1
00:00:02,520 --> 00:00:07,040
Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

2
00:00:11,080 --> 00:00:14,200
Speaker 2: Welcome to the Daybreak Asia podcast. I'm dek Krisner. We

3
00:00:14,280 --> 00:00:16,520
Speaker 2: had a rally in chip stocks in the States and

4
00:00:16,600 --> 00:00:20,599
Speaker 2: it came onward of a blockbuster deal between Advanced micro

5
00:00:20,680 --> 00:00:24,480
Speaker 2: Devices and open Ai. AMD is going to provide graphics

6
00:00:24,520 --> 00:00:29,680
Speaker 2: processing units to open Ai over multiple years. And interestingly,

7
00:00:29,760 --> 00:00:32,479
Speaker 2: this deal also sets the stage for open Ai to

8
00:00:32,600 --> 00:00:37,599
Speaker 2: acquire a large stake in AMD. Here is a MD CEO,

9
00:00:37,920 --> 00:00:38,640
Speaker 2: Lisa Sue.

10
00:00:38,760 --> 00:00:41,159
Speaker 3: This is a huge milestone for AMD. You know, we

11
00:00:41,200 --> 00:00:44,440
Speaker 3: are so thrilled with the partnership with the open Ai team.

12
00:00:44,479 --> 00:00:46,479
Speaker 3: And it's also you know, a huge moment for the

13
00:00:46,520 --> 00:00:48,800
Speaker 3: AI industry because you know, when you get to the

14
00:00:48,800 --> 00:00:51,000
Speaker 3: write down to it, you need more AI.

15
00:00:51,080 --> 00:00:52,720
Speaker 4: Compute. I mean, that's where we are today.

16
00:00:52,760 --> 00:00:55,160
Speaker 3: Compute is a foundation for all of the intelligence we

17
00:00:55,200 --> 00:00:57,720
Speaker 3: can get from AI, and you know, we are a

18
00:00:57,800 --> 00:01:01,000
Speaker 3: compute provider. We have spent years on our roadmap, We've

19
00:01:01,040 --> 00:01:04,920
Speaker 3: spent years working with open Ai and Lisa.

20
00:01:04,640 --> 00:01:07,679
Speaker 2: Sue there, she is the CEO of AMD, speaking earlier

21
00:01:07,720 --> 00:01:10,600
Speaker 2: to Bloomberg. By the way, shares an AMD rallied nearly

22
00:01:10,640 --> 00:01:14,520
Speaker 2: twenty four percent today and the Philadelphia Semiconductor index was

23
00:01:14,600 --> 00:01:17,320
Speaker 2: up about two point nine percent. At the same time,

24
00:01:17,480 --> 00:01:20,520
Speaker 2: during New York trading, we had the Japanese yen weakening

25
00:01:20,600 --> 00:01:24,520
Speaker 2: by nearly two percent. This is after the election over

26
00:01:24,560 --> 00:01:27,959
Speaker 2: the weekend of Sanai taka Ichi as head of the LDP,

27
00:01:28,160 --> 00:01:30,480
Speaker 2: And in a moment, we'll look at what her victory

28
00:01:30,560 --> 00:01:34,880
Speaker 2: means for Japan with Bloomberg opinion columnist Gerode Reedi. But

29
00:01:34,959 --> 00:01:37,800
Speaker 2: we begin with a look at US price action. Our

30
00:01:37,840 --> 00:01:42,760
Speaker 2: guest is Ed Butowski. He is managing partner at Chapwood Investments. Ed,

31
00:01:42,840 --> 00:01:44,920
Speaker 2: thank you so much. Can we talk first about the

32
00:01:44,920 --> 00:01:48,680
Speaker 2: price action that we had in the artificial intelligence trade today.

33
00:01:48,960 --> 00:01:51,520
Speaker 2: There's been a lot of talk about the fact that

34
00:01:51,680 --> 00:01:54,640
Speaker 2: we may be in a bubble right now, given where

35
00:01:54,760 --> 00:01:57,080
Speaker 2: valuations are. I just want you to weigh in. What's

36
00:01:57,120 --> 00:01:57,520
Speaker 2: your take.

