WEBVTT - BOJ Raises Rates, Scraps Yield Curve Control 0:00:00.080 --> 0:00:02.320 We are getting a hot headline from the Bloomberg terminal. 0:00:02.360 --> 0:00:05.760 Bank of Japan sets policy rate in a range between 0:00:05.960 --> 0:00:10.640 zero to ten basis points, so a big move and 0:00:11.000 --> 0:00:14.480 scrapping the ill curve control program. So the sources at 0:00:14.520 --> 0:00:17.880 the nie K seem to be well placed. Martin, what 0:00:18.320 --> 0:00:20.959 reaction might you have to what we're learning now? 0:00:22.400 --> 0:00:24.840 This is what we were expecting. So we got kind 0:00:24.880 --> 0:00:27.920 of glad that it actually happened, and we didn't get 0:00:27.920 --> 0:00:29.960 a kind of shock. Oh no, no, they are not 0:00:30.040 --> 0:00:33.800 doing anything. They chose a perfect timing more or less. 0:00:34.120 --> 0:00:37.720 So this seems to be quite welcome by markets who 0:00:37.720 --> 0:00:41.640 have been tested before. So let's see how Japan is 0:00:41.680 --> 0:00:43.159 now working with the normalization. 0:00:44.040 --> 0:00:46.640 We're not actually seeing a huge change in dollars yen. 0:00:47.000 --> 0:00:50.440 We're moving at the moment one fifty or so, so 0:00:50.520 --> 0:00:54.160 that's pretty steady. And also in terms of the nie ke, 0:00:54.800 --> 0:00:57.280 we'd have been on the lunch break, so very interesting 0:00:57.320 --> 0:00:59.800 to see how those things move. We're getting these flashes 0:00:59.840 --> 0:01:02.000 now now every couple of seconds. We have David in Glace, 0:01:02.080 --> 0:01:06.160 one of our market correspondence and also an anchor on 0:01:06.240 --> 0:01:09.280 Bloomberg Television with us in the studios. David your early 0:01:09.280 --> 0:01:10.640 thoughts on what we're seeing in markets. 0:01:10.800 --> 0:01:13.720 Well, it's a counterintuitive move. We're seeing in the yen. 0:01:14.720 --> 0:01:16.840 We're weaker in fact here point three percent. And this 0:01:16.959 --> 0:01:19.000 is to your point, Brian. We're moving really on the 0:01:19.040 --> 0:01:22.160 second here, a couple of other headlines coming through. So 0:01:22.600 --> 0:01:24.639 we know most of these because of all the leaks 0:01:24.640 --> 0:01:27.160 that have taken place. Right, So, they've scrap yield curve control, 0:01:27.200 --> 0:01:29.319 they've raced rates for the first time since two thousand 0:01:29.959 --> 0:01:34.600 and seven. They've tweaked their acid purchases as well. Nothing 0:01:34.640 --> 0:01:37.160 so far I could be mistaken. Still here, they've also 0:01:37.280 --> 0:01:41.399 ended buying ets. Now just taking a step back, right, 0:01:41.480 --> 0:01:43.320 So I was having a look at some market measures 0:01:43.360 --> 0:01:46.959 going into this meeting today, and what really called my 0:01:47.000 --> 0:01:49.760 eye were yen ten year swaps. And you look at 0:01:49.800 --> 0:01:54.160 how behaved that gauge has been. In fact, that was 0:01:55.280 --> 0:01:59.120 really bid up substantially in previous meetings on the back 0:01:59.160 --> 0:02:01.600 of expectations of what we'd get. What we did get 0:02:01.680 --> 0:02:04.120 right now, that's actually you remained in range. In fact, 0:02:04.240 --> 0:02:06.240 the spread and this is going to sound like Greek, 0:02:06.240 --> 0:02:08.440 but I'll explain it in a bit. The spread between 0:02:08.480 --> 0:02:12.400 the ten year swap and a tenure yield is actually 0:02:12.440 --> 0:02:15.440 now back to the narrowest since the Fed started raising 0:02:15.480 --> 0:02:18.680 interest rates in twenty twenty two, which tells me the 0:02:18.720 --> 0:02:22.120 market was expecting this. It's number one and number two. 0:02:22.919 --> 0:02:27.200 It looks like for now the BOJ is done right. 