know, this is
Speaker 10: the time when people are going to be spending on
Speaker 10: Christmas within their means as much as they can. So
Speaker 10: I think the key thing is to see really how
Speaker 10: the consumer copes in January and the months beyond when
Speaker 10: the credit card bills come in. The buy now, pay
Speaker 10: later figures need to be settled. We have seen that
Speaker 10: figures from PwC say that Christmas spending is going to
Speaker 10: be down thirteen percent to twenty billion pounds in the UK,
Speaker 10: and so shoppers are sort of pulling back a bit,
Speaker 10: and I think it's going to be interesting to see
Speaker 10: how they how they cope in the months when the
Speaker 10: bills come due.
Speaker 2: Oh yeah, they buy now, pay later. Yes, that's a
Speaker 2: big issue. But on the other side of things, luxury Andrew,
Speaker 2: you keep a close watch on this sector amongst others
Speaker 2: in retail. Are there those sectors that remain robust.
Speaker 9: The only set of retail that really seems to be
Speaker 9: remaining robust is that catering through the very wealthiest echelon
Speaker 9: in society. So we had Brunello Cucinelli makes, you know,
Speaker 9: very expensive cashmere. They upgraded their outlook for the fourth
Speaker 9: time this year. Hermes make a very expensive bags, still
Speaker 9: doing well, but lower down luxury, the luxury that you know,
Speaker 9: perhaps the simply comfortable treat themselves too. They might treat
Speaker 9: themselves to a Gucci handbag or perhaps a nice watch.
Speaker 9: They're really under pressure from interest rates, you know, stock
Speaker 9: markets being quite volatile, less crypto gains, you know, interest rates.
Speaker 9: They can't buy things on credit, or they're putting their
Speaker 9: safe if they've got savory, they may be putting them
Speaker 9: to work rather than perhaps spend spending it on a rolex,
Speaker 9: so that they're they're really you know, they are pulling
Speaker 9: it pulling back, and we've got luxury really normalizing. Aside
Speaker 9: from that really top.
Speaker 2: End, Well, what about the pricing power that retailers broadly have, Katie,
Speaker 2: Do they have much of that left? We talked a
Speaker 2: lot about that, you know, with the rise in inflation.
Speaker 10: Yes, I think retailers are still really flagging the fact
Speaker 10: that they are under pressure from inflation, that there is
Speaker 10: still a huge burden from the cost of energy. Yes,
Speaker 10: it's come down, but it's still much higher than where
Speaker 10: it was before. And then the other key thing to
Speaker 10: look at is the labor market, and labor costs have
Speaker 10: really gone up. Also, we can look at the fact
Speaker 10: that we had the recent awesome statement announcing that from
Speaker 10: April we will see a rise in the national living wage,
Speaker 10: and we had a piece recently out from saying that
Speaker 10: retailers are really not not best placed in a way
Speaker 10: about this burden. They have a huge workforce and that's
Speaker 10: really going to push up their costs. And I think
Speaker 10: therefore we can actually expect that inflation won't necessarily come down.
Speaker 10: Price inflation from retailers won't come down as fast as
Speaker 10: we might hope, because they've got to help their margins,
Speaker 10: you know, they can't cost their cut their prices as
Speaker 10: frequently as quickly as they might like to because of
Speaker 10: that burden from the higher wages.
Speaker 2: And then you have the story of the Dice and
Speaker 2: Air app which is apparently one of the potentially hot
Speaker 2: items of the holiday season of this quarter, and it's
Speaker 2: something you've written about. Andrea, A thousand bucks. What's the
Speaker 2: price tag in the UK or in Europe, Well.
Speaker 9: It should be about four hundred and eighty pounds, but
Speaker 9: at the moment there's about eighty pounds off, so this
Speaker 9: is quite unusual that it's actually been discounted at the moment.
Speaker 9: Now curries are saying they're selling very well, and this
Speaker 9: is really interesting because you know, we're buying them so
Speaker 9: we can save on getting our hairstyled. We can do,
Speaker 9: you know, a bouncy look at home rather than have
Speaker 9: to go to the salon. So I thought that was
Speaker 9: quite an interesting little take on the consumer mindset.
