WEBVTT - Japan's Takaichi Set to Call Early Election 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Welcome to the Daybreak

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<v Speaker 1>Asia podcast. I'm Doug Prisner. We begin today in Japan,

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<v Speaker 1>where the country's finance minister, together with a top currency official,

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<v Speaker 1>issued a warning to speculators after the end weakened to

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<v Speaker 1>its lowest level against the dollar in eighteen months. The

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<v Speaker 1>officials said they will respond appropriately to any moves they

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<v Speaker 1>deem excessive, including those that are speculative. Now, betts against

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<v Speaker 1>the End seem to pick up speed after sana E

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<v Speaker 1>Takiichi emerged as the leading candidate to become Prime Minister

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<v Speaker 1>last October. Takiichi is known for her pro fiscal and

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<v Speaker 1>monetary stimulus views. Well now Takiichi is obviously Prime Minister,

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<v Speaker 1>and she will be calling a snap election later this

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<v Speaker 1>month at the start of the parliamentary session. This is

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<v Speaker 1>an attempt by Takiichi to shore up her leadership and

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<v Speaker 1>secure mandate for a new ruling coalition. For a closer look,

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<v Speaker 1>I'm joined by Bloomberg's Isabel Reynolds. Isabel is Bloomberg's Tokyo

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<v Speaker 1>bureau chief, and she joins from our studios in the

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<v Speaker 1>Japanese capital. Thank you for being here. Happy New Year,

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<v Speaker 1>to you, Isabel, Can I get you to begin by

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<v Speaker 1>kind of laying out the dynamics that are at play

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<v Speaker 1>because Takei ICHI's Liberal Democratic Party is so reliant on

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<v Speaker 1>a coalition partner.

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<v Speaker 2>Yes, I mean for more than a quarter of a

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<v Speaker 2>century it was in this coalition partnership with a party

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<v Speaker 2>called Cormeto. They had very little in common in terms

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<v Speaker 2>of policy really, but what they did get out of

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<v Speaker 2>Cormeto was this ability to really turn out the vote

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<v Speaker 2>when it came to an election. So there were many

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<v Speaker 2>LDP members of parliament who in fact owed their seats

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<v Speaker 2>really to Cormeto. Then, when Takeichi came into power as

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<v Speaker 2>Prime Minister last year, she had certain views that Cormeto

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<v Speaker 2>really took issue with. But the one that finally sort

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<v Speaker 2>of put an end to the coalition was her refusal

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<v Speaker 2>to clamp down any further on these allegations about corruption

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<v Speaker 2>within the party, about slush funds and so on. So

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<v Speaker 2>Cormator left the coalition. She was left scrabbling around desperately

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<v Speaker 2>for another coalition partner. She did find one in the

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<v Speaker 2>form of the Japan Innovation Party, but that party is

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<v Speaker 2>very sort of regionally based, has less capacity to turn

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<v Speaker 2>out the vote, and in any case has said that

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<v Speaker 2>it will sort of not coordinate on seats and will

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<v Speaker 2>be end up fighting against the LVP in the next election.

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<v Speaker 2>So in terms of actual election cooperation, they're not as

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<v Speaker 2>nearly as strong a partner.

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<v Speaker 1>So if she is successful in shoring up per leadership,

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<v Speaker 1>is it a foregone conclusion that we're going to see

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<v Speaker 1>much more in the way of government stimulus going forward.

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<v Speaker 2>We don't know that for sure at all. At the moment,

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<v Speaker 2>this election looks much more uncertain than it does on

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<v Speaker 2>the surface. So if you look at Takehi's popularity, I mean,

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<v Speaker 2>she's had extremely high popularity ratings kind of personally and

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<v Speaker 2>for her cabinet, but that sort of same feeling doesn't

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<v Speaker 2>necessarily extend to her party. So what we don't know

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<v Speaker 2>is how far you know that positive feeling towards her

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<v Speaker 2>will actually translated into people getting off the couch on

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<v Speaker 2>that day and going into the polling station to vote.

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<v Speaker 1>So help me understand why her polling is showing such

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<v Speaker 1>strong kind of sentiment here in regards to her leadership.