37
00:01:58,680 --> 00:02:02,800
Speaker 1: Yes, I absolutely think it's a crucial subject because the

38
00:02:02,880 --> 00:02:06,720
Speaker 1: spending that's going on is sort of like looking into

39
00:02:06,960 --> 00:02:10,000
Speaker 1: the globe or looking into space and knowing what we

40
00:02:10,040 --> 00:02:13,280
Speaker 1: see where there's Mars and there's the moon, but we

41
00:02:13,360 --> 00:02:15,760
Speaker 1: really don't know what else is beyond that, and the

42
00:02:15,840 --> 00:02:20,600
Speaker 1: spending is just outrageous. There's this frenzy of trying to

43
00:02:20,600 --> 00:02:23,400
Speaker 1: get money into the AI space. All my clients ask

44
00:02:23,520 --> 00:02:25,800
Speaker 1: me how to take advantage of the AI space, and

45
00:02:25,840 --> 00:02:27,600
Speaker 1: I tell them that it's sort of like it's going

46
00:02:27,680 --> 00:02:30,360
Speaker 1: to be like nanotechnology, where it's going to be a

47
00:02:30,480 --> 00:02:34,160
Speaker 1: part of businesses, but making money in AI is going

48
00:02:34,240 --> 00:02:37,079
Speaker 1: to be very, very difficult. And the analogy I was

49
00:02:37,120 --> 00:02:39,920
Speaker 1: starting to make was that you can look and see

50
00:02:39,919 --> 00:02:44,080
Speaker 1: only so far, but how much further does the universe go?

51
00:02:44,480 --> 00:02:46,760
Speaker 1: We just don't know, and we don't know what the

52
00:02:46,840 --> 00:02:50,000
Speaker 1: universe is going to hold for these AI stops.

53
00:02:50,360 --> 00:02:52,519
Speaker 2: So is that going to put a lot of pressure

54
00:02:52,639 --> 00:02:56,160
Speaker 2: on the Magnificent seven in particular when we get quarterly

55
00:02:56,200 --> 00:02:58,840
Speaker 2: earnings coming up in the next few weeks and if

56
00:02:58,880 --> 00:03:02,200
Speaker 2: there is disappointment, maybe not on the most recent quarter,

57
00:03:02,240 --> 00:03:04,600
Speaker 2: but when it comes to guidance, it is the market

58
00:03:04,720 --> 00:03:06,200
Speaker 2: particularly vulnerable here?

59
00:03:06,200 --> 00:03:08,880
Speaker 1: Do you think, Well, there's no question about it. The

60
00:03:08,880 --> 00:03:14,600
Speaker 1: Magnificent Seven is very very expensive based on today's predictions.

61
00:03:14,880 --> 00:03:17,600
Speaker 1: But we just don't know what the rest of the

62
00:03:17,600 --> 00:03:20,720
Speaker 1: world is going to look like for them, So it's

63
00:03:20,760 --> 00:03:25,200
Speaker 1: a very very difficult thing to forecast. But their earnings expectations,

64
00:03:25,360 --> 00:03:28,359
Speaker 1: they're probably going to meet their earnings because earnings expectations

65
00:03:28,560 --> 00:03:31,800
Speaker 1: have come down. But what they say is what's going

66
00:03:31,840 --> 00:03:34,119
Speaker 1: to be important and how much cap X spending they're

67
00:03:34,120 --> 00:03:36,240
Speaker 1: going to be able to do is also going to

68
00:03:36,240 --> 00:03:38,520
Speaker 1: be very crucial. They don't do a lot of cap

69
00:03:38,680 --> 00:03:41,160
Speaker 1: X spending, then they're probably going to get slaughtered.

70
00:03:41,720 --> 00:03:41,920
Speaker 4: Yeah.

71
00:03:41,960 --> 00:03:44,520
Speaker 2: I want to give a hat tip to Wired magazine.

72
00:03:44,560 --> 00:03:47,400
Speaker 2: I was reading today a piece in Wired talking about

73
00:03:47,440 --> 00:03:51,480
Speaker 2: projected spending in AI infrastructure this year at around four

74
00:03:51,560 --> 00:03:54,200
Speaker 2: hundred billion dollars. But if you look at where consumer

75
00:03:54,280 --> 00:03:57,960
Speaker 2: demand for AI is right now, it's only at around

76
00:03:58,000 --> 00:04:01,160
Speaker 2: twelve billion a year. So that seems to be a

77
00:04:01,200 --> 00:04:03,760
Speaker 2: pretty remarkable disconnect, does it not?

78
00:04:04,840 --> 00:04:07,080
Speaker 1: Yeah, but then you have to ask yourself, what kind

79
00:04:07,080 --> 00:04:11,880
Speaker 1: of demand is there for AI other than perplexity, chat, GBT,

80
00:04:12,640 --> 00:04:15,600
Speaker 1: grock where you pay twenty dollars a month. How else

81
00:04:15,680 --> 00:04:20,080
Speaker 1: are we having this appetite for AI? I don't understand it.

