WEBVTT - Bloomberg Daybreak Weekend: Fed, BOJ, Yellen, Tech 0:00:02.000 --> 0:00:04.440 This is Bloomberg day Break Weekend, our global look at 0:00:04.480 --> 0:00:06.920 the top stories in the coming week from our Daybreak 0:00:06.920 --> 0:00:09.920 anchors all around the world, and straight ahead on the program. 0:00:10.039 --> 0:00:13.880 Is the Fed really about to press pause on raid hikes? 0:00:14.320 --> 0:00:15.760 I'm Tom Busby in New York. 0:00:15.960 --> 0:00:19.680 I'm Brian Curtis in Hong Kong. What next for the boj. 0:00:19.640 --> 0:00:22.800 I'm Kayleie Lines in Washington where Treasury Secretary Janet Yellen 0:00:22.880 --> 0:00:24.759 is getting set to take the hot seat in front 0:00:24.760 --> 0:00:26.480 of the House Financial Services Committee. 0:00:26.520 --> 0:00:28.920 I'm Stephen Carolyn London, where tech leaders are gathering as 0:00:28.960 --> 0:00:31.680 a leading industry body has worn the UK risks, losing 0:00:31.680 --> 0:00:33.360 its attractiveness for the sector. 0:00:35.440 --> 0:00:39.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:39.479 --> 0:00:43.280 Eleve them three own New York Bloomberg ninety nine to one, Washington, DC, 0:00:43.600 --> 0:00:47.600 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:47.880 --> 0:00:52.080 DAB Digital Radio, London, Sirius XM one nineteen and around 0:00:52.159 --> 0:00:54.800 the world on Bloomberg Radio dot com and via the 0:00:54.840 --> 0:00:56.240 Bloomberg Business app. 0:01:00.160 --> 0:01:00.200 You. 0:01:00.280 --> 0:01:02.560 I'm Tom Busby, and we begin today's program with this 0:01:02.600 --> 0:01:06.479 week's latest two day Federal Reserve meeting on interest rates 0:01:06.959 --> 0:01:09.200 and joining me now to talk about what to expect 0:01:09.200 --> 0:01:11.920 when the Federal Open Market Committee wraps up on Wednesday. 0:01:12.280 --> 0:01:16.600 Bloomberg Global Economic and Policy Editor Michael McKee Michael Well. 0:01:16.640 --> 0:01:18.680 The FED has lifted the federal funds rate by a 0:01:18.720 --> 0:01:21.960 staggering five percentage points in the last fourteen months to 0:01:22.000 --> 0:01:24.960 curb runaway inflation, which is still running at more than 0:01:25.040 --> 0:01:29.039 double its two percent target, and after ten interest rate 0:01:29.080 --> 0:01:32.039 hikes in its last ten meetings, many FED watchers feel 0:01:32.080 --> 0:01:34.440 the FED is going to pause its rate hiking plans 0:01:34.640 --> 0:01:36.839 and not raise rates this week. 0:01:37.200 --> 0:01:39.720 What are you expecting For the first. 0:01:39.480 --> 0:01:42.679 Time in many years, I can't even remember the last 0:01:42.680 --> 0:01:45.200 time I said this. I don't know what the Fed 0:01:45.440 --> 0:01:48.320 is going to do. It's a close call. They are 0:01:48.640 --> 0:01:52.240 divided over whether they need to do more and when 0:01:52.400 --> 0:01:53.360 they need to do more. 0:01:53.440 --> 0:01:57.280 If they do more, And while. 0:01:57.080 --> 0:02:00.720 Wall Street has settled on the idea that they're going 0:02:00.760 --> 0:02:05.360 to not raise raids next week, they don't know. It's 0:02:05.400 --> 0:02:07.640 still an open question of whether they say but we 0:02:07.680 --> 0:02:10.880 will in July. I think the case could be made 0:02:10.919 --> 0:02:14.200 either way. And we don't know what the CPI is 0:02:14.240 --> 0:02:17.320 going to show us on Tuesday. So if we get 0:02:17.360 --> 0:02:21.720 a strong CPI, then the Fed may lean towards raising 0:02:21.800 --> 0:02:25.640 rates in June. If it's more benign, as the forecast 0:02:25.840 --> 0:02:29.720 would have it, then they probably will hold off so 0:02:29.800 --> 0:02:32.920 they can see what's happening with the economy. But right 0:02:32.960 --> 0:02:35.280 now it does look like with inflation, as you mentioned, 0:02:35.320 --> 0:02:38.920 way above their target, that something more has to happen. 