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<v Speaker 1>Is there something that the population in Japan is expecting

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<v Speaker 1>from her?

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<v Speaker 2>I think she came in talking about all the things

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<v Speaker 2>that the Japanese are worried about at the moment. So

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<v Speaker 2>last summer during the Upper House elections, one of the

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<v Speaker 2>issues that kind of cropped up more than it ever

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<v Speaker 2>had done before was immigration, and well, I mean, she

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<v Speaker 2>didn't take a very strong stance on it, but she

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<v Speaker 2>was more outspoken about the need for limits on immigration

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<v Speaker 2>and the need to clamp down on sort of non

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<v Speaker 2>nationals who commit crimes or who break the rules. So

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<v Speaker 2>that was popular with the people who had kind of

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<v Speaker 2>drifted to a more sort of right wing new party

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<v Speaker 2>that had cropped up over the past couple of years.

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<v Speaker 2>So she was able to co opt I think those

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<v Speaker 2>people into supporting her. But I think there are other

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<v Speaker 2>issues that go beyond policy. To be honest, I mean,

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<v Speaker 2>I think she's she's conveyed this very enthusiastic and energetic

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<v Speaker 2>sort of atmosphere. She's always out there smiling. She's very

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<v Speaker 2>kind of dynamic in her relationship. If you see her

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<v Speaker 2>on the international stage, she'll be at summit, she'll be

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<v Speaker 2>rushing up to meet people and hug people, Whereas you know,

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<v Speaker 2>previous Japanese leaders would kind of sit in a corner

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<v Speaker 2>and play with their iPhone rather than going out proactively

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<v Speaker 2>to talk to the other leaders, and she's just comes

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<v Speaker 2>across as very dynamic, and I think people appreciate that

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<v Speaker 2>that although Japan has these huge problems and who knows

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<v Speaker 2>if she'll be able to resolve them, the aging population,

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<v Speaker 2>the massive debt, at least she looks like she's really trying.

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<v Speaker 1>And talking about breaking the glass ceiling, right. I mean,

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<v Speaker 1>she's the first female prime minister that Japan has had.

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<v Speaker 1>Talk to me a little bit about the way in

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<v Speaker 1>which she's being evaluated when comes to foreign policy, whether

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<v Speaker 1>we're talking about the relationship with US and trade issues,

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<v Speaker 1>whether we're talking about mainland China or even to somewhat

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<v Speaker 1>lesser extent, South Korea.

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<v Speaker 2>If you talk about the US. I mean, I think

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<v Speaker 2>Japan has resigned itself to the only thing that can

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<v Speaker 2>do with Donald Trump is to basically flatter him, offer

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<v Speaker 2>him gifts, just look as enthusiastic as possible, and never

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<v Speaker 2>contradict him, never criticize him. And that's exactly what she's done.

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<v Speaker 2>In space. I mean, we saw her going down to

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<v Speaker 2>the US military base at Your COSTCA, appearing by Trump's side,

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<v Speaker 2>talking to the all the military people there and looking really,

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<v Speaker 2>really happy to be there, and that's been the modus

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<v Speaker 2>operandi for Japan for some time. So I think the

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<v Speaker 2>Japanese and people appreciate that. I mean, I don't think

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<v Speaker 2>everybody in Japan supports Trump. I think he's relatively unpopular here,

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<v Speaker 2>but they recognize that that's the way that you have

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<v Speaker 2>to deal with him because Japan is sort of reliant

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<v Speaker 2>on the US for defensive purposes. When it comes to China,

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<v Speaker 2>she did make these remarks in parliament a while back

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<v Speaker 2>which angered China about the possibility of Japan sending in

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<v Speaker 2>its military if there were to be a sort of

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<v Speaker 2>a military clash over for Taiwan. Essentially, she hinted that

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<v Speaker 2>if it were to involve the US, and if it

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<v Speaker 2>were to be sort of an actual, full non military clash,

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<v Speaker 2>then Japan might have to send in its own military.