Speaker 2: Yes, and I'm sorry your peace was talking about how
Speaker 2: they should be a thously They.
Speaker 9: Should they should be because there's lots of competition in
Speaker 9: this space.
Speaker 11: Now.
Speaker 9: Interesting last year there were no discounts. I mean you
Speaker 9: couldn't count the amount of times. I googled dice and
Speaker 9: air app discount last year and there were none, But
Speaker 9: this year, you know, there were a lot of discous
Speaker 9: There's a lot of competition out there, so to stay
Speaker 9: ahead of the curve, Dyson needs to reinvent itself as
Speaker 9: a luxury brand.
Speaker 2: Thanks to Blimberg's consumer goods opinion colonist Andrew Fel said,
Speaker 2: and our UK retail reporter Katie Lindsel, I'm Calline Hepgar
Speaker 2: here in London. You can catch us every weekday morning
Speaker 2: for Bloomberg Daybreak Europe, beginning at six am in London.
Speaker 2: That's one am on Wall Street.
Speaker 1: Tom, Thanks Caroline, and coming up on Bloomberg day Break weekend,
Speaker 1: we preview the upcoming rate decision out of the Bank
Speaker 1: of Japan. I'm Tom Busby and this is Bloomberg. I'm
Speaker 1: Tom Busby with your global look ahead at the top
Speaker 1: stories for investors in the coming week. Onto Japan and
Speaker 1: whether we're at the end of an unprecedented run of
Speaker 1: monetary easing policies. Economists expect the Bank of Japan to
Speaker 1: scrap negative interest rates by the end of April. Meantime,
Speaker 1: Bloomberg has reported Japan's Central Bank is likely to keep
Speaker 1: its monetary stimulus settings unchanged at a policy meeting next week.
Speaker 1: Let's take a further look with Bloomberg Daybreak Asia co
Speaker 1: host Doug Krisner.
Speaker 3: Tom Our sources tell us the Bank of Japan is
Speaker 3: in no rush to scrap negative interest rates, nor is
Speaker 3: the BOJ ready to drop its yield curve control program.
Speaker 3: Now this does counter market speculation a bit. There have
Speaker 3: been bets on the BOJ shifting to end negative interest rates,
Speaker 3: and some were saying it could happen as soon as
Speaker 3: this meeting. But what we are told is that the
Speaker 3: BOJ has yet to see enough evidence of wage growth,
Speaker 3: and wage growth would support the notion of sustainable inflation.
Speaker 5: To help us.
Speaker 3: Preview the BOJ meeting, we bring in Bloomberg's Taro Komura.
Speaker 3: Tarrow is Bloomberg Economics Japan economist. He joins us from Tokyo. Taro,
Speaker 3: thanks for making time for us. I think we have
Speaker 3: to say that the BOJ has in the past surprise
Speaker 3: not only economists but markets. Is it likely that we
Speaker 3: get a surprise this time around?
Speaker 12: No, I don't think so. I At this time, the
Speaker 12: busy will stand pad on its ilk curve control and
Speaker 12: negative interest rates. So of course, like I understand, the
Speaker 12: market suspects another surprise this month, particularly after last year's
Speaker 12: December accrued US YCC surprise. That's understandable, But the governor
Speaker 12: changed and with us communication, although he had to tweak
Speaker 12: YCC a little bit in July in October, but I
Speaker 12: think his baseline is he don't want to make a
Speaker 12: huge surprise and shock to the financial market. And based
Speaker 12: on his communication, it's clear that economic development doesn't support
Speaker 12: achieving two percent inflation near time soon and with a
Speaker 12: clearly underscores that he has to see the result of
Speaker 12: the spring waste negotiation, which is an annual catalyst of
Speaker 12: Japanese workers regular workers base pay. So that's why he
Speaker 12: at least has to wait until April before scrapping YC
Speaker 12: see a negative rate instead of this month.
Speaker 3: So Governor Wada, the head of the BOJ, has a
Speaker 3: long history with the Bank of Japan, and I think
Speaker 3: it's fair to say that he understands the danger of
Speaker 3: moving hastily. Am I right on that right absolutely?