0:02:39.840 --> 0:02:42.360 Well, let's go back to that CPI. Do you have 0:02:42.639 --> 0:02:45.960 any indication of what we're expecting on that and why. 0:02:46.240 --> 0:02:49.600 We are expecting a drop in the CPI? The headline 0:02:49.680 --> 0:02:52.240 CPI down to four point two percent, which puts you 0:02:52.280 --> 0:02:55.240 in that range of three percent the Fed is anticipating 0:02:55.280 --> 0:02:58.480 by the end of the year. And why would relate 0:02:58.520 --> 0:03:02.880 to a couple of things. Prices have gotten less expensive, 0:03:03.200 --> 0:03:08.000 but in large part it's used cars. They're again declining 0:03:08.240 --> 0:03:09.640 in cost. 0:03:10.200 --> 0:03:10.320 Uh. 0:03:10.480 --> 0:03:14.160 The other wild card out there is housing. We've been 0:03:14.200 --> 0:03:18.560 expecting housing prices to start to fall within the CPI 0:03:18.720 --> 0:03:22.040 to or a rise at a significantly slower pace. There's 0:03:22.080 --> 0:03:24.720 some signs of it. It hasn't happened yet, but it's 0:03:24.760 --> 0:03:28.280 anticipated happen anytime, So that too could add downward pressure. 0:03:29.120 --> 0:03:31.959 Well, let's go back to some FED policy makers. They've 0:03:32.000 --> 0:03:35.000 been out there speaking, not not recently, but at a 0:03:35.080 --> 0:03:38.400 pause in June. Does not mean the Fed's done with 0:03:38.480 --> 0:03:41.240 this current cycle of hiking rates now. One of those 0:03:41.280 --> 0:03:44.040 who thinks we're not done Neil Dutta ahead of US 0:03:44.120 --> 0:03:47.680 Economic research at Renaissance macro. Let's hear from him right now, 0:03:47.680 --> 0:03:49.440 because he spoke to Bloomberg very recently. 0:03:49.920 --> 0:03:53.040 The economy is far more resilient, as you know, than 0:03:53.040 --> 0:03:55.160 than than is that is appreciated, and that's going to 0:03:55.200 --> 0:03:56.760 mean that the FED is ultimately going to have to 0:03:56.760 --> 0:03:58.680 do more than what's than what's priced. 0:03:58.720 --> 0:03:58.880 Now. 0:03:58.880 --> 0:04:01.120 What are the chances Mike, that that is right? The 0:04:01.160 --> 0:04:03.720 FED will have to do more than what's priced in. 0:04:04.400 --> 0:04:07.240 Well, I hate to sound like the two handed economists, 0:04:07.240 --> 0:04:08.880 but I think it's about fifty to fifty. A lot 0:04:08.920 --> 0:04:11.800 of the data Douce show strengthen the economy. We've had 0:04:11.920 --> 0:04:15.800 strong job creation. The Jolts jobs data show a lot 0:04:15.840 --> 0:04:19.880 of job opening still in place. We did see jobless 0:04:19.880 --> 0:04:23.240 claims rise by a lot last week, but we don't 0:04:23.320 --> 0:04:25.200 yet know if that's a one off because it was 0:04:25.279 --> 0:04:28.240 just one week's data, or whether that's the beginning of 0:04:28.279 --> 0:04:31.520 a trend. But consumer spendings hung in there. We're seeing 0:04:31.839 --> 0:04:36.479 signs of business spending still remaining relatively strong. We know 0:04:36.560 --> 0:04:40.279 that new home construction is relatively strong, so you can 0:04:40.600 --> 0:04:43.479 make the cases Neil does. The FED is going to 0:04:43.520 --> 0:04:46.520 have to do more. The other side of the story 0:04:47.040 --> 0:04:50.840 is that we are going to see consumer spending weekend 0:04:50.880 --> 0:04:55.120 as people's nest eggs start to dwindle. We're going to 0:04:55.160 --> 0:04:58.400 see more supply chain problems out there, particularly if the 0:04:58.440 --> 0:05:02.840 West Coast doc workers go on strike. Housing may not 0:05:03.080 --> 0:05:07.240 come down as fast as people want. And we've already 0:05:07.240 --> 0:05:10.760 picked the low hanging fruit for inflation, and it's just 0:05:10.800 --> 0:05:12.640 going to get harder and harder to bring it down. 0:05:13.120 --> 0:05:17.560 And so the FED may not have to do more 0:05:18.560 --> 0:05:23.400 and just wait until we see the cumulative effects of 0:05:23.480 --> 0:05:26.120 all the tightening that's been done start to hit the economy. 