0:02:27.240 --> 0:02:29.840 We'll have a separate conversation on what whether or not 0:02:29.840 --> 0:02:32.360 they need a second rate hike, but for now it 0:02:32.400 --> 0:02:33.840 seems like they've done what they needed to do. 0:02:33.880 --> 0:02:36.680 Interesting, and bond buying will continue. We're getting a hot 0:02:36.720 --> 0:02:40.440 headline that the BOJ will continue buying jgbs with broadly 0:02:40.480 --> 0:02:43.280 the same amount as before. What is missing here is 0:02:43.440 --> 0:02:47.400 obviously a target in the yield curve here. I mean, so, 0:02:47.600 --> 0:02:51.000 are they going to be much more clandestined in moving 0:02:51.320 --> 0:02:54.520 in the marketplace? Are they going to be less transparent? 0:02:54.600 --> 0:02:55.239 What do you think it? 0:02:58.840 --> 0:03:02.720 I think again, no one's surprised by this news. Dollar 0:03:02.840 --> 0:03:05.520 yen's not moving anywhere, because on purpose, we were all 0:03:05.560 --> 0:03:08.840 told what was going to happen. No. I think they're 0:03:08.880 --> 0:03:13.119 going to favor a managed information process where they don't 0:03:13.120 --> 0:03:15.400 want to shock the market in a way. They've achieved 0:03:15.400 --> 0:03:19.280 exactly what they wanted here, Delian. Actually nothing's changed. They're 0:03:19.320 --> 0:03:22.600 getting out of buying ETFs, because that's a long term 0:03:22.600 --> 0:03:25.480 problem for them how to unwind the ETF purchases. You 0:03:25.480 --> 0:03:27.680 can always buy more bonds, and I remember having this 0:03:27.680 --> 0:03:30.120 conversation with guys on the BOJA ten years ago. They 0:03:30.120 --> 0:03:33.400 can hold a bond until it runs out. Disposing of 0:03:33.440 --> 0:03:37.560 an ETF is a different issue altogether, and I believe 0:03:37.560 --> 0:03:39.760 this indicates some level of confidence by the way that 0:03:40.040 --> 0:03:42.680 consumers are returning to buying equities and they don't have 0:03:42.840 --> 0:03:45.880 to engage in that behavior any further. 0:03:46.520 --> 0:03:49.320 It is interesting that the vote was not unanimous. It 0:03:49.440 --> 0:03:52.040 was seven to two to scrap the negative interest rate. 0:03:52.360 --> 0:03:56.360 That's closer than what some people expected. Martin. Can we 0:03:56.400 --> 0:03:59.440 read anything into that or is that something that you 0:03:59.480 --> 0:04:02.640 know you'd figure on a move as big as this, 0:04:02.760 --> 0:04:03.960 that there might be a little dissent. 0:04:05.640 --> 0:04:06.240 Not really. 0:04:06.360 --> 0:04:08.839 I mean, there are people who are just looking at 0:04:08.880 --> 0:04:12.280 the economy, and the economy has been slowing. So if 0:04:12.320 --> 0:04:16.560 you would be just looking and well reading the data, 0:04:16.640 --> 0:04:19.479 looking only in your domestic economy, then there is a 0:04:19.480 --> 0:04:23.839 good reason to keep policy more expansionly, not to increase 0:04:23.880 --> 0:04:26.320 interest rates. On the other hand, the Bank of Japan 0:04:26.400 --> 0:04:29.440 has been driven and the government has recognized that as 0:04:29.480 --> 0:04:32.000 well by the very weak yend. So this is an 0:04:32.040 --> 0:04:34.960 important variable that you don't have to take, but it 0:04:35.040 --> 0:04:40.240 affects policy. Plus by sentiment overall that well, the economy 0:04:40.279 --> 0:04:44.680 is normalizing, the policy should be normalized as well. This 0:04:44.800 --> 0:04:49.680 is the overwhelming mood around well people in industry and 0:04:49.800 --> 0:04:51.080 also in the Bank of Japan. 0:04:51.520 --> 0:04:53.920 You know, ed made an interesting point David and Glace 0:04:54.000 --> 0:04:57.880 about the effect that the equity market is having maybe 0:04:58.000 --> 0:05:02.680 on the to community in Japan, and I'm wondering if 0:05:02.680 --> 0:05:05.880 you can imagine how that may have impacted the thinking 0:05:05.920 --> 0:05:08.039 at the BOJ when you're looking at an ek that's 0:05:08.080 --> 0:05:10.800 not far from an all time high. 0:05:11.000 --> 0:05:14.880 Interesting a question. In fact, this came up about two 0:05:14.880 --> 0:05:18.520 hours back on the TV show Man Group was on, 0:05:18.720 --> 0:05:22.320 and certainly to your