82
00:04:20,800 --> 00:04:23,160
Speaker 2: The other thing that was interesting today I mentioned the

83
00:04:23,160 --> 00:04:25,760
Speaker 2: records for the equity market. We also had a record

84
00:04:25,760 --> 00:04:27,880
Speaker 2: for the price of gold. We came very close to

85
00:04:28,000 --> 00:04:31,599
Speaker 2: four thousand dollars announce Here in New York, Bloomberg was

86
00:04:31,600 --> 00:04:34,960
Speaker 2: talking with Ken Griffin from Citadel and he was saying

87
00:04:34,960 --> 00:04:38,839
Speaker 2: that investors are starting to view gold as a safer

88
00:04:38,960 --> 00:04:41,720
Speaker 2: asset than the dollar, and this is something that is

89
00:04:41,880 --> 00:04:44,240
Speaker 2: very very concerning to him. Do you share that point

90
00:04:44,240 --> 00:04:44,600
Speaker 2: of view?

91
00:04:45,800 --> 00:04:49,560
Speaker 1: Yeah, I think that gold has you know, it was

92
00:04:49,600 --> 00:04:52,640
Speaker 1: always thought to be an inflation protection, but you can

93
00:04:52,680 --> 00:04:56,279
Speaker 1: see that inflation has come lower and in gold prices

94
00:04:56,320 --> 00:04:59,760
Speaker 1: have gone higher. So I don't think anybody really understands

95
00:05:00,120 --> 00:05:04,000
Speaker 1: the movement of gold today. I certainly don't. I've been

96
00:05:04,000 --> 00:05:06,760
Speaker 1: doing this forty years and I've just seen gold kind

97
00:05:06,760 --> 00:05:10,320
Speaker 1: of remain flat, never really being an inflation hedge. And

98
00:05:10,440 --> 00:05:12,640
Speaker 1: you know, because of the weakening of the dollar, that's

99
00:05:12,680 --> 00:05:14,760
Speaker 1: one of the reasons that we've seen gold go higher,

100
00:05:15,279 --> 00:05:17,600
Speaker 1: But it has not been an inflation protection. So I

101
00:05:17,640 --> 00:05:21,200
Speaker 1: don't think anybody really truly understands that other than the

102
00:05:21,200 --> 00:05:23,640
Speaker 1: momentum that you're seeing with gold.

103
00:05:23,760 --> 00:05:27,799
Speaker 2: What about the notion that tariffs will be inflationary Today,

104
00:05:28,000 --> 00:05:30,240
Speaker 2: As a matter of fact, the White House announced tariffs

105
00:05:30,240 --> 00:05:33,960
Speaker 2: of twenty five percent on medium and heavy duty trucks.

106
00:05:34,000 --> 00:05:36,719
Speaker 2: They will take effect November the first. Originally that was

107
00:05:36,760 --> 00:05:40,760
Speaker 2: supposed to have been an October first deadline. But talk

108
00:05:40,800 --> 00:05:44,360
Speaker 2: to me about the extent to which tariff policy will

109
00:05:44,400 --> 00:05:45,640
Speaker 2: impact future inflation.

110
00:05:46,960 --> 00:05:49,279
Speaker 1: Yes, I think that you had to look at the

111
00:05:49,440 --> 00:05:52,240
Speaker 1: number that twenty five percent of what we use in

112
00:05:52,240 --> 00:05:55,680
Speaker 1: this country comes from outside the United States, it's only

113
00:05:55,720 --> 00:05:58,680
Speaker 1: twenty five percent is subject to teriffs. Then you have

114
00:05:58,800 --> 00:06:02,080
Speaker 1: to dice, you know, yet to splice up exactly which

115
00:06:02,200 --> 00:06:05,679
Speaker 1: tariffs are going to be impactful. You know, middle sized

116
00:06:05,720 --> 00:06:09,000
Speaker 1: trucks and small trucks. You know, you have to figure

117
00:06:09,000 --> 00:06:12,800
Speaker 1: out what percentage of our GDP does that represent, And

118
00:06:12,839 --> 00:06:16,000
Speaker 1: nothing really represents a lot. So I think the inflationary

119
00:06:16,040 --> 00:06:20,040
Speaker 1: pressure from tariffs is something that's misguided. I don't think

120
00:06:20,040 --> 00:06:23,320
Speaker 1: there's going to be a huge amount of inflation because

121
00:06:23,320 --> 00:06:24,000
Speaker 1: of tariffs.

122
00:06:24,360 --> 00:06:27,039
Speaker 2: So does that necessarily mean then the Fed is clear

123
00:06:27,120 --> 00:06:29,320
Speaker 2: to begin with another rate cut this month?

124
00:06:30,440 --> 00:06:32,080
Speaker 1: I don't think there's any question we're going to see

125
00:06:32,080 --> 00:06:35,720
Speaker 1: another rate cut. I think the GDP numbers and the

126
00:06:35,720 --> 00:06:39,680
Speaker 1: inflationary numbers are begging for a rate cut, probably one

127
00:06:39,760 --> 00:06:42,680
Speaker 1: this month, and then one next month, and then maybe

128
00:06:42,760 --> 00:06:45,320
Speaker 1: another one before the end of the year. But definitely

129
00:06:45,480 --> 00:06:47,680
Speaker 1: we're seeing a lower interest rate environment.