0:05:26.760 --> 0:05:27.000 Well. 0:05:27.040 --> 0:05:29.880 Now, we also heard from former Vice Chair of the FED, 0:05:29.960 --> 0:05:33.440 Richard Clarida, now Global Economic Advisor at PIMCO, when he's 0:05:33.480 --> 0:05:37.119 talking about possible rate cuts. Now he's not saying until 0:05:37.120 --> 0:05:40.360 twenty twenty four after more rate hikes this year. Let's 0:05:40.360 --> 0:05:41.200 hear what he had to say. 0:05:41.720 --> 0:05:44.800 The FED has penciled into its productions a pretty sharp 0:05:44.839 --> 0:05:47.400 slow down the labor market. They have the unemployment rate 0:05:47.440 --> 0:05:49.440 going up to four and a half percent by the 0:05:49.520 --> 0:05:51.880 end of the year without any cuts, So I do 0:05:51.920 --> 0:05:54.000 think if there are cuts, it's really a twenty twenty 0:05:54.040 --> 0:05:56.920 four story. But yeah, I think the bar's high. 0:05:57.320 --> 0:05:58.480 What do you think of that? 0:05:58.960 --> 0:06:01.880 I agree with Rich that it is a very high 0:06:01.960 --> 0:06:05.720 bar for the Fed to cut rates this year, simply 0:06:05.720 --> 0:06:08.280 because we're sort of running out of time for the 0:06:08.520 --> 0:06:12.480 bad news to pile up. It certainly can, but the 0:06:12.480 --> 0:06:15.320 Fed is pretty convinced that it's going to take a 0:06:15.360 --> 0:06:18.400 lot more, whether it's just sitting on high rates or 0:06:18.600 --> 0:06:21.560 raising them even further, to bring down inflation towards their 0:06:21.600 --> 0:06:26.000 two percent target. So they do not want to cut rates. 0:06:26.360 --> 0:06:26.960 The only thing that. 0:06:26.960 --> 0:06:29.880 Would drive them to do that is if we had 0:06:29.960 --> 0:06:34.400 some sort of crash in the economy, a slowdown, if 0:06:34.560 --> 0:06:38.080 growth stayed positive, even if growth went negative for a 0:06:38.160 --> 0:06:41.039 quarter or possibly even two, although no sign of that 0:06:41.120 --> 0:06:43.440 at the moment. They're going to want to leave rates 0:06:43.480 --> 0:06:46.479 where they are. Then the question is, in twenty twenty four, 0:06:46.800 --> 0:06:51.640 where's inflation and where's the economy? So yes, there could 0:06:51.680 --> 0:06:55.040 be rate cuts next year. Once the Fed reaches its peak, 0:06:55.120 --> 0:06:58.480 it's usually seven or eight months until it starts cutting rates. 0:06:59.240 --> 0:07:02.400 So it's certainly possible. But I think one thing we 0:07:02.480 --> 0:07:05.640 have learned over the last two years is that it's 0:07:05.960 --> 0:07:09.760 almost impossible to predict what's going to happen with the economy. 0:07:10.320 --> 0:07:13.320 That's for sure well, and a lot of things are changing. 0:07:13.400 --> 0:07:16.960 You know, we talked about the unemployment rate, which you know, 0:07:17.040 --> 0:07:19.080 the FED has a target of four and a half percent. 0:07:19.160 --> 0:07:21.640 Now it's just three point seven percent. I mean only 0:07:21.680 --> 0:07:24.960 six months ago in the year no rate cuts this 0:07:25.040 --> 0:07:27.600 year that we heard Clara to talk about. But how 0:07:27.600 --> 0:07:31.800 would that affect, you know, this wide gap in what 0:07:31.840 --> 0:07:33.760 the FED has said four and a half percent and 0:07:33.800 --> 0:07:34.760 what it is right now. 0:07:34.880 --> 0:07:36.560 Well, I think come Wednesday you're going to have a 0:07:36.600 --> 0:07:40.640 different number from the Fed. That prediction was made in March, 0:07:40.920 --> 0:07:45.240 and we have seen stronger than expected labor markets since then, 0:07:45.880 --> 0:07:47.840 and to get to four and a half you would 0:07:47.880 --> 0:07:53.080 need a significant deterioration in the labor market, something like 0:07:53.160 --> 0:07:56.920 we saw in the household survey this past month continuing 0:07:57.120 --> 0:08:00.240 for the rest of the year. So I think they're 0:08:00.240 --> 0:08:01.920 going to have to mark up and the FED officials 0:08:01.920 --> 0:08:03.280 I've talked to have, so they're going to have to 0:08:03.280 --> 0:08:08.600 mark up there well marked down moderate. They're unemployment forecasts. 