point at this point in the 0:05:22.400 --> 0:05:24.560 rally forty thousand, right, you know how you know what 0:05:24.600 --> 0:05:27.000 exposure to you this one one with the in the 0:05:27.080 --> 0:05:31.159 Japanese equity market. And the interesting point from our guest 0:05:31.560 --> 0:05:34.839 is that is the biogen what they're doing. Now you 0:05:34.880 --> 0:05:36.960 could look at that as simply a symptom of the 0:05:37.040 --> 0:05:40.400 underlying change that's taking place in the economy. Right, Two 0:05:40.480 --> 0:05:43.840 things there, right, One is the economy is normalizing, right, 0:05:43.880 --> 0:05:48.479 so they enter this ultra aggressive policy stands I think 0:05:48.480 --> 0:05:50.479 thirteen years ago. I just joined Bloomberg then, and that 0:05:50.600 --> 0:05:55.760 was when Caroroda was coming in April of course, twenty thirteen, 0:05:55.800 --> 0:05:57.520 that's when they embarked in this. And you know, eleven 0:05:57.600 --> 0:06:00.560 years after that they've managed to achieve two percent, right, 0:06:00.600 --> 0:06:02.960 which and they're coming out with in fact guidance and 0:06:03.000 --> 0:06:06.679 inflation they're saying will likely remain above two percent through 0:06:07.000 --> 0:06:10.240 fiscal twenty twenty four. But here's the interesting part too. 0:06:10.320 --> 0:06:14.560 They've also downgraded their assessment on consumer spending and production. 0:06:14.720 --> 0:06:18.120 So job done, but job done not just yet. So 0:06:18.920 --> 0:06:20.960 the part I'm trying to make is what exposure does 0:06:20.960 --> 0:06:23.880 one want for man group? They think it's time to 0:06:23.880 --> 0:06:25.880 go to small caps because that's the part of the 0:06:25.880 --> 0:06:29.520 equity market that might not be as exposed to a 0:06:29.560 --> 0:06:31.560 stronger yet in case the yen strengthens from here. 0:06:31.680 --> 0:06:34.280 So the end hasn't really moved all that much at 0:06:34.279 --> 0:06:37.000 the moment, trading at one forty nine eighty four, so 0:06:37.040 --> 0:06:40.400 it's actually weakened a little here, and that's a pattern 0:06:40.400 --> 0:06:42.840 that we've seen. Nick had been lower but now is higher, 0:06:42.880 --> 0:06:46.039 moving up around about ninety five points or so a 0:06:46.160 --> 0:06:49.160 quarter of one percent. Let me go back to ed 0:06:49.279 --> 0:06:53.760 Rodgers in terms of looking at the equity market that 0:06:53.880 --> 0:06:56.120 question that David was dressing earlier about whether or not 0:06:56.440 --> 0:06:59.600 it's getting close to being tapped out. I think you 0:06:59.640 --> 0:07:01.240 were one one of the first ones who told me 0:07:01.400 --> 0:07:05.320 that in looking at Japanese companies, they're sort of like 0:07:06.040 --> 0:07:09.640 a warrant on global growth. Do you think that the 0:07:09.680 --> 0:07:11.800 games that we've seen in the nik are signaling a 0:07:11.800 --> 0:07:13.720 little bit that global growth is coming back. 0:07:16.560 --> 0:07:20.320 I think there's optimism, yes, and definitely that small MidCap 0:07:20.440 --> 0:07:24.560 space in Japan has in many ways been a harbinger 0:07:25.720 --> 0:07:28.680 and foreshadowing of a global global you know, to play 0:07:28.720 --> 0:07:33.040 on the global economy in many respects. I'll still stand 0:07:33.040 --> 0:07:34.120 by those statements. 0:07:35.160 --> 0:07:35.920 The kind of. 0:07:35.960 --> 0:07:39.160 Leveraged if you will exposure you can get in that 0:07:39.240 --> 0:07:42.120 space for certain parts of the globe economy are absolutely real. 0:07:42.600 --> 0:07:44.680 And the differentiation that we're going to now see in 0:07:44.720 --> 0:07:47.160 that space is also I think going to be real. 0:07:47.840 --> 0:07:49.840 You know, some of those companies that won't have access 0:07:49.840 --> 0:07:52.480 to chief capital or free money anymore, it's going to 0:07:52.480 --> 0:07:55.600 have impact on their businesses. You know, in addition to 0:07:55.600 --> 0:07:57.440 other things, you know, lack of labor and other things. 