130
00:06:48,240 --> 00:06:51,360
Speaker 2: To what extent is the equity market discounted that completely,

131
00:06:51,440 --> 00:06:55,479
Speaker 2: and if so, is further upside necessarily limited.

132
00:06:57,040 --> 00:06:59,479
Speaker 1: I don't think further upside is limited, and I'm not

133
00:06:59,520 --> 00:07:03,360
Speaker 1: a raging bull, but I do look at things practically,

134
00:07:03,680 --> 00:07:05,919
Speaker 1: and lower interest rates are going to make the cost

135
00:07:05,960 --> 00:07:10,760
Speaker 1: of borrowing a lot cheaper. And I do believe answer specifically,

136
00:07:11,040 --> 00:07:13,320
Speaker 1: I do believe a lot of this is already factored

137
00:07:13,360 --> 00:07:16,360
Speaker 1: in to the market. If you look at the futures market,

138
00:07:16,480 --> 00:07:18,880
Speaker 1: they're looking at a ninety six to one hundred percent

139
00:07:19,320 --> 00:07:23,320
Speaker 1: probability of a rate cut this month. So that's that.

140
00:07:23,400 --> 00:07:25,680
Speaker 1: You know, the market is a great discount or of

141
00:07:25,680 --> 00:07:28,200
Speaker 1: future events, and I think they've already discounted it.

142
00:07:28,320 --> 00:07:31,240
Speaker 2: So where are you finding opportunity these days?

143
00:07:31,760 --> 00:07:35,320
Speaker 1: I love utilities. I have for quite some time. I

144
00:07:35,360 --> 00:07:40,000
Speaker 1: actually like utls, which is three times the utility of

145
00:07:40,120 --> 00:07:44,560
Speaker 1: bull market, and it takes the the utility index and

146
00:07:44,640 --> 00:07:47,560
Speaker 1: multiplies the times three, and my clients have done very

147
00:07:47,600 --> 00:07:50,640
Speaker 1: well by it, and I continue to believe that utilities

148
00:07:50,640 --> 00:07:51,360
Speaker 1: are going to excel.

149
00:07:51,680 --> 00:07:53,880
Speaker 2: Doesn't that go back to the AI story? Though? When

150
00:07:53,880 --> 00:07:56,280
Speaker 2: you look at demand from data centers, isn't that really

151
00:07:56,320 --> 00:07:57,120
Speaker 2: the thesis here?

152
00:07:58,760 --> 00:08:01,120
Speaker 1: Now? I don't look at it from that standpoint, although

153
00:08:01,120 --> 00:08:03,320
Speaker 1: that is a nice beneficiary. I look at it from

154
00:08:03,360 --> 00:08:05,920
Speaker 1: the standpoint that interest rates are going to drop and

155
00:08:05,960 --> 00:08:09,960
Speaker 1: the cost to generate energy has come down. So if

156
00:08:10,000 --> 00:08:13,480
Speaker 1: you look at what goes into utilities, those costs have

157
00:08:13,560 --> 00:08:16,200
Speaker 1: come down, those commodity prices, and that is kind of

158
00:08:16,240 --> 00:08:20,160
Speaker 1: a secret or a silent dividend to all of these

159
00:08:20,240 --> 00:08:23,120
Speaker 1: utility companies because the cost for them to do business

160
00:08:23,360 --> 00:08:24,080
Speaker 1: has gone down.

161
00:08:24,360 --> 00:08:26,640
Speaker 2: So what is the average dividend that one of the

162
00:08:27,160 --> 00:08:30,200
Speaker 2: utility stocks? What does it kick off? On average?

163
00:08:30,960 --> 00:08:33,480
Speaker 1: About three and a half percent. So I look at

164
00:08:33,480 --> 00:08:37,600
Speaker 1: them as growth plus income versus income plus growth. I

165
00:08:37,640 --> 00:08:40,080
Speaker 1: do look at the growth of the value of the

166
00:08:40,240 --> 00:08:43,240
Speaker 1: asset going higher plus getting about three and a half

167
00:08:43,240 --> 00:08:46,880
Speaker 1: percent income off of them. And they've been really wonderful,

168
00:08:47,120 --> 00:08:49,600
Speaker 1: and I truly believe they're going to continue to be

169
00:08:49,640 --> 00:08:50,480
Speaker 1: towards the end of the year.

170
00:08:50,720 --> 00:08:52,719
Speaker 2: How are you feeling about the bond market. We've got

171
00:08:52,720 --> 00:08:55,000
Speaker 2: a ten year at around four point fifteen. You said

172
00:08:55,040 --> 00:08:58,160
Speaker 2: a moment ago you expect the FED to continue to

173
00:08:58,200 --> 00:09:00,880
Speaker 2: cut rates. Is this an opportunit unity maybe to take

174
00:09:00,880 --> 00:09:02,559
Speaker 2: a position in fixed income.