0:08:09.320 --> 0:08:12.600 We will also get new forecasts for inflation, and we'll 0:08:12.600 --> 0:08:16.840 see based on what we've gotten from the PCE and 0:08:16.880 --> 0:08:19.360 the CPI, which have both come down, not as far 0:08:19.440 --> 0:08:21.400 as they want, but they've come down. We'll see if 0:08:21.400 --> 0:08:24.280 they anticipate it coming down any faster, which might give 0:08:24.320 --> 0:08:26.239 a clue as to the policy path. 0:08:26.520 --> 0:08:27.880 Yeah, no, and that has been good. 0:08:27.880 --> 0:08:30.720 It's moderated a bit in April, which helped consumer spending 0:08:30.880 --> 0:08:34.720 jump a little higher. May forecast the show continued cooling 0:08:34.760 --> 0:08:35.320 and prices. 0:08:36.800 --> 0:08:37.719 But what should we be. 0:08:37.679 --> 0:08:41.400 Watching for again exactly on CPI you said four point 0:08:41.480 --> 0:08:44.720 two percent still double the Fed's target rate. 0:08:45.280 --> 0:08:50.480 We're past the I guess peak danger and we've taken 0:08:50.520 --> 0:08:54.360 the low hanging fruit off the tree in terms of 0:08:54.400 --> 0:08:57.400 bringing inflation down. The real question now is how fast 0:08:57.440 --> 0:09:00.240 do service prices come down. You've heard Japowell talk at 0:09:00.240 --> 0:09:03.080 that a lot, and those are heavily driven by wages. 0:09:03.880 --> 0:09:07.480 We're seeing in the jobs numbers that they're still concern 0:09:07.559 --> 0:09:12.000 about hiring for service industry companies because they were the 0:09:12.080 --> 0:09:15.000 last ones to be able to fill jobs and unless 0:09:15.080 --> 0:09:17.680 that stops, or until that stops, we probably don't see 0:09:17.880 --> 0:09:23.400 wage gains drop significantly. And so at this point you're 0:09:23.440 --> 0:09:28.880 looking at some time before inflation moves moves far enough 0:09:28.880 --> 0:09:31.080 in the direction of what the fence says it wants. 0:09:31.160 --> 0:09:33.959 And let's circle back again to housing, because it's such 0:09:33.960 --> 0:09:36.240 a huge part of what they're watching, a huge part 0:09:36.240 --> 0:09:39.480 of the economy. Three jobs for every house that goes up. 0:09:39.960 --> 0:09:42.440 Mortgage rates have come off the recent high, still very 0:09:42.520 --> 0:09:44.920 high though six point eight one percent, and because there 0:09:44.920 --> 0:09:48.080 were so few homes on the market, home prices stubbornly high. 0:09:48.640 --> 0:09:51.600 Mortgage demand is lowered down twenty seven percent from a 0:09:51.640 --> 0:09:54.520 year ago. Also, homeowners we just found out so their 0:09:54.520 --> 0:09:58.040 first annual decline in equity in more than a decade, 0:09:58.120 --> 0:10:02.880 at least according to core Logic. How important is all this? 0:10:02.880 --> 0:10:05.800 This uneven recovery in housing, or maybe even a slow down. 0:10:06.280 --> 0:10:09.559 Well, Housing can be an important component of GDP, and 0:10:09.600 --> 0:10:12.080 we have seen it drop off as such in the 0:10:12.120 --> 0:10:14.880 last couple of quarters because they're not selling very many houses. 0:10:15.400 --> 0:10:19.720 They are still selling new houses like hotcakes, and builders 0:10:20.000 --> 0:10:22.559 are throwing them up as fast as they can because 0:10:22.600 --> 0:10:25.080 there is housing demand. What we're not seeing is the 0:10:25.120 --> 0:10:31.480 turnover in existing homes because with low mortgage rates locked 0:10:31.520 --> 0:10:34.480 in for so many people who refinanced over the last 0:10:34.480 --> 0:10:36.760 few years, why do you want to trade a three 0:10:36.760 --> 0:10:39.640 percent mortgage for a six percent mortgage if you're moving. 