0:07:57.440 --> 0:08:00.440 You can talk about a lot of things, but oh yes, 0:08:01.000 --> 0:08:02.320 I'd still stand by those datements. 0:08:03.280 --> 0:08:07.880 Ed Rodgers is the CEO also CIO of Rogers Investment Advisors, 0:08:07.960 --> 0:08:10.960 joining us as we continue our special coverage of the 0:08:10.960 --> 0:08:15.320 BOJ decision, with the Bank of Japan hiking interest rates 0:08:15.320 --> 0:08:19.280 a target range night between zero and ten bases points. 0:08:19.520 --> 0:08:24.560 The BOJ also ending yield curve control, the last country 0:08:24.640 --> 0:08:30.360 essentially to exit negative interest rates. Joined by Bloomberg's Brian Curtis, 0:08:30.360 --> 0:08:32.719 co host of Daybreak Asia, Day to Dating, Glace is 0:08:32.800 --> 0:08:37.120 with US, host of one of the Bloomberg TV shows 0:08:37.160 --> 0:08:39.920 in Hong Kong, and Martin Schulz is with US chief 0:08:39.920 --> 0:08:43.000 economist at Fujitsu. Martin, we were talking a moment ago 0:08:43.040 --> 0:08:47.800 about the drag that the Chinese economy, the weak Chinese economy, 0:08:47.840 --> 0:08:51.280 is having on Japan. You know, recently there's been a 0:08:51.280 --> 0:08:55.240 little bit of conversation about the parallels between what China 0:08:55.280 --> 0:08:58.520 may be facing now in deflation and what Japan has 0:08:58.559 --> 0:09:01.400 been struggling with for what's seems like three decades. 0:09:01.440 --> 0:09:01.640 Now. 0:09:01.920 --> 0:09:05.760 Do you think policymakers in Beijing have really looked at 0:09:05.760 --> 0:09:08.840 the mistakes that Japan may have made over the last 0:09:08.880 --> 0:09:13.080 thirty years and are learning from them absolutely. 0:09:13.480 --> 0:09:17.120 I mean the Japanese how to deal with a real 0:09:17.280 --> 0:09:20.080 estate of financial bubble has been one of the main 0:09:20.200 --> 0:09:24.680 cases in any textbook. The Chinese government is very well 0:09:24.720 --> 0:09:29.120 aware that their growth model, with a huge amount of 0:09:29.160 --> 0:09:33.080 investment into infrastructure investment in particular, has been driving the 0:09:33.160 --> 0:09:37.240 economy and this needs to change towards more consumer spending, 0:09:37.280 --> 0:09:42.559 towards a more domestic driven economy that is focusing on technology, 0:09:42.679 --> 0:09:47.080 on digital digital technologies. This is what they've been focusing on. 0:09:47.640 --> 0:09:50.960 They have been studying the Japanese case very very well. 0:09:51.000 --> 0:09:54.280 The problem is it remains to be hard. Such a 0:09:54.440 --> 0:09:59.040 change is really a significant problem. China knows it will 0:09:59.080 --> 0:10:02.720 have to expand well it exports somehow, which will have 0:10:02.800 --> 0:10:05.640 to go into Asia. We should expect to see this 0:10:05.800 --> 0:10:08.240 in the future, and that they have to deal with 0:10:08.280 --> 0:10:11.560 the well more technology driven companies that have been growing 0:10:11.600 --> 0:10:14.199 so much. This is why the policy makers are probably 0:10:14.240 --> 0:10:18.480 so very careful with their technology giants. They are not sure. 0:10:18.520 --> 0:10:20.600 They know that they have to rely on them, but 0:10:20.640 --> 0:10:23.400 they are not sure if they can control them. Figuring 0:10:23.480 --> 0:10:26.440 out the right way forward. Here will be a major 0:10:26.480 --> 0:10:29.120 major challenge for policy makers in China over the next 0:10:29.160 --> 0:10:29.640 few years. 0:10:30.160 --> 0:10:32.760 David's something we touched on a little bit earlier in 0:10:32.800 --> 0:10:35.760 this hour when we were waiting on the bog announcement. 0:10:36.360 --> 0:10:39.480 We were sort of musing over what might happen with 0:10:39.600 --> 0:10:43.280 the holdings, the existing holdings of ETFs and reads. Now 0:10:43.280 --> 0:10:46.080 we see today that they have scrapped the purchases of 0:10:46.120 --> 0:10:48.520 these and we understand they haven't actually been buying all 0:10:48.520 --> 0:10:51.280 that much of late, but they still have those large holdings. 