175
00:09:03,920 --> 00:09:08,280
Speaker 1: Yes, although fixed income bores me to tears, it really

176
00:09:08,320 --> 00:09:13,400
Speaker 1: does unless we're dealing with distressed When high yield bonds,

177
00:09:13,559 --> 00:09:16,440
Speaker 1: those kind of excite me. But when you look at

178
00:09:16,440 --> 00:09:19,080
Speaker 1: a single aid corporate, you know, I mean, it's just

179
00:09:19,120 --> 00:09:21,920
Speaker 1: like buying, you know, a ten year treasury and it

180
00:09:22,040 --> 00:09:24,920
Speaker 1: just doesn't do much for me. So I'm not really

181
00:09:24,960 --> 00:09:25,959
Speaker 1: that interested.

182
00:09:25,600 --> 00:09:28,480
Speaker 2: In beyond the coupon, though. I'm wondering if there's an

183
00:09:28,480 --> 00:09:31,559
Speaker 2: opportunity for a little capital gain if you were to trade.

184
00:09:31,280 --> 00:09:35,319
Speaker 1: It a very little and you'd have to be dealing

185
00:09:35,320 --> 00:09:38,760
Speaker 1: with millions and millions of dollars to make it worthwhile.

186
00:09:38,840 --> 00:09:41,280
Speaker 1: Otherwise you're just getting about a four or five percent

187
00:09:41,600 --> 00:09:44,640
Speaker 1: increase in the value of the underlying security.

188
00:09:44,840 --> 00:09:47,000
Speaker 2: Okay, Ed, we'll leave it there, Thank you so very much.

189
00:09:47,160 --> 00:09:50,679
Speaker 2: Edwutowski is managing partner at Chapwood Investments. Joining us here

190
00:09:50,679 --> 00:10:01,439
Speaker 2: on The Daybreak as your podcast. Welcome back to the

191
00:10:01,520 --> 00:10:05,360
Speaker 2: day Break Asia Podcast. I'm Doug Prisner. The weekend election

192
00:10:05,520 --> 00:10:09,760
Speaker 2: win by Sinai Takeiichi as leader of Japan's LDP is

193
00:10:09,840 --> 00:10:13,479
Speaker 2: still reverberating in markets. She is set to become Japan's

194
00:10:13,559 --> 00:10:15,240
Speaker 2: first female prime minister.

195
00:10:15,800 --> 00:10:16,000
Speaker 3: Now.

196
00:10:16,040 --> 00:10:19,520
Speaker 2: Take Ichi has long been a critic of BOJ normalization,

197
00:10:20,200 --> 00:10:25,960
Speaker 2: and her fiscal stance suggests continued tolerance for ultra loose policy. Now,

198
00:10:25,960 --> 00:10:28,480
Speaker 2: there have been a couple of dramatic moves in markets

199
00:10:28,520 --> 00:10:30,320
Speaker 2: over the last twenty four hours. We had the knee

200
00:10:30,400 --> 00:10:34,319
Speaker 2: k soaring by four point seven percent on Monday as

201
00:10:34,400 --> 00:10:36,480
Speaker 2: the end sold off, and then in New York trading

202
00:10:36,520 --> 00:10:39,600
Speaker 2: on Monday, we had the end weakening by nearly two

203
00:10:39,640 --> 00:10:42,080
Speaker 2: percent against the dollar. For a closer look at what

204
00:10:42,160 --> 00:10:46,640
Speaker 2: Takeiichi's win means, I'm joined by Gerodridi of Bloomberg Opinion.

205
00:10:47,040 --> 00:10:48,840
Speaker 2: Thank you so much for making time to chat with me.

206
00:10:49,280 --> 00:10:52,400
Speaker 2: I got to begin by asking how surprised you may

207
00:10:52,440 --> 00:10:54,320
Speaker 2: have been at the outcome of this election.