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<v Speaker 2>That has really angered China. But I think from the

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<v Speaker 2>Japanese perspective, although she's saying out lies something that sort

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<v Speaker 2>of politicians never said in the past, or at least

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<v Speaker 2>people in high office did not say in the past,

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<v Speaker 2>I mean, it's not a change in policy. And I

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<v Speaker 2>think this kind of backlash from China against her over

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<v Speaker 2>this has actually aided her own popularity domestically that they're

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<v Speaker 2>glad to see that she's sort of standing up for

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<v Speaker 2>what she says.

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<v Speaker 1>So when it comes back to the issue of economic stimulus,

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<v Speaker 1>I'm wondering whether or not there are obstacles in the way,

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<v Speaker 1>perhaps fiscal hawks that would push back against the idea

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<v Speaker 1>of that to government debt in Japan, that may tie

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<v Speaker 1>her hands to some extent. Is that a possibility, Well.

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<v Speaker 2>Yes, I mean it's it's a kind of a topsy

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<v Speaker 2>turvy situation in Japan, it is kind of in some

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<v Speaker 2>other parts of the world now. In that I mean,

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<v Speaker 2>she's seen as a right wing figure, but she favors

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<v Speaker 2>more spending, which is kind of not the traditional right

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<v Speaker 2>wing position, and there are the main opposition party, the CDP,

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<v Speaker 2>is a little less enthusiastic about spending, and that CDP

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<v Speaker 2>is now kind of in talks with the LDP's former partner, Cormeto,

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<v Speaker 2>and they are linking up potentially for the next election,

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<v Speaker 2>so they could take some votes away on that side.

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<v Speaker 2>So obviously, I mean, if Takai she wins a big

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<v Speaker 2>election victory for her LDP on on her own and

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<v Speaker 2>manages to get a majority on her own for the party.

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<v Speaker 2>I mean, she can pretty well do what she likes,

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<v Speaker 2>but that the budget has more less been put together already,

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<v Speaker 2>so it'd just be a question of passing what's already there.

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<v Speaker 2>The only other issue is, you know, whether that victory

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<v Speaker 2>will turn out to be as big as it might

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<v Speaker 2>potentially look on the surface.

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<v Speaker 1>As you and I both know, the Japanese equity market

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<v Speaker 1>is very near record highs, and I'm wondering about, away

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<v Speaker 1>from the politics, how people in Japan are feeling about

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<v Speaker 1>the economy.

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<v Speaker 2>Yes, I think the stock market is one thing, and

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<v Speaker 2>the way people are feeling on the ground is definitely

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<v Speaker 2>a different thing. While wages have been going up, they

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<v Speaker 2>have not kept pace with the cost of living at all,

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<v Speaker 2>especially for people kind of in the lower income groups.

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<v Speaker 2>And also, as you know, Japan's a very elderly country,

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<v Speaker 2>so people on these fixed incomes people and pensions and

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<v Speaker 2>so on are facing a rather painful financial situation on

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<v Speaker 2>personal level. So any poll you look at, if you

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<v Speaker 2>if you ask what is the biggest issue that the

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<v Speaker 2>govern should be focusing on, they all say the cost

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<v Speaker 2>of living, And whether she can really deliver on that

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<v Speaker 2>it is difficult to say because she's sort of overseen

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<v Speaker 2>this fall in the en, which contributes to inflation, because

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<v Speaker 2>Japan imports so much of the stuff that people need

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<v Speaker 2>to know for food and fuel and so on, that

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<v Speaker 2>this is part of their daily living expenses.

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<v Speaker 1>Normally, you and I don't speak about the Bank of Japan,

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<v Speaker 1>but if I can ask for a little bit of

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<v Speaker 1>perspective here, does this necessarily tie the hands of central

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<v Speaker 1>bankers in Japan right now until the dust settles on

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<v Speaker 1>what take Ichi intends to do on the fiscal side.

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<v Speaker 2>Yes, I mean I think with an election in the offing.

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<v Speaker 2>The next meeting is on January the twenty thirds, and

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<v Speaker 2>I'd be very surprised if they made any dramatic move

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<v Speaker 2>at that point, because they tend from past experience not

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<v Speaker 2>to do anything when there's political uncertainty. But in the

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<v Speaker 2>longer term, I don't necessarily think so. I mean, obviously

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<v Speaker 2>there's a lot of concern over the week a yen

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<v Speaker 2>at this point, I mean, it is getting to the

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<v Speaker 2>point where even the Bank of Japan would start to

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<v Speaker 2>think about it. So in the longer term I wouldn't

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<v Speaker 2>I wouldn't rule out further action by the bank.