0:10:51.520 --> 0:10:53.560 We put it to the other guests, what might happen. 0:10:53.840 --> 0:10:56.880 Do you think that it's sizeable enough that it could 0:10:56.920 --> 0:11:00.199 weigh on the levels of the equity market injine And 0:11:00.280 --> 0:11:02.200 if they start to sell now? And would they. 0:11:03.600 --> 0:11:05.800 Good question if I had If I had the answer, 0:11:05.800 --> 0:11:08.439 I'd be sitting on a sunny beat somewhere else with 0:11:08.559 --> 0:11:09.760 a very expensive cocktail. 0:11:09.920 --> 0:11:11.640 We can't get inside their minds, can't wait. 0:11:12.840 --> 0:11:14.959 The interesting thing though, is the is the vote on 0:11:15.559 --> 0:11:18.840 the purchases right, So it seems that the vote on 0:11:19.120 --> 0:11:23.400 policy is seven to two and two, yeah, but it's 0:11:23.480 --> 0:11:26.400 eight to one on JGBS on the purchases as well, 0:11:26.440 --> 0:11:30.280 So that you have a slightly more slightly larger majority 0:11:30.280 --> 0:11:34.640 there if you will on ETFs, I mean you have 0:11:34.679 --> 0:11:37.400 an incremental buyer now right. You know, I haven't done 0:11:37.440 --> 0:11:39.800 the math, but you do have an incremental buyer outside 0:11:39.800 --> 0:11:42.280 of BOJ at the moment. And I'd still be interested 0:11:42.320 --> 0:11:44.600 to see what they'll do with all the jgb's under 0:11:44.600 --> 0:11:45.920 balance beat right, and they can hold that for a. 0:11:45.960 --> 0:11:48.040 Veran It wouldn't be interesting if they set up a 0:11:48.040 --> 0:11:52.199 scheme just like the FED in QT when they finally 0:11:52.520 --> 0:11:55.439 decide to dispose of a lot of what they've bought 0:11:55.440 --> 0:11:57.319 that it just becomes kind of like machine. 0:11:57.160 --> 0:12:01.120 Like, Yeah, and shrinking the balance sheet. Right, Yeah, that's 0:12:01.120 --> 0:12:03.719 a good point because the Feds tomorrow and something else 0:12:03.760 --> 0:12:06.400 that came up on shows today. You look at what's 0:12:06.400 --> 0:12:09.320 happening in the US equity market, you look at risk assets, 0:12:09.320 --> 0:12:11.480 you look at crypto, You look at where copper is 0:12:11.480 --> 0:12:13.920 eleven month highs, you look at oil at four month highs, SMP. 0:12:14.600 --> 0:12:17.160 It doesn't seem that what the Fed's telling us is true, 0:12:17.200 --> 0:12:20.480 you know, if it's been saying policies restrictive enough. You 0:12:20.520 --> 0:12:22.760 look at markets, it looks like there's enough liquidity out there. 0:12:22.800 --> 0:12:25.120 Yeah, I would agree with that, Martin. I know that 0:12:25.160 --> 0:12:26.920 you've been with us for much of the hour, and 0:12:26.960 --> 0:12:29.400 I want to thank you, Martin Schulz, a chief economist 0:12:29.480 --> 0:12:32.840 at Fujitsu, for joining us on our special coverage of 0:12:32.920 --> 0:12:35.880 the decision from the Bank of Japan at Rogers of 0:12:36.080 --> 0:12:39.800 Rogers Investment Advisors. Stay with us. I'm looking at the 0:12:39.920 --> 0:12:42.880 WEI function now in the Bloomberg terminal. We're seeing a 0:12:42.920 --> 0:12:45.640 weaker NK down only two tenths of one percent and 0:12:45.679 --> 0:12:49.199 the end pulling into one forty nine sixty five thereabouts, 0:12:49.520 --> 0:12:52.120 with a loss against the greenback of about three tenths 0:12:52.160 --> 0:12:54.720 of one percent. But if you look inside the NK 0:12:54.880 --> 0:12:58.439 right now, anything that's interest rates sensitive, real estate, utilities, 0:12:58.840 --> 0:13:01.920 financial shares push to the upside. Seeing a little bit 0:13:01.920 --> 0:13:05.559 of weakness in healthcare and consumer discretionary. David, you were 0:13:05.559 --> 0:13:09.760 making a point earlier about the relative strength of the 0:13:09.880 --> 0:13:12.480 n K, and I'm wondering whether or not we should 0:13:12.840 --> 0:13:15.960 kind of read into that that maybe at the margins 0:13:16.000 --> 0:13:18.520 had something to do with the decision today on the 0:13:18.520 --> 0:13:19.479 Bank of Japan. 