208
00:10:55,160 --> 00:10:59,480
Speaker 4: It certainly wantsn't the result that was most likely. I

209
00:10:59,480 --> 00:11:03,240
Speaker 4: think going into Saturday's vote at the same time, it

210
00:11:03,360 --> 00:11:05,960
Speaker 4: was highly likely that it was going to be Takeiichi

211
00:11:06,320 --> 00:11:10,320
Speaker 4: or shinjiokois Me. I think most of the money. If

212
00:11:10,320 --> 00:11:12,640
Speaker 4: you'd asked me on Friday, I would have bet on

213
00:11:13,240 --> 00:11:16,319
Speaker 4: coois Me. But as we got closer to the vote,

214
00:11:16,440 --> 00:11:20,640
Speaker 4: the sans seemed to be shifting. So it wasn't a

215
00:11:20,840 --> 00:11:23,640
Speaker 4: total surprise. And it makes a lot of sense when

216
00:11:23,679 --> 00:11:26,920
Speaker 4: you think about the position that the LDP finds itself

217
00:11:26,960 --> 00:11:32,360
Speaker 4: in losing support among conservatives, losing support among its base

218
00:11:32,800 --> 00:11:37,160
Speaker 4: and really needing someone to get the traditional LDP members

219
00:11:37,520 --> 00:11:40,040
Speaker 4: back on board. That wasn't going to be coison me

220
00:11:40,400 --> 00:11:43,160
Speaker 4: and certainly Takechi appeals to that segment.

221
00:11:43,360 --> 00:11:46,200
Speaker 2: So I mentioned a moment ago the perception that markets

222
00:11:46,240 --> 00:11:49,280
Speaker 2: have of taka Ichi. Do you think they are accurate?

223
00:11:51,200 --> 00:11:54,240
Speaker 4: They're accurate in terms of what she believes. I think

224
00:11:54,280 --> 00:11:57,120
Speaker 4: what she believes in what she achieves will be two

225
00:11:57,240 --> 00:12:00,920
Speaker 4: very different things. You know, Takeichi does see herself as

226
00:12:01,320 --> 00:12:04,600
Speaker 4: you know, a scion of the late Prime Minister Shinzo Abbe.

227
00:12:05,040 --> 00:12:08,240
Speaker 4: In the past, she has talked a lot about you know,

228
00:12:08,320 --> 00:12:12,760
Speaker 4: easy money policy, about as you say, opposing boj hikes.

229
00:12:13,120 --> 00:12:16,839
Speaker 4: She has been a lot more circumspects in this race

230
00:12:16,920 --> 00:12:19,760
Speaker 4: than she was before. She focused more on trying to

231
00:12:19,800 --> 00:12:22,840
Speaker 4: moderate her her line a little bit, focused more on

232
00:12:23,960 --> 00:12:28,120
Speaker 4: talking about responsible spending. Now she is more of a

233
00:12:28,160 --> 00:12:31,080
Speaker 4: believer in free spending than I think most of the

234
00:12:31,160 --> 00:12:35,320
Speaker 4: other candidates would have been. At the same time, she's

235
00:12:35,360 --> 00:12:38,800
Speaker 4: going to be very constrained about what she can actually achieve.

236
00:12:39,320 --> 00:12:43,760
Speaker 4: It's not it's not the same situation as it was

237
00:12:44,280 --> 00:12:48,120
Speaker 4: when Shinzo Abe came in and subsequently came in as

238
00:12:48,120 --> 00:12:51,199
Speaker 4: an LDP leader and then subsequently was swept back into

239
00:12:51,280 --> 00:12:54,800
Speaker 4: power with a huge majority and a huge mandate to

240
00:12:54,840 --> 00:12:57,760
Speaker 4: get a lot of stuff done. Takaichi is in a

241
00:12:58,040 --> 00:13:01,160
Speaker 4: minority in both houses of parliament. She's going to have

242
00:13:01,240 --> 00:13:04,760
Speaker 4: to make deals just to just to keep the lights on,

243
00:13:05,040 --> 00:13:07,680
Speaker 4: as it were. She's going to find it very hard

244
00:13:08,000 --> 00:13:14,080
Speaker 4: to get any big, bold policy, anything like ebonomics. I

245
00:13:14,160 --> 00:13:16,679
Speaker 4: don't think is on the you know, I don't think

246
00:13:16,720 --> 00:13:19,240
Speaker 4: he's on the cards in the near term. What she's

247
00:13:19,280 --> 00:13:20,719
Speaker 4: going to need to do in the near term is

248
00:13:20,760 --> 00:13:24,280
Speaker 4: going to be stuff that's going to immediately put cash

249
00:13:24,520 --> 00:13:28,360
Speaker 4: in the wallets of every day voters who are suffering

250
00:13:28,480 --> 00:13:32,079
Speaker 4: with and very unhappy with japan sustained inflation.

251
00:13:32,720 --> 00:13:36,080
Speaker 2: I'm wondering if there is any evidence to suggest that

252
00:13:36,200 --> 00:13:39,360
Speaker 2: her thinking may be shifting in terms of the trade

253
00:13:39,400 --> 00:13:42,720
Speaker 2: relationship with the US and how to approach coming up

254
00:13:42,760 --> 00:13:43,600
Speaker 2: with a trade deal.