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<v Speaker 1>Isabelle will leave it there. Thank you so very much.

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<v Speaker 1>Bloomberg's Isabelle Reynolds. She's a Bloomberg's Tokyo bureau chief. Joining

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<v Speaker 1>from our studios in Tokyo here on the Daybreak Asia podcast.

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<v Speaker 1>Welcome back to the Daybreak Asia Podcast. I'm Doug Prisoner.

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<v Speaker 1>Since the beginning of the year in the US stock market,

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<v Speaker 1>we have seen a steady rotation out of megacap tech shares. Well,

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<v Speaker 1>today that trend seemed to gather steam. We had the

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<v Speaker 1>Nasdaq Composite suffering its worst decline in about a month,

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<v Speaker 1>with a drop of one percent, and at the same time,

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<v Speaker 1>stocks with more exposure to the economy continue to benefit.

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<v Speaker 1>The Russell two thousand index of small cap shares added

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<v Speaker 1>seven tenths of one percent today. And that's where we

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<v Speaker 1>began our discussion with Jason lu Jason is head of

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<v Speaker 1>a pac equity and derivative strategy at BNP PERIBA. He

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<v Speaker 1>spoke with Bloomberg TV host Averril Honk and Paul Allen.

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<v Speaker 3>I do want to start with what we saw during

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<v Speaker 3>the US session, this move out of tech, the Nasdaq

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<v Speaker 3>having its worst day in a month, small caps doing

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<v Speaker 3>pretty well. Do you see this as being a US

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<v Speaker 3>specific story or could we expect to see a bit

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<v Speaker 3>of a weakness and Asia tech stocks going ahead as well.

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<v Speaker 4>Sure, I think that's a great question. When it comes

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<v Speaker 4>to rotation. We actually seen this started maybe towards later

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<v Speaker 4>of last year within the USI between tech and the

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<v Speaker 4>non tech, but even within tech we have also seen

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<v Speaker 4>some meaningful divergence as well. You may record it if

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<v Speaker 4>you look back at the tech rally last year. Very

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<v Speaker 4>often it tends to be a coordinated rally and a

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<v Speaker 4>coordinated decline. But since perhaps November and December last year,

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<v Speaker 4>where we see the success of Gemini, there's now a

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<v Speaker 4>lot more debate about even within the tech complex, which

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<v Speaker 4>AI model will be winning and subsequently which technology hardware

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<v Speaker 4>that are driving those AI models will be winning. And

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<v Speaker 4>so it resulted in the rather divergence among the MAC seven.

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<v Speaker 4>And also if you start this year, you're also seeing

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<v Speaker 4>a divergence between the hardware semiconductor side of things versus

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<v Speaker 4>the broader NASTAC And this also translates into Asia as well,

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<v Speaker 4>because if you look at you to date, some of

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<v Speaker 4>the best performing markets are Korea, Taiwan and Japan, who

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<v Speaker 4>tends to have a little bit more hardware exposure. When

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<v Speaker 4>it comes to the AI complex.

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<v Speaker 3>I noticed Jason missing from that list. You did not

0:12:34.520 --> 0:12:36.079
<v Speaker 3>say China. But if we take a look at a

0:12:36.160 --> 0:12:38.640
<v Speaker 3>chat that we have on the Bloomberg here, China AI

0:12:39.440 --> 0:12:41.840
<v Speaker 3>has been finding a lot of new niches, you know,

0:12:41.880 --> 0:12:46.040
<v Speaker 3>in terms of medical self diagnosis tools, short videos as well.

0:12:46.080 --> 0:12:49.240
<v Speaker 3>We've seen a bit of strength in this space. Do

0:12:49.280 --> 0:12:52.160
<v Speaker 3>you think there's better priced opportunities in the China AI

0:12:52.240 --> 0:12:55.760
<v Speaker 3>story away from the USAI story.