0:13:21.640 --> 0:13:24.600 Most likely in fact the NICK and also when they 0:13:24.600 --> 0:13:27.360 look at the Bank's index right because the Topics Bank 0:13:27.559 --> 0:13:31.600 index has really been a boj trade that's actually up 0:13:31.679 --> 0:13:35.920 right now, I'm getting more details on the statement, and 0:13:36.400 --> 0:13:39.960 you know what this is actually looking And I could 0:13:39.960 --> 0:13:41.480 be wrong, and the next yards could prove me wrong. 0:13:41.520 --> 0:13:43.000 We'll see what they say in the press briefing. But 0:13:44.000 --> 0:13:47.520 the headlines that are coming through right now are tilting 0:13:48.320 --> 0:13:51.360 this narrative more in favor of this being actually a 0:13:51.400 --> 0:13:54.600 doubvish move. Right, So fine, first rate hikes in two 0:13:54.600 --> 0:13:57.600 thousand and seven, and notwithstanding it's just barely above zero, 0:13:57.960 --> 0:13:59.839 but the bog is coming out and saying that they 0:14:00.080 --> 0:14:03.880 had increased GG be buying if rates writes rapidly, So 0:14:03.920 --> 0:14:06.760 it's looking like they'll be there to keep rates steady. 0:14:07.160 --> 0:14:09.520 Well, yeah, that's that's what we thought was the case, 0:14:09.600 --> 0:14:12.120 because if you scrap everything, you know, you might have 0:14:12.360 --> 0:14:14.880 yields running to the upside. So when I saw that 0:14:14.960 --> 0:14:19.080 Nick story that they would continue with government bond purchases 0:14:19.160 --> 0:14:23.680 but scrap YCC, it gives them more control in the market. 0:14:24.200 --> 0:14:26.200 It gives them the freedom to get in there and 0:14:26.240 --> 0:14:29.440 buy you know, when and where they see, and they 0:14:29.440 --> 0:14:31.360 can they can guide the yield to a level that 0:14:31.360 --> 0:14:33.920 they feel comfortable with. And we were speculating what would 0:14:34.000 --> 0:14:36.760 that level be, you know, would it be one percent, 0:14:36.800 --> 0:14:39.040 would it be one and a half percent. Let's go 0:14:39.080 --> 0:14:41.880 back to ed Rodgers ed anything that you've been seeing 0:14:41.920 --> 0:14:45.080 here in some of the latest flashes that catch your attention, 0:14:46.480 --> 0:14:50.480 that that might show that the market is somehow in 0:14:50.680 --> 0:14:52.760 or out of favor with what the boj would like 0:14:52.840 --> 0:14:53.320 to see. 0:14:55.440 --> 0:14:57.800 So I got the same we I open. I got 0:14:57.840 --> 0:15:01.480 the say, btmm, interest rates aren't really moving. 0:15:02.080 --> 0:15:04.200 It bounce around a little bit, you know from playing. 0:15:06.560 --> 0:15:10.320 But this is such a non event, which because we've 0:15:10.320 --> 0:15:12.560 all been predicting it for a while, and they told 0:15:12.640 --> 0:15:14.520 us what the trigger was going to be like when 0:15:14.560 --> 0:15:16.480 you saw the wage the conclusion of the wage high, right, 0:15:18.640 --> 0:15:22.000 it was kind of obvious. Now we're there. What the 0:15:22.080 --> 0:15:24.000 other thing I'm watching on Bloomberg is, you know every 0:15:24.040 --> 0:15:27.480 grand loses seventy eight billion dollars. You know, it's eight 0:15:27.560 --> 0:15:31.880 times the accounting fraud, you know, the Enron's and the 0:15:31.880 --> 0:15:34.480 world comms. And I think we should be thinking a 0:15:34.560 --> 0:15:38.400 lot more about what a potential China implosion looks like 0:15:39.240 --> 0:15:42.240 visa of each Japan Wow, and everybody else by the 0:15:42.280 --> 0:15:46.160 way too, because there is there is you know, if 0:15:46.200 --> 0:15:48.000 you go back to the late eighties and the early nineties. 