255
00:13:44,800 --> 00:13:48,000
Speaker 4: She's been pretty reasonable, I think, pretty pragmatic in terms

256
00:13:48,040 --> 00:13:50,000
Speaker 4: of what she said. She said she was not going

257
00:13:50,000 --> 00:13:55,080
Speaker 4: to attempt to renegotiate the deal that has been made

258
00:13:55,440 --> 00:13:59,080
Speaker 4: with Ishiba and President Trump. Of course, we do have

259
00:13:59,480 --> 00:14:04,200
Speaker 4: reports that President Trump is going to visit Japan about

260
00:14:04,920 --> 00:14:09,040
Speaker 4: a handful of days after Takaichi is likely confirmed as

261
00:14:09,120 --> 00:14:13,199
Speaker 4: Prime Minister. But I wouldn't expect to see fireworks there.

262
00:14:13,600 --> 00:14:16,760
Speaker 4: I think, you know, Takaichi knows that probably that's the

263
00:14:16,760 --> 00:14:18,960
Speaker 4: best deal that they're going to have for the moment.

264
00:14:19,400 --> 00:14:21,800
Speaker 4: Over the long term they can think about. There's a

265
00:14:21,800 --> 00:14:24,240
Speaker 4: lot of questions in terms of that deal, in terms

266
00:14:24,280 --> 00:14:27,560
Speaker 4: of the five hundred and fifty billion dollar investment fund,

267
00:14:27,840 --> 00:14:30,280
Speaker 4: but I don't think she's going to be in any

268
00:14:30,280 --> 00:14:32,760
Speaker 4: position to tackle that immediately.

269
00:14:33,480 --> 00:14:36,440
Speaker 2: You mentioned a moment ago the level of inflation in

270
00:14:36,520 --> 00:14:40,360
Speaker 2: Japan and how uncomfortable that is for so many consumers.

271
00:14:40,400 --> 00:14:44,280
Speaker 2: I'm curious about the reaction of the Takaichi win among

272
00:14:44,640 --> 00:14:45,520
Speaker 2: Japanese public.

273
00:14:46,840 --> 00:14:49,520
Speaker 4: So far, the pulling has been quite supportive. I think

274
00:14:49,560 --> 00:14:53,120
Speaker 4: she's seen, as you know, potentially like a very strong

275
00:14:53,240 --> 00:14:57,360
Speaker 4: leader if she can get if she can get things right.

276
00:14:57,560 --> 00:15:02,080
Speaker 4: There was you know, me who, as I mentioned at

277
00:15:02,080 --> 00:15:04,920
Speaker 4: the start, was looking like the most likely to win.

278
00:15:05,320 --> 00:15:08,160
Speaker 4: He is popular among some parts of the public, but

279
00:15:08,200 --> 00:15:11,080
Speaker 4: there also is a large part of the public that

280
00:15:11,160 --> 00:15:14,160
Speaker 4: really does not like him. So I think there is

281
00:15:14,600 --> 00:15:18,560
Speaker 4: especially amongst conservative leaning voters. So there's a little bit

282
00:15:18,560 --> 00:15:20,960
Speaker 4: of a of a relief, and I think I saw

283
00:15:21,080 --> 00:15:24,120
Speaker 4: Paul yesterday that was like something in the region of

284
00:15:24,280 --> 00:15:29,280
Speaker 4: sixty eight percent of people had high expectations for her

285
00:15:29,760 --> 00:15:32,800
Speaker 4: as leader. Again, is she going to be able to

286
00:15:32,880 --> 00:15:37,480
Speaker 4: do anything quickly? We see over and over again with

287
00:15:38,160 --> 00:15:42,560
Speaker 4: new LDP leaders, with new prime ministers, that even if

288
00:15:42,760 --> 00:15:46,840
Speaker 4: the public goes in with high expectations for them, it's

289
00:15:46,920 --> 00:15:49,480
Speaker 4: quite hard to actually get stuff done. There's a lot

290
00:15:49,520 --> 00:15:53,080
Speaker 4: of interested bodies, there's a lot of negotiations that need

291
00:15:53,120 --> 00:15:55,520
Speaker 4: to be done. And that's even more true now than

292
00:15:55,520 --> 00:15:58,320
Speaker 4: it has been in the past with the LDP's minority position.

293
00:15:58,840 --> 00:16:02,480
Speaker 4: So you can see time and time again that starts

294
00:16:02,480 --> 00:16:05,800
Speaker 4: off high and just immediately tanks. Takeichi is going to

295
00:16:05,840 --> 00:16:08,360
Speaker 4: have to make sure that she avoids that situation if

296
00:16:08,360 --> 00:16:10,160
Speaker 4: she wants to stay in power.

297
00:16:10,240 --> 00:16:13,200
Speaker 2: So you're right in your piece that Takeiichi had been

298
00:16:13,440 --> 00:16:17,479
Speaker 2: LDP president for all of five minutes when she generated

299
00:16:17,520 --> 00:16:19,720
Speaker 2: her first controversy. What happened?