0:10:40.320 --> 0:10:44.439 So that does keep supply down and prices go back up, 0:10:44.440 --> 0:10:47.880 and that will also hurt CPI in the longer run. 0:10:47.920 --> 0:10:50.520 But we've talked about the delays in getting the declines 0:10:50.559 --> 0:10:53.040 into CPI. It'll be a while before we saw that. 0:10:53.200 --> 0:10:55.360 A lot to watch out for, Michael. Thank you. 0:10:55.440 --> 0:10:58.560 That was Bloomberg's Global Economics and Policy editor Michael McKee. 0:10:58.600 --> 0:11:01.480 And coming up on Bloomberg day Break weekend, decision Day. 0:11:01.800 --> 0:11:04.680 Also coming up for the Bank of Japan. I'm Tom 0:11:04.679 --> 0:11:15.720 Busby and this is Bloomberg. This is Bloomberg day Break weekend, 0:11:15.800 --> 0:11:18.200 our global look ahead at the top stories for investors 0:11:18.280 --> 0:11:20.600 in the coming week. I'm Tom Busby in New York. 0:11:20.760 --> 0:11:23.280 Up later in our program a big week for tech 0:11:23.360 --> 0:11:26.800 in London and Paris with some high profile industry events. 0:11:26.840 --> 0:11:29.520 But first, in addition to decision Day at the FED, 0:11:29.600 --> 0:11:32.000 we also have a decision coming from the Bank of Japan. 0:11:32.320 --> 0:11:34.720 And for more let's go to Hong Kong and Bloomberg 0:11:34.760 --> 0:11:38.520 day Break Asia host Brian Curtis and his colleague Doug Krisner. 0:11:38.920 --> 0:11:41.840 Tom After surprises from the Bank of Canada and the 0:11:41.880 --> 0:11:44.840 Reserve Bank of Australia, we look forward to the Bank 0:11:44.880 --> 0:11:47.679 of Japan meeting in the coming week. But if you're 0:11:47.720 --> 0:11:51.760 looking for change from new Governor Kazuhua, don't get your hopes. 0:11:51.600 --> 0:11:53.800 Up in the beginning of this term. For the governor 0:11:53.840 --> 0:11:56.600 in particular, you know it goes. You need to build 0:11:56.640 --> 0:11:59.480 your credibility and the first thing you want is to 0:11:59.480 --> 0:12:04.360 avoid any animistep so gradual and rhetoric is probably what 0:12:05.160 --> 0:12:06.920 you should expect for this meeting. 0:12:07.320 --> 0:12:12.160 Xavier Barreton there from HSBC Asset Management and perhaps bearing 0:12:12.160 --> 0:12:16.000 that out, only three out of forty seven economist polled 0:12:16.080 --> 0:12:18.800 are expecting a tightening move at that meeting. That is 0:12:18.920 --> 0:12:22.160 down from eighteen in the previous survey back in April. 0:12:22.320 --> 0:12:25.440 Yes, instead of June. Now it seems that July is 0:12:25.520 --> 0:12:28.560 the most likely month for a change in policy. This 0:12:28.800 --> 0:12:32.360 was from about a third of respondents. The timing appears 0:12:32.400 --> 0:12:35.080 to be moving back a little because we've heard the 0:12:35.080 --> 0:12:39.959 governor repeatedly signal the need for continued monetary stimulus. Joining 0:12:40.040 --> 0:12:43.440 us now in our studios is Taro Kimura, Bloomberg's Japan 0:12:43.520 --> 0:12:46.560 economists who spent more than ten years at the BOJ. 0:12:47.559 --> 0:12:50.120 Taro Kimura, thanks so much for joining us first. This 0:12:50.240 --> 0:12:53.880 poll was taken actually before we got the stronger than 0:12:53.920 --> 0:12:57.640 expected GDP numbers of growth of two point seven percent 0:12:58.000 --> 0:13:01.720 in the first quarter, if it's annualized, Does that change 0:13:01.760 --> 0:13:03.120 anything for the BOJ. 0:13:03.520 --> 0:13:05.839 No, I don't think so. I'm also for the stay 0:13:05.960 --> 0:13:09.200 and I am expecting the big shift will finally happen 0:13:09.640 --> 0:13:12.160 the latter half of the next year. So like thing 0:13:12.200 --> 0:13:16.880 is that the Japan's demand is very weak and although 0:13:17.120 --> 0:13:21.360 you see a q key strong indicator such as today's GDP, 0:13:21.880 --> 0:13:25.040 but it's just a rally from a very subdued level 0:13:25.200 --> 0:13:28.240 due to a pandemic. It's just on a way to recovery. 