0:15:48.040 --> 0:15:50.480 When Japan's trouble started, there were a lot of people 0:15:50.520 --> 0:15:52.880 that would tell you, yeah, well there's one set of 0:15:52.880 --> 0:15:54.840 boats and another set of boats, and not a whole 0:15:54.880 --> 0:15:58.200 lot of good disclosure going on at the national level. 0:15:59.000 --> 0:16:01.200 You know, Japan's a really good, clean, easy place to 0:16:01.240 --> 0:16:03.600 do business now for the most part, as is the 0:16:03.640 --> 0:16:05.840 United States again for the most part. I think China 0:16:05.920 --> 0:16:08.920 is a real question, and I think we've touched on 0:16:09.120 --> 0:16:11.160 a couple of times. But if you really want to 0:16:11.160 --> 0:16:14.240 think about ripple effects, I think that's where you start 0:16:14.240 --> 0:16:16.280 to think about where the big next big ripple effects 0:16:16.320 --> 0:16:18.440 might be felt. And I agree with I think Martin 0:16:18.480 --> 0:16:20.120 was saying, you know, the Chinese have sort of been 0:16:20.160 --> 0:16:22.920 studying Japan for a long time about what happened with 0:16:22.960 --> 0:16:24.800 their real estate. It was a real estate driven crisis, 0:16:24.880 --> 0:16:27.440 right nine, the peak was a real estate driven crisis. 0:16:27.480 --> 0:16:29.840 Here you look at two thousand and United State, it's 0:16:29.840 --> 0:16:32.200 a real estate crisis. So the impact of a real 0:16:32.280 --> 0:16:34.840 estate crisis on a large economy, I don't know if 0:16:34.840 --> 0:16:37.600 anybody's ever really done all the right studies about the 0:16:37.720 --> 0:16:41.120 level of political, social, and economic impact when it's something 0:16:41.160 --> 0:16:44.440 that big, and you know that's the bloombird screen. I've 0:16:44.440 --> 0:16:45.920 been reading a lot of them this morning. 0:16:46.040 --> 0:16:46.800 No doubt about that. 0:16:47.480 --> 0:16:49.640 It's already priced in. It's already priced in. 0:16:49.920 --> 0:16:53.239 It's already priced in well telegraphed. I think you're not surprising, 0:16:53.320 --> 0:16:56.600 but well telegraphed. Nick Smith is with us. He is 0:16:56.680 --> 0:17:01.040 Japan strategist at CLSA. On the line, Nick, your reaction 0:17:01.160 --> 0:17:04.200 to this move by the BOJA to essentially do everything 0:17:04.200 --> 0:17:06.200 that the knee k said the BOJ would. 0:17:06.040 --> 0:17:10.560 Do well, I've been warning of this for quite a while. 0:17:10.600 --> 0:17:14.080 I got the three hikes right last year and said 0:17:14.080 --> 0:17:17.719 that would be coming out of negative rates today. So 0:17:18.359 --> 0:17:22.360 exactly has forecast the questions what you do with your 0:17:22.400 --> 0:17:25.560 equities from here on in. I mean I've been very 0:17:25.560 --> 0:17:28.880 long banks her for quite a while and done extremely 0:17:28.960 --> 0:17:32.280 nicely out of them. The questions whether they underperform like 0:17:32.320 --> 0:17:35.200 they did after the first rate hike in two thousand 0:17:35.240 --> 0:17:39.280 and six, or whether they keep going. I think that 0:17:39.880 --> 0:17:42.760 the BOJ hasn't finished this. I think there's a certain 0:17:42.840 --> 0:17:46.920 amount of contrition from the Bank of Japan that they 0:17:46.920 --> 0:17:51.200 have been waterboarding the economy for quite some time, and 0:17:51.240 --> 0:17:54.879 that's the speech of seven December, when they're saying, sorry, 0:17:54.920 --> 0:17:58.480 we crushed net interest income in the household sector, in 0:17:58.520 --> 0:18:01.600 the financial sector. Certainly didn't help in the corporate sector 0:18:01.640 --> 0:18:05.160 because they don't have debt anymore, and so they're essentially 0:18:05.280 --> 0:18:09.639 they were essentially saying, we messed up. We didn't expect 0:18:09.640 --> 0:18:11.280 it to go on for as long as that. We 0:18:11.400 --> 0:18:13.040 knew that the longer we do it, the more it 0:18:13.119 --> 0:18:16.440 hurts the economy. And therefore they've been signaling for quite 0:18:16.480 --> 0:18:19.240 some time they'll get out on this. I think think 0:18:19.280 --> 0:18:21.000 there's possibly more to come. 0:18:22.000 --> 0:18:24.159 Nick, we were sort of musing at the beginning of 0:18:24.160 --> 0:18:26.920 this week, you know, what would have the bigger impact 0:18:27.000 --> 0:18:30.680 on markets? Would it be the Bank of Japan call today? 