Speaker 12: Looking back the boj's history, there are two painful experience
Speaker 12: in which the BOJ was hugely criticized as their exits
Speaker 12: were hasty. One timing is its exit from zero interest
Speaker 12: rate policy already back in two thousand and Actually the
Speaker 12: terrent governor Uda was one of the policy members then
Speaker 12: and he actually voted against to that exit, but also
Speaker 12: as a policy member, I think he has a vivid
Speaker 12: memory that its exit was probably too quick, given that
Speaker 12: soon after that there was a US tech bubble collapse
Speaker 12: and a huge downturn in the economy. And the second
Speaker 12: one is back in two thousand and six, when it
Speaker 12: exits from its first quantitative easing started in two thousand
Speaker 12: and one, and even though it was criticized as hasty,
Speaker 12: the BOJ took more than half a year to signals.
Speaker 12: It's given that timeframe, I think it's still a long
Speaker 12: way for the BOJ to communicate and to make market
Speaker 12: understand the exits is coming.
Speaker 3: That said, I can understand the market's tendency to want
Speaker 3: to make a bet that the BOJ would move at
Speaker 3: the December meeting. We've been well above or when I
Speaker 3: say we am speaking of the Japanese economy, we have
Speaker 3: seen inflation well above the two percent target for more
Speaker 3: than a year now, and I'm going to go back
Speaker 3: to last week with the ton Con data, the large
Speaker 3: manufacturing and non manufacturing indexes were much above forecast. So
Speaker 3: is there not a case to be made that the
Speaker 3: economy is doing well enough where the BOJ could begin
Speaker 3: altering policy at this point in time?
Speaker 12: Right the assessment about the assessment of the Japan's economy,
Speaker 12: it's correct that the Tonkens data was a big positive,
Speaker 12: so the sentiment for at least big corporates are getting better.
Speaker 12: And actually that's right. The headline inflation as well above
Speaker 12: boj's two percent target for nineteen months. Now. I'm having
Speaker 12: said that in terms of the inflation, as a japan
Speaker 12: economist and as a person who grew up in Japan,
Speaker 12: I cannot underscore enough that it's such a high hurdle
Speaker 12: for this country to have two percent inflation. So long
Speaker 12: term macroeconomic stagnation since nineteen nineties led firms very reluctant
Speaker 12: to raise prices because customers got really price sensitive. And
Speaker 12: at the same time, we haven't had inflation for three decades.
Speaker 12: That means one generation. That means people don't expect inflation
Speaker 12: to happen very easily. So those are the background in
Speaker 12: which the BOJ is very causes. Although headline inflation is
Speaker 12: above two percent, they are very I think they are
Speaker 12: very afraid of after the cost push factor abates, it's
Speaker 12: getting back to this inflation state. That's why they keep
Speaker 12: the stimulus. At the same time, a recent positive note
Speaker 12: in TUNCAM supports the next year's annual spring wage negotiation.
Speaker 12: So if there's a huge wage hike happened there in
Speaker 12: the next spring, it's going to be a big push
Speaker 12: for the BOJA to consider shifts about the policy.
Speaker 3: Last week on Daybreak Asia, we were talking with Bloomberg's
Speaker 3: Paul Jackson, one of your colleagues in Tokyo, about the
Speaker 3: Japanese economy, and we tried to address the issue of
Speaker 3: how consumers in Japan are feeling and whether or not
Speaker 3: mister and Missus Watanabe are optimistic about the economy. Here's
Speaker 3: what Paul had to say.
Speaker 13: They're not happy at all. The popularity and support for
Speaker 13: the Prime Minister has been at historic record lows for
Speaker 13: his administration, and he's been pulling out all the stops
Speaker 13: with subsidies to try and lower the impact of inflation.
Speaker 13: So the inflation rate actually would be significantly higher without
Speaker 13: these government subsidies. This, of course, has created a lot
Speaker 13: of you know, conflicting signals for the public. You know,
Speaker 13: the government wants inflation and yet it's giving measures to
Speaker 13: lower inflation. It's going to make up your mind. So
Speaker 13: in a sense, if the boj does scrap its negative
Speaker 13: interest rate, it's going to look more like the government
Speaker 13: and the Bank of Japan are pointing in the same
Speaker 13: direction for the average person on the street.