0:13:28.480 --> 0:13:30.920 So that doesn't mean, like you know, the BOJ is 0:13:30.920 --> 0:13:34.720 committing to two percent demand led inflation, but the demand 0:13:34.800 --> 0:13:38.120 level itself is not enough to ignite inflation. So that's 0:13:38.160 --> 0:13:41.560 why BOJ will keep continuing saying steamulus is needed. 0:13:41.600 --> 0:13:43.640 A few moments ago, you said you didn't expect a 0:13:43.840 --> 0:13:46.800 change or an adjustment in policy until the latter part 0:13:46.840 --> 0:13:49.560 of next year. Did you mean next year or this year? 0:13:49.760 --> 0:13:52.760 And in either case what would be the main catalyst? 0:13:53.000 --> 0:13:56.040 Yeah, I meant twenty twenty four, So I'm putting myself 0:13:56.120 --> 0:13:57.319 a very late person. 0:13:57.360 --> 0:13:57.560 Wow. 0:13:57.679 --> 0:14:01.680 Actually wow. But I'm talking about big change. I'm barring 0:14:01.720 --> 0:14:05.240 the risk scenario that the end is depreciated too much again, 0:14:05.440 --> 0:14:08.160 or the FED is going to a rate high world again. 0:14:08.320 --> 0:14:10.840 Maybe there would be a tweak to YCC. But in 0:14:10.880 --> 0:14:15.200 the base scenario, BOJ want to continue stimulus because looking 0:14:15.280 --> 0:14:19.320 at with US communication, he's clearly committing to that. He's 0:14:19.400 --> 0:14:22.080 keeping YCC until he will see a demand led steady 0:14:22.080 --> 0:14:25.120 two percent inflation, and in my assessment, it's very far 0:14:25.200 --> 0:14:28.040 below as I said, in terms of the demand. And 0:14:28.080 --> 0:14:31.600 at the same time, putting your foot into a BOJ shoes. 0:14:32.200 --> 0:14:36.760 In history, they've already failed to exit from unconventional manitari 0:14:36.800 --> 0:14:40.640 policy twice. It was a very scurring experience for bojs. 0:14:40.680 --> 0:14:43.360 So that's why my take is the BOJ will very 0:14:43.480 --> 0:14:47.400 very carefully communicate and build a case and finally made 0:14:47.440 --> 0:14:48.840 a big change in the next year. 0:14:48.920 --> 0:14:52.200 Well, that's an interesting point. Laying the groundwork for a 0:14:52.240 --> 0:14:55.560 policy change. How might the BOJ go about that again, 0:14:56.120 --> 0:14:59.320 Xavier Barton from HSBC Asset Management. 0:14:59.440 --> 0:15:04.000 Next steps maybe further widening of the yield of control 0:15:04.800 --> 0:15:10.000 bounds and leading the rights to continue to create up steadily. 0:15:10.160 --> 0:15:13.200 But I think again the BOG is very is being 0:15:13.240 --> 0:15:16.440 a lot of attention making sure that their actions are 0:15:16.520 --> 0:15:20.440 not interfering with the l C organic growth that we've 0:15:20.480 --> 0:15:23.720 been seeing really and it's quite important for them. 0:15:23.800 --> 0:15:27.920 Again, that's Exavier Burton from HSBC Asset Management. So, Tara, 0:15:28.160 --> 0:15:31.240 when the adjustment does come, will it be very gradual 0:15:31.440 --> 0:15:33.480 like we just heard there, or do you think they'll 0:15:33.520 --> 0:15:36.080 wait long enough that they can make a more dramatic move. 0:15:36.240 --> 0:15:36.480 Yeah. 0:15:36.640 --> 0:15:39.760 In the April meeting, as you know, the BOJA announced it. 0:15:39.760 --> 0:15:43.000 It will conduct a policy review and it will take 0:15:43.280 --> 0:15:45.800 a year or maybe a year and a half, and 0:15:45.880 --> 0:15:48.800 I think the BOGA will use it as a stepping 0:15:48.840 --> 0:15:53.000 stone to communicate and build a case and actually whether 0:15:53.080 --> 0:15:55.760 acknowledge is the negative side effects of the current scheme 0:15:55.880 --> 0:15:58.600 like vacuuming too much JGB But like you know, since 0:15:58.640 --> 0:16:01.960 the interest rates is already zero, it has not much 0:16:02.080 --> 0:16:05.760 effect for stimulating so maybe, like you know, whether will 0:16:05.880 --> 0:16:08.520 make a case to getting back to more for a 0:16:08.560 --> 0:16:11.480 normal like controlling the short term ills, but like he 0:16:11.520 --> 0:16:15.120 will carefully build a case that those the new framework 0:16:15.400 --> 0:16:19.360 will be still as accommodative enough and like it's it's 0:16:19.400 --> 0:16:22.120 a sound policy framework. He will communicate like that through 0:16:22.120 --> 0:16:22.920 a policy review. 