0:12:56.920 --> 0:12:58.719
<v Speaker 4>I think that's a great question. The reason I did

0:12:58.760 --> 0:13:02.199
<v Speaker 4>not mention China earlier is because when it comes to divergence,

0:13:02.240 --> 0:13:06.200
<v Speaker 4>there's also the divergence between the China AI complex versus

0:13:06.360 --> 0:13:08.880
<v Speaker 4>the rest of the world, which mostly driven by the

0:13:09.040 --> 0:13:11.840
<v Speaker 4>US market, and the behavior tends to be quite different.

0:13:11.920 --> 0:13:15.640
<v Speaker 4>So specifically on the China AI side, we are positive

0:13:15.679 --> 0:13:19.160
<v Speaker 4>on this, especially with the anticipation of the fifteen five

0:13:19.240 --> 0:13:23.640
<v Speaker 4>year plan that I believe investors are expecting more policy support,

0:13:23.920 --> 0:13:27.560
<v Speaker 4>and from the recent IPOs over the past month and

0:13:27.600 --> 0:13:30.040
<v Speaker 4>some of the outperformance of these AI related names, it

0:13:30.080 --> 0:13:33.640
<v Speaker 4>seems to suggests that there has been a structural change

0:13:33.760 --> 0:13:36.920
<v Speaker 4>when it comes to how investor think about the competitiveness

0:13:36.960 --> 0:13:39.680
<v Speaker 4>of China AI, but the way that they trade may

0:13:39.679 --> 0:13:42.520
<v Speaker 4>have slightly deviated from the rest of the world because

0:13:42.520 --> 0:13:45.640
<v Speaker 4>of the China ecosystem is not necessarily, at least at

0:13:45.640 --> 0:13:50.559
<v Speaker 4>this point, connected with the USAI ecosystem.

0:13:50.880 --> 0:13:55.199
<v Speaker 5>What could potentially derail this? I think this, I guess

0:13:55.280 --> 0:13:57.760
<v Speaker 5>is a bit of a background concern. But we see

0:13:57.760 --> 0:14:01.960
<v Speaker 5>how authorities on shore maybe looking to cub some of

0:14:02.000 --> 0:14:05.880
<v Speaker 5>the risks. You see the tightening of these margin financing ratios,

0:14:05.960 --> 0:14:07.719
<v Speaker 5>perhaps in the short term, longer term, what are you

0:14:07.760 --> 0:14:11.520
<v Speaker 5>seeing as how this might impact the trajectory?

0:14:13.160 --> 0:14:15.760
<v Speaker 4>Sure? I think when we look at the China rally

0:14:15.800 --> 0:14:19.040
<v Speaker 4>for over the past year or so, it actually started

0:14:19.080 --> 0:14:22.040
<v Speaker 4>as a policy driven rally, or driven by the liquidity

0:14:22.400 --> 0:14:26.680
<v Speaker 4>transfer from fixing come marketer deposits into equity. It is

0:14:26.720 --> 0:14:30.440
<v Speaker 4>true that we have also seen an increase of margin trading,

0:14:30.800 --> 0:14:33.320
<v Speaker 4>but that is very much a reflection of investor getting

0:14:33.360 --> 0:14:36.400
<v Speaker 4>more positive on the broader market. I think very often

0:14:36.560 --> 0:14:39.760
<v Speaker 4>we have heard investor looking at the absolute level of

0:14:39.840 --> 0:14:43.240
<v Speaker 4>the margin balance or the margin turnover. It is true

0:14:43.480 --> 0:14:46.960
<v Speaker 4>that they are now in absolute terms near a record high,

0:14:47.040 --> 0:14:49.960
<v Speaker 4>but we should also remember that the overall size of

0:14:50.040 --> 0:14:53.640
<v Speaker 4>the Chinese equity market has also expanded quite significantly. So

0:14:53.720 --> 0:14:56.760
<v Speaker 4>if you take the current margin balance outstanding as a

0:14:56.840 --> 0:15:00.520
<v Speaker 4>percentage of the overall market cap, we're only a sixty

0:15:00.560 --> 0:15:03.280
<v Speaker 4>percent of the previous peak that we saw back in