Speaker 3: Tara, I'd like to get your reaction on what you
Speaker 3: just heard there from Paul about the way in which
Speaker 3: the average consumer in Japan is making sense of government policies, right.
Speaker 12: I totally agree with Paul's view. Actually, the current inflation
Speaker 12: is it's clear that it's sapping the consumer sentiment, and
Speaker 12: not only the sentiment. The GDP data shows are GDP
Speaker 12: data show the private consumption drops for the second straight quarters,
Speaker 12: in the second quarter, in the third quarter of this year,
Speaker 12: even though Japan should have had a strong tailwink from
Speaker 12: COVID reopening happened since May. So that says like inflation
Speaker 12: usually way on consumer sentiments and consumption. So it's the
Speaker 12: tricky part is as a Japanic Onnlyst, I always struggle
Speaker 12: to give a easy explanation on this. But the BOJ
Speaker 12: is irked by inflation, the cost push inflation or bad inflation.
Speaker 12: So that's why in their logic they have to keep
Speaker 12: a stimulus in the economy. And actually the government wants
Speaker 12: to do something for that and that Fishita Prime Minister
Speaker 12: decided an income tax cut, but it's going to be
Speaker 12: happening only in June or July in next year. So
Speaker 12: kind of the government is not giving a strong leadership
Speaker 12: and sending a clear message to help the consumer and households.
Speaker 12: And probably that's one of the main reasons Prime Minister
Speaker 12: Kishida's supporting rate is getting lower and lower.
Speaker 3: Taro, thank you so much for helping us set up
Speaker 3: this week's BOJ meeting. Taro Komura is a Bloomberg Economics
Speaker 3: Japan economist joining us. I'm Doug Krisner. You can join
Speaker 3: Brian Curtis and myself weekdays here for Bloomberg day Break
Speaker 3: Asia beginning at seven am in Hong Kong six pm
Speaker 3: on Wall Street.
Speaker 1: Tom, thank you, Doug, and coming up on Bloomberg day
Speaker 1: Break weekend, we hear from the SEC about a possible
Speaker 1: approval of a spot bitcoin et F. I'm Tom Busby
Speaker 1: And this is Bloomberg. This is Bloomberg day Break weekend,
Speaker 1: our global look ahead at the top stories for investors
Speaker 1: in the coming week. I'm Tom Busby in New York.
Speaker 1: Anticipation of a new wave of investors has bitcoin booming
Speaker 1: once again. Key to the newfound optimism indications that the
Speaker 1: US will likely soon approve exchange traded funds that invest
Speaker 1: directly in the cryptocurrency. For more, Let's add to our
Speaker 1: Bloomberg ninety nine to one newsroom in Washington and Bloomberg
Speaker 1: Sound On co host Kaylee lines.
Speaker 4: Yeah, Tom, So often here in Washington we talk about
Speaker 4: politics because this is where the politicians are, but it's
Speaker 4: also where the regulators are, and one in particular has
Speaker 4: been in the spotlight, the SEC. There's a big question
Speaker 4: around whether the Securities in Exchange Commission may be getting
Speaker 4: close to doing something it hasn't done yet, finally approving
Speaker 4: a spot bitcoin ETF. I actually asked the SEC chair,
Speaker 4: Gary Gensler about that. This past week.
Speaker 11: We have I think somewhere between eight and a dozen
Speaker 11: filings in front of this agency with regard to exchange
Speaker 11: traded products around bitcoin, and the staff of the various
Speaker 11: divisions respond when market participants have filings. We also had
Speaker 11: a court case earlier this fall in this regard, and
Speaker 11: so we do things according to our authorities and how
Speaker 11: courts interpret our authorities, and that's what we'll do here
Speaker 11: as well.
Speaker 4: The court case he is alluding to, by the way,
Speaker 4: is the gray Scale case. Long story short. Grayscale wanted
Speaker 4: to convert its Bitcoin Investment Trust GBTC into a spot ETF.