0:16:23.000 --> 0:16:25.600 I think we can agree that that two point seven 0:16:25.680 --> 0:16:28.720 percent rate on annualized growth for the first quarter was 0:16:28.760 --> 0:16:31.920 pretty impressive. Is there the chance though, the growth in 0:16:31.960 --> 0:16:34.480 the second quarter will be markedly weaker? 0:16:34.680 --> 0:16:38.960 Oh yes, looking at this one q GDP, it's behalf 0:16:38.960 --> 0:16:42.960 of the growth is driven by private inventory. And also 0:16:42.840 --> 0:16:46.680 looking ahead, like you know, the real wage is dropping. 0:16:46.760 --> 0:16:49.880 Although like we were expecting the nominal waste growth after 0:16:49.920 --> 0:16:53.560 the reflecting the result of annual wage hikes, but it's 0:16:53.760 --> 0:16:58.880 the nominal wage growth itself is decelerated, the real wage dropped. Furthermore, 0:16:58.960 --> 0:17:01.680 that implies for the second quarter it's going to be 0:17:01.680 --> 0:17:05.520 a damping on for a recovery of consumption after the 0:17:05.920 --> 0:17:08.400 post pandemic recovery of consumption. 0:17:08.560 --> 0:17:10.600 It's kind of very interesting because if you look at 0:17:10.600 --> 0:17:14.320 the equity market in Japan, the NIEK is trading very 0:17:14.359 --> 0:17:18.160 near a thirty three year high. Is there the risk 0:17:18.240 --> 0:17:20.720 here that if a waited were to send the wrong 0:17:20.880 --> 0:17:24.680 signal that that may be kind of or become reflected 0:17:24.680 --> 0:17:27.840 in equity prices in a rather sharp and negative way. 0:17:27.960 --> 0:17:30.800 I think what's happening in the real economy and stock 0:17:31.040 --> 0:17:34.919 market should be like thought separately. So stock market is, 0:17:35.080 --> 0:17:37.760 you know, it's like coming over to a price for 0:17:37.800 --> 0:17:40.240 the first time in like twenty or thirty years. It 0:17:40.400 --> 0:17:43.880 means like we didn't exceed the price level since nineteen 0:17:43.960 --> 0:17:46.600 eighties or something. So maybe like you know, the japan 0:17:46.640 --> 0:17:49.600 stock I know, a stock price stock expect that suggests, 0:17:49.760 --> 0:17:52.960 like you know, the investors think Japanese stocks are cheap, 0:17:53.240 --> 0:17:56.800 and actually Japanese big firms are investing a lot abroad, 0:17:56.880 --> 0:17:59.920 so that's why they incorporate the growth of the inter 0:18:00.119 --> 0:18:03.800 national economy to their earnings. But in terms of the 0:18:03.880 --> 0:18:07.480 domestic real economy still it's weak. So that's why a 0:18:07.560 --> 0:18:11.679 BOH keeps stimulating. Maybe that's supported for the stock process. 0:18:11.880 --> 0:18:14.760 I don't think any wrong message will coming out from 0:18:14.920 --> 0:18:16.440 UETA in the next meeting. 0:18:16.320 --> 0:18:19.600 If we take a broader look at the original Abinomics 0:18:19.680 --> 0:18:23.280 plan and look at the third row about corporate reform. 0:18:23.320 --> 0:18:26.439 You mentioned a little bit about corporate behavior. Are you 0:18:26.520 --> 0:18:30.879 seeing enough reform in the economy compared to what was 0:18:30.960 --> 0:18:32.120 hoped for and expected. 0:18:32.240 --> 0:18:35.480 The new corporate governance for Japan's firms are introduced under 0:18:35.680 --> 0:18:39.200 Aby's initiative, and it has been almost ten years since 0:18:39.240 --> 0:18:42.720 it has started, so like kind of gradual improvement in 0:18:42.760 --> 0:18:48.359 the Japanese corporate governance is supporting current rally in Nikki 0:18:48.440 --> 0:18:51.000 stock prices. But on the contrary, like you know, in 0:18:51.400 --> 0:18:54.160 terms of the domestic real economy, as I've mentioned, although 0:18:54.240 --> 0:18:58.879 Curuda has has done extreme stimulus, it proved that that 0:18:58.960 --> 0:19:01.120 doesn't boost domes take economy. 