0:15:03.320 --> 0:15:06.360
<v Speaker 4>twenty fifteen. And speaking of twenty fifteen, I believe that

0:15:06.400 --> 0:15:10.840
<v Speaker 4>the policymakers have tried to learn from the experience of

0:15:11.000 --> 0:15:15.120
<v Speaker 4>those leverage driven market and they're trying to cool down

0:15:15.200 --> 0:15:17.400
<v Speaker 4>the market in order to encourage what they call the

0:15:17.440 --> 0:15:21.080
<v Speaker 4>slobal market, which is more based on long term capital

0:15:21.160 --> 0:15:25.720
<v Speaker 4>allocation rather than speculative flow on specific high growth sectors.

0:15:28.840 --> 0:15:31.400
<v Speaker 5>That's a good point talk to us about structurally. I mean,

0:15:31.480 --> 0:15:34.760
<v Speaker 5>we've been seeing data in the past they exports growth

0:15:35.360 --> 0:15:39.880
<v Speaker 5>in China is still growing really strong. We have Yuen strengths,

0:15:39.920 --> 0:15:42.400
<v Speaker 5>maybe taking a bit of breather for parts of this week.

0:15:42.680 --> 0:15:46.000
<v Speaker 5>How does that all affect inflows into China you think?

0:15:48.360 --> 0:15:51.200
<v Speaker 4>I think the info into China are quite divided, because

0:15:51.280 --> 0:15:55.000
<v Speaker 4>historically when investors look at info into China, they often

0:15:55.040 --> 0:15:58.160
<v Speaker 4>start from the consumer angle. But for the past year

0:15:58.240 --> 0:16:01.320
<v Speaker 4>or two, I think the consumer side remains quite weak.

0:16:01.960 --> 0:16:04.680
<v Speaker 4>Or you have the socolled new consumption that are very

0:16:04.720 --> 0:16:09.600
<v Speaker 4>specific to a handful of stocks, or specific subsectors instead.

0:16:09.640 --> 0:16:12.560
<v Speaker 4>I think we've seen a lot more focus on technology

0:16:12.840 --> 0:16:16.120
<v Speaker 4>and on healthcare and high end manufacturing that both of

0:16:16.120 --> 0:16:18.640
<v Speaker 4>you mentioned at the earlier point. So, for example, in

0:16:18.680 --> 0:16:22.080
<v Speaker 4>the Hong Kong market, we have seen a significant repricing

0:16:22.360 --> 0:16:25.520
<v Speaker 4>of a lot of the foreign appetite into the technology

0:16:25.520 --> 0:16:29.640
<v Speaker 4>related stocks, but that level of optimism are not equally

0:16:29.680 --> 0:16:32.720
<v Speaker 4>distributed across other sectors as well. So when it comes

0:16:32.720 --> 0:16:35.200
<v Speaker 4>to forum FLN flow, we maintain the view that this

0:16:35.280 --> 0:16:37.760
<v Speaker 4>year will be very targeted by the sectors, and it

0:16:37.800 --> 0:16:40.320
<v Speaker 4>will be very targeted by the different segments as well,

0:16:40.360 --> 0:16:43.360
<v Speaker 4>because when you look at the listing structure of the

0:16:43.400 --> 0:16:46.360
<v Speaker 4>Hong Kong market and the China onore market, they do

0:16:46.440 --> 0:16:49.920
<v Speaker 4>offer a very distinct exposure. For example, Hong Kong is

0:16:49.920 --> 0:16:53.280
<v Speaker 4>more on the AI application, internet and software, whereas you

0:16:53.320 --> 0:16:56.200
<v Speaker 4>can find a lot more hardware oriented companies and higher

0:16:56.320 --> 0:16:58.360
<v Speaker 4>manufacturings in the China onial market.

0:17:00.600 --> 0:17:02.720
<v Speaker 3>Jason, I know that one of the risks you see

0:17:02.720 --> 0:17:05.040
<v Speaker 3>potentially in twenty twenty six will be from a major

0:17:05.119 --> 0:17:08.080
<v Speaker 3>change in FED policy. There's certainly no evidence of that

0:17:08.119 --> 0:17:11.000
<v Speaker 3>happening at the moment, but could you foresee a set

0:17:11.000 --> 0:17:13.360
<v Speaker 3>of circumstances where that might change.