Speaker 4: The SEC originally said no, so Grayscale sued, and a
Speaker 4: judge ruled that the SEC was arbitrary and capricious. That's
Speaker 4: a quote in its rejection. So the prevailing thinking is
Speaker 4: that gray Scale's finally going to be able to convert,
Speaker 4: and that opens the door to other spot ETFs being approved.
Speaker 4: Let's get more on this with an actual expert. James
Speaker 4: Steifert is joining us. He's an ETF analyst for Bloomberg Intelligence.
Speaker 4: All right, James, is this going to happen and when?
Speaker 14: Yeah? So, first of all, I want to commend you
Speaker 14: on getting like a very unique and differentiative response from
Speaker 14: Kensler on this topic. He's notorious for giving a lot
Speaker 14: of long winded non answers, so that was not exactly
Speaker 14: a clear straightforward answer, but it was better than most
Speaker 14: people get, so put the job on that front. Yeah.
Speaker 14: So we basically since the beginning of October, even since August,
Speaker 14: we've been saying we think this is going to happen
Speaker 14: in January because we thought gray Scale was going to
Speaker 14: win this case. In October we went to ninety percent
Speaker 14: odds that we'd see approvals on this front for spotpack
Speaker 14: on ets by January tenth. There's been some moves by
Speaker 14: the SEC, by Gensler's SEC in the recent weeks, and
Speaker 14: it's really looking like these things are going to be approved,
Speaker 14: and we could see those orders come down anywhere from
Speaker 14: January eighth to January tenth if we're really narrowing in
Speaker 14: on this window. So things are looking good and looking
Speaker 14: like our call is going to be correct. But there
Speaker 14: obviously there's no guarantees here, but that's the way things
Speaker 14: are looking right now. And based on his quote that
Speaker 14: he gave you there, that sounds pretty promising that he's
Speaker 14: basically going to listen to the courts.
Speaker 4: Yeah. Well, he may not have a choice when all
Speaker 4: this said and done, but as we just heard from Chairgainsler,
Speaker 4: there are a lot of these file in front of him,
Speaker 4: so in front of the commission more broadly, and I
Speaker 4: wonder if it's going to be an idea where Greyscale
Speaker 4: won the battle, everybody else gets to win the war.
Speaker 4: Who gets to go first? Does everybody get to go
Speaker 4: all at once? Assuming it is going to be approval,
Speaker 4: Are they all going to get approved at the same time?
Speaker 4: How do you see this working?
Speaker 14: Yeah, so we've been pretty vocal in thinking that they're
Speaker 14: going to approve all at once. Basically, the way they
Speaker 14: approve Bitcoin futures GTS was they let it go first come,
Speaker 14: first serve, and pro shares was the first come in
Speaker 14: that case. And they've basically become dominant in the space.
Speaker 14: They are the only game in town for the most
Speaker 14: part when you look at trading liquidity and volume and
Speaker 14: assets for bitcoin futures etf So they'd learned from that
Speaker 14: and they basically don't want to be a king maker.
Speaker 14: We saw this when they allowed each futures ETFs in October,
Speaker 14: they allowed everyone to go at once. There's thirteen applications
Speaker 14: if you include grey Scale's application for spot Bitcoin ETFs,
Speaker 14: and some of them have different variations how they would
Speaker 14: do this, But our view is they're going to allow
Speaker 14: all of them, basically approve all of them at once.
Speaker 4: All right, Well, they still need to get approval first,
Speaker 4: but it sounds like you think that'll be coming in
Speaker 4: just a few week. Extreme Safer of Bloomberg Intelligence, thank
Speaker 4: you so much, and Tom, I guess it may finally happen.
Speaker 1: Thank you, Kaylee. That was Bloomberg's sound on co host
Speaker 1: Kaylee Lines, reporting from our Bloomberg ninety nine to one
Speaker 1: newsroom in Washington. And you can hear sound on weekdays
Speaker 1: one to three pm Eastern Time on Bloomberg Radio. And
Speaker 1: that does it for this edition of Bloomberg day Break Weekend.
Speaker 1: Join us again Monday morning at five am Wall Street
Speaker 1: Time for the latest on the market's overseas and the
Speaker 1: news you need to start your day. I'm Tom Buzzby.
Speaker 1: Stay with us. Top stories and global business headlines are
Speaker 1: coming up right now.