0:19:01.160 --> 0:19:04.000 Well, is there a way in which this policy begins 0:19:04.040 --> 0:19:09.359 to intersect with the political environment in Japan and the 0:19:09.400 --> 0:19:12.399 ambitions that Prime Minister Kishida would have. 0:19:12.880 --> 0:19:15.680 I don't think that, like you know, such issue will 0:19:16.359 --> 0:19:19.000 happen in a highly probability. What I mean is that 0:19:19.080 --> 0:19:22.719 my baseline scenario is a BOJ will keep stimulus, and 0:19:22.800 --> 0:19:25.360 I think the government will be happy with it. And 0:19:25.680 --> 0:19:28.960 like you know, Abbey is gone and Kishida, I guess 0:19:29.040 --> 0:19:32.520 he doesn't have a specific own strong view on the 0:19:32.560 --> 0:19:36.600 monetary policy, so that's why there will be less pressure 0:19:36.640 --> 0:19:38.200 from the government's side to the BOJA. 0:19:38.480 --> 0:19:41.359 But would the BOJ simply be cautious because it looks 0:19:41.359 --> 0:19:43.919 like Kishia will soon call an early election. 0:19:44.160 --> 0:19:46.639 Oh yeah, if like you know, if the BOJA is 0:19:46.680 --> 0:19:49.240 seeking for a policy change right now, maybe it's it 0:19:49.320 --> 0:19:51.680 might be one of the factors that the election will 0:19:51.720 --> 0:19:54.040 be coming or and maybe they should post maybe it's 0:19:54.119 --> 0:19:56.400 not a decisive factor, but might be one of the factors. 0:19:56.480 --> 0:19:58.880 But my guess is whether it doesn't think any change 0:19:58.880 --> 0:20:00.960 at Also, it doesn't matter to toorrow. 0:20:01.000 --> 0:20:02.280 Thanks so much for being with us. 0:20:02.520 --> 0:20:05.840 We really learned a lot. Tara Kimura, Bloomberg's japan economist, 0:20:06.119 --> 0:20:08.960 who by the way, spent more than ten years as 0:20:09.000 --> 0:20:12.200 an economist at the Bank of Japan. I'm Brian Curtis 0:20:12.240 --> 0:20:14.960 in Hong Kong along with Doug Krisner. You can catch 0:20:15.040 --> 0:20:18.479 us every weekday here for Bloomberg day Break Asia, beginning 0:20:18.520 --> 0:20:21.399 at six am in Hong Kong and six pm on 0:20:21.520 --> 0:20:22.080 Wall Street. 0:20:22.400 --> 0:20:24.359 Tom, thank you, Brian and Doug. 0:20:24.440 --> 0:20:27.320 And coming up on Bloomberg day Break weekend, a big 0:20:27.359 --> 0:20:29.400 focus on tech in London in Paris in the coming 0:20:29.480 --> 0:20:31.880 week with two high profile tech events. 0:20:32.119 --> 0:20:33.960 I'm Tom Busby and this is. 0:20:34.000 --> 0:20:43.120 Boberg broadcasting live from the Bloomberg It a active brokers 0:20:43.160 --> 0:20:46.600 Studio in New York, Bloomberg e levon free oh to Washington, 0:20:46.680 --> 0:20:50.000 d C, Bloomberg ninety nine one to Boston, Bloomberg one 0:20:50.040 --> 0:20:53.280 O six one to San Francisco, Bloomberg nine sixty to 0:20:53.359 --> 0:20:56.520 the country, Syrius XM Channel one to nineteen to London, 0:20:56.680 --> 0:21:00.359 DAB Digital Radio, and around the globe the Bloomberg Business 0:21:00.440 --> 0:21:05.000 app in Bloomberg Radio dot com. This is Bloomberg Daybreak weekend. 0:21:11.160 --> 0:21:13.280 I'm Tom Busby in New York with your global look 0:21:13.280 --> 0:21:15.880 ahead at the top stories for investors in the coming week. 0:21:16.280 --> 0:21:19.280 Challenges facing the tech industry will be in focus in 0:21:19.320 --> 0:21:22.359 the coming days in Europe with two big industry events 0:21:22.359 --> 0:21:25.720 taking place in London and Paris. And for more, let's 0:21:25.720 --> 0:21:28.080 say to London and bring in Bloomberg day Break Europe 0:21:28.119 --> 0:21:29.439 Banker Steven Carrol. 0:21:29.560 --> 0:21:32.520 Tom, We're heading into London Tech Week, where industry leaders 0:21:32.560 --> 0:21:36.240