0:17:14.840 --> 0:17:17.000
<v Speaker 4>Sure, I think if you look at the fat on

0:17:17.080 --> 0:17:19.880
<v Speaker 4>market right now, I think it's pricing and roughly two

0:17:19.920 --> 0:17:23.879
<v Speaker 4>to three cut. But it is possible that as we

0:17:24.080 --> 0:17:27.280
<v Speaker 4>enter into Q two we'll be faced with a few

0:17:27.359 --> 0:17:30.280
<v Speaker 4>unknown number one, as we know now there are quite

0:17:30.280 --> 0:17:33.960
<v Speaker 4>a few legal cases around the Fed officials share power

0:17:34.000 --> 0:17:37.840
<v Speaker 4>and also Governor Lisa Cook. We also will likely start

0:17:37.880 --> 0:17:40.480
<v Speaker 4>to see the implementation of the One Big Beautiful Bill,

0:17:40.720 --> 0:17:43.560
<v Speaker 4>which will feed into the physical spending, and that could

0:17:43.600 --> 0:17:47.960
<v Speaker 4>also translate into a potential recovery in the employment market,

0:17:48.000 --> 0:17:50.760
<v Speaker 4>which feeds into the inflation. And at the same time

0:17:51.000 --> 0:17:53.360
<v Speaker 4>we will have a new fat chair. So in Q two,

0:17:53.440 --> 0:17:55.280
<v Speaker 4>I think there is a point that the market will

0:17:55.280 --> 0:18:00.919
<v Speaker 4>be forced to recalibrate the interest rate trajectory on the

0:18:01.119 --> 0:18:03.879
<v Speaker 4>latest economic data, and I think that could drive either to

0:18:03.920 --> 0:18:07.120
<v Speaker 4>a more dubbish or hackish tilt, and that will transmit

0:18:07.320 --> 0:18:08.480
<v Speaker 4>to the rest of the world as well. So I

0:18:08.480 --> 0:18:11.040
<v Speaker 4>think that is indeed a key event that we're watching

0:18:11.080 --> 0:18:11.560
<v Speaker 4>in Q two.

0:18:14.520 --> 0:18:17.400
<v Speaker 5>You alluded to some of the potential risks for tech,

0:18:17.440 --> 0:18:23.119
<v Speaker 5>in particular in terms of memory prices and demand. Do

0:18:23.160 --> 0:18:25.480
<v Speaker 5>you think there is a chance that the likes of

0:18:25.520 --> 0:18:28.040
<v Speaker 5>South Korean markets, they sort of become a victim of

0:18:28.040 --> 0:18:31.000
<v Speaker 5>their own success. Given how some of these big players

0:18:31.000 --> 0:18:34.040
<v Speaker 5>they're also flagging that that could affect growth in other

0:18:34.080 --> 0:18:35.000
<v Speaker 5>parts of their business.

0:18:37.480 --> 0:18:39.399
<v Speaker 4>I think you're right that when we look at the

0:18:39.440 --> 0:18:43.160
<v Speaker 4>memory price, we have seen a remarkable increase a recorded

0:18:43.280 --> 0:18:45.640
<v Speaker 4>during the fourth quarter. Some of the memory mardule price

0:18:45.680 --> 0:18:49.240
<v Speaker 4>has actually gone up four times, which drove the outperformance

0:18:49.280 --> 0:18:52.159
<v Speaker 4>of the Korean taxtocks throughout Q four and also at

0:18:52.160 --> 0:18:54.520
<v Speaker 4>the start of this year. And that actually creates some

0:18:54.720 --> 0:18:58.680
<v Speaker 4>very unique situation for the Asian tech or global tech

0:18:58.720 --> 0:19:02.560
<v Speaker 4>because it's like Korea and Taiwan, they do have a

0:19:02.600 --> 0:19:06.120
<v Speaker 4>dominant position in a very specific segment. So Korea will

0:19:06.119 --> 0:19:10.280
<v Speaker 4>be memory and storage, Taiwan will be foundries and AI servers.