0:18:31.000 --> 0:18:34.520 Would it be the Nvidia Developers conference or the FED? 0:18:35.400 --> 0:18:38.720 Given that you know, we got a lot telegraphed from 0:18:39.480 --> 0:18:42.280 from the BOJ, through the Nike and through Kyoto on 0:18:42.280 --> 0:18:46.160 what might happen today, I'm just curious whether you think 0:18:46.200 --> 0:18:48.840 maybe what your own pal says in the next twenty 0:18:48.880 --> 0:18:50.520 four hours could be the most important. 0:18:52.320 --> 0:18:55.399 Yeah. I mean, obviously, in terms of the currency, this 0:18:55.520 --> 0:18:59.119 is a relatively small impact. In fact, it's sending the 0:18:59.480 --> 0:19:01.560 currency in the wrong direction. Rates have gone up, and 0:19:01.640 --> 0:19:04.439 yet the currency is weakened. What's going to be important 0:19:04.440 --> 0:19:06.760 for the currency is clearly going to be the FED, 0:19:07.920 --> 0:19:12.080 and that the cuts we've been expecting from the Fed. 0:19:12.119 --> 0:19:14.560 I think people are getting less and less confidence that 0:19:15.119 --> 0:19:17.440 they'll get the number and size of them that they'd 0:19:17.760 --> 0:19:21.920 thought some while ago. That's why we're staying weak. I mean, 0:19:21.920 --> 0:19:25.240 the main thing with the end is it effects emotions. 0:19:25.960 --> 0:19:29.200 The effect on profits is nowhere close to what most 0:19:29.240 --> 0:19:30.080 people think it is. 0:19:30.600 --> 0:19:32.800 Let's get back to Ed Rogers very quickly. For the 0:19:32.880 --> 0:19:35.960 last time, Ed and few had had take a guess 0:19:36.000 --> 0:19:37.679 at what the FED is going to do in terms 0:19:37.720 --> 0:19:40.560 of forecasting future rate cuts this year, are you in 0:19:40.600 --> 0:19:44.159 the seventy five basis point in terms of total cuts 0:19:44.160 --> 0:19:49.360 this year? Are you leaning more towards fifty My. 0:19:49.400 --> 0:19:51.760 Guess that it would be lower than seventy five. If 0:19:51.760 --> 0:19:52.960 you're going to put a gun in my head and 0:19:52.960 --> 0:19:57.880 make me tick, you're going to be a bit more gradualist, 0:19:57.880 --> 0:20:01.439 because I think there's a lot more concern and uncertainty 0:20:02.040 --> 0:20:04.800 in that in that regard in the United States about 0:20:04.800 --> 0:20:06.160 what exactly impact will be. 0:20:06.359 --> 0:20:09.440 Where to go, David, let me put this question to 0:20:09.560 --> 0:20:13.159 you then about the environment. We've had earnings and that 0:20:13.200 --> 0:20:15.640 has driven stock market gains in the US and people 0:20:15.680 --> 0:20:18.600 have set aside macro policy a little bit. Now you've 0:20:18.600 --> 0:20:20.880 got uh, the FED coming in in the next day, 0:20:20.920 --> 0:20:22.800 and we really are at the end of the earnings 0:20:23.080 --> 0:20:25.640 for this season. Did we start to fret a little 0:20:25.640 --> 0:20:28.160 bit more about rates and levels of inflation? 0:20:30.080 --> 0:20:32.800 Well, let let's well, let's see what the dots look 0:20:32.880 --> 0:20:36.320 like first, right, and let's see what the thinking there said. 0:20:36.400 --> 0:20:39.320 And I think that's a very good point. Let me 0:20:39.359 --> 0:20:42.159 rephrase that. You know, markets have done well despite the 0:20:42.200 --> 0:20:45.600 fact that we pushed back in rate high expectations, right, yeah, 0:20:45.800 --> 0:20:46.960 and the fact that. 0:20:46.920 --> 0:20:49.359 And that's because of earnings. Earnings have been pretty solid. 0:20:50.240 --> 0:20:52.960 Yes, I think that the Nvidia story overnight just to 0:20:53.280 --> 0:20:55.800 crowbar that in the crowbar that in right. So the 0:20:55.920 --> 0:20:57.960 issue for Nvidia, if you had to pick one, that 0:20:58.200 --> 0:21:01.560