0:19:10.440 --> 0:19:14.320
<v Speaker 4>There are no clear replacement of these companies, and so

0:19:14.400 --> 0:19:17.320
<v Speaker 4>they do have very strong price in power. And in fact,

0:19:17.320 --> 0:19:20.280
<v Speaker 4>I think we have seen early signs of the transmission

0:19:20.320 --> 0:19:23.359
<v Speaker 4>of higher component price into end products, and I think

0:19:23.560 --> 0:19:26.320
<v Speaker 4>we have seen a few companies raising their price on

0:19:26.400 --> 0:19:29.080
<v Speaker 4>laptops and PC or smartphone to start the year. So

0:19:29.119 --> 0:19:32.480
<v Speaker 4>I think if there is indeed a potential concern that

0:19:32.560 --> 0:19:35.359
<v Speaker 4>if these price continue to stay high will that hurt demand,

0:19:35.560 --> 0:19:38.119
<v Speaker 4>But I think specifically on the Ai side of things,

0:19:38.200 --> 0:19:40.800
<v Speaker 4>it seems that demand is still quite strong and it's

0:19:40.840 --> 0:19:44.480
<v Speaker 4>more of a supply constraint rather than a kind of

0:19:44.480 --> 0:19:47.040
<v Speaker 4>demand constraint. So I think on that part, perhaps it's

0:19:47.080 --> 0:19:49.639
<v Speaker 4>less of concern and it is wide because of that

0:19:50.240 --> 0:19:54.000
<v Speaker 4>very sharp increase in an expectation, it actually still make

0:19:54.119 --> 0:19:57.840
<v Speaker 4>Korean equity relatively cheap on a pe basis, because it

0:19:57.880 --> 0:20:00.840
<v Speaker 4>costs me two hundred right now trading around Henhog's pe,

0:20:01.080 --> 0:20:03.480
<v Speaker 4>and that is in line with its long term average.

0:20:03.560 --> 0:20:05.840
<v Speaker 4>And when they look at Taiwan, the tai x is

0:20:05.880 --> 0:20:08.440
<v Speaker 4>also trading at about a thirty percent discount to the

0:20:08.520 --> 0:20:10.840
<v Speaker 4>NESTAC of one hundred as well. So in that sense,

0:20:10.880 --> 0:20:14.320
<v Speaker 4>I think depending on the specific product, I think for

0:20:14.320 --> 0:20:16.159
<v Speaker 4>a certain part of the Asian market, they do have

0:20:16.280 --> 0:20:18.920
<v Speaker 4>very strong price and power. That's your feed into the

0:20:19.119 --> 0:20:19.840
<v Speaker 4>earning scrowth.

0:20:20.440 --> 0:20:23.280
<v Speaker 1>That was Jason leu Had of APAC Equity and Derivative

0:20:23.320 --> 0:20:27.719
<v Speaker 1>Strategy at BNP Pariba, speaking with Bloomberg TV host Avril

0:20:27.760 --> 0:20:30.199
<v Speaker 1>Hong and Paul Allen, bringing it to you here on

0:20:30.240 --> 0:20:35.800
<v Speaker 1>the Daybreak Asia podcast. Thanks for listening to today's episode

0:20:35.880 --> 0:20:39.879
<v Speaker 1>of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we

0:20:39.920 --> 0:20:43.800
<v Speaker 1>look at the story shaping markets, finance, and geopolitics in

0:20:43.840 --> 0:20:47.000
<v Speaker 1>the Asia Pacific. You can find us on Apple, Spotify,

0:20:47.160 --> 0:20:50.639
<v Speaker 1>the Bloomberg Podcast YouTube channel, or anywhere else you listen.

0:20:51.080 --> 0:20:54.000
<v Speaker 1>Join us again tomorrow for insight on the market moves

0:20:54.040 --> 0:20:58.600
<v Speaker 1>from Hong Kong to Singapore and Australia. I'm Doug Prisner,

0:20:58.720 --> 0:20:59.960
<v Speaker 1>and this is Bloomberg

0:21:03.320 --> 0:21:03.560
<v Speaker 4>Four