300
00:16:21,280 --> 00:16:26,640
Speaker 4: So in her acceptance speech for immediately after she won

301
00:16:26,680 --> 00:16:30,560
Speaker 4: the vote to be president, she pledged that she was

302
00:16:30,640 --> 00:16:33,960
Speaker 4: going to she was going to work work, work, work, work,

303
00:16:34,120 --> 00:16:36,760
Speaker 4: is what she said, and she encouraged all of the

304
00:16:36,840 --> 00:16:40,640
Speaker 4: lawmakers to also join her in working and said that

305
00:16:40,720 --> 00:16:43,840
Speaker 4: she was going to no longer use the phrase work

306
00:16:43,880 --> 00:16:47,920
Speaker 4: life balance and dedicate herself to working. Now she was

307
00:16:47,960 --> 00:16:53,760
Speaker 4: talking to the lawmakers, she was encouraging lawmakers to work hard. Immediately,

308
00:16:53,840 --> 00:16:57,480
Speaker 4: this got a reaction online in terms of, you know,

309
00:16:57,600 --> 00:17:02,480
Speaker 4: advocates for promoting work life balance. Obviously, Japan in the

310
00:17:02,520 --> 00:17:06,280
Speaker 4: past has had issues in terms of overwork, in terms of,

311
00:17:06,320 --> 00:17:09,639
Speaker 4: you know, there have been many cases of deaths from overwork,

312
00:17:09,960 --> 00:17:13,240
Speaker 4: and immediately there was this reaction to how is she

313
00:17:13,640 --> 00:17:17,480
Speaker 4: encouraging everyone in the country to work themselves to death? Now,

314
00:17:17,480 --> 00:17:19,959
Speaker 4: that is not at all what she meant, and her

315
00:17:20,040 --> 00:17:23,200
Speaker 4: quote has been taken very much out of context. There

316
00:17:23,800 --> 00:17:27,120
Speaker 4: that is a little bit of something that you can

317
00:17:27,240 --> 00:17:30,120
Speaker 4: expect to see, because just as I mentioned that there

318
00:17:30,200 --> 00:17:33,359
Speaker 4: is a segment of the public who did not like Koizumi,

319
00:17:33,920 --> 00:17:36,360
Speaker 4: there is a segment of the public that does not

320
00:17:36,600 --> 00:17:40,720
Speaker 4: like Takichi at all and does not like the school

321
00:17:40,800 --> 00:17:43,600
Speaker 4: of thought, you know, the shinzo Abe kind of school

322
00:17:43,600 --> 00:17:46,880
Speaker 4: of thought that she comes from. That school has been

323
00:17:47,280 --> 00:17:50,080
Speaker 4: relatively quiet over the past couple of years because they've

324
00:17:50,080 --> 00:17:55,200
Speaker 4: been happy enough with Ishiba and his predecessor Funiyokishida, who

325
00:17:55,200 --> 00:17:59,040
Speaker 4: were very much centrist or center left. People within the

326
00:17:59,200 --> 00:18:02,719
Speaker 4: LDP Takeiichi's very much on the right wing, and so

327
00:18:02,760 --> 00:18:05,080
Speaker 4: you're going to see a lot of situations like that

328
00:18:05,119 --> 00:18:09,840
Speaker 4: where people are deliberately or otherwise taking what she says

329
00:18:10,240 --> 00:18:11,040
Speaker 4: out of context.

330
00:18:11,240 --> 00:18:13,520
Speaker 2: So what do you believe to be the first major

331
00:18:13,760 --> 00:18:16,120
Speaker 2: challenge that taka Ichi will confront?

332
00:18:17,000 --> 00:18:20,480
Speaker 4: The very first challenge that she has is essentially is

333
00:18:20,480 --> 00:18:22,880
Speaker 4: making sure that she can become prime minister at all.

334
00:18:23,480 --> 00:18:27,560
Speaker 4: So the LDP has its long standing coalition member Kometo,

335
00:18:28,240 --> 00:18:31,199
Speaker 4: that has been a coalition for for many years. But

336
00:18:31,280 --> 00:18:35,800
Speaker 4: Komeito have been making noises even before the election that

337
00:18:35,960 --> 00:18:39,000
Speaker 4: suggests that they're not super happy with the prospect of

338
00:18:39,080 --> 00:18:42,200
Speaker 4: Takaichi winning. They are a much more kind of moderate

339
00:18:42,280 --> 00:18:46,160
Speaker 4: force than she would than she would be seen as,

340
00:18:47,000 --> 00:18:50,119
Speaker 4: and they're putting out some noises now suggesting they're not

341
00:18:50,320 --> 00:18:54,200
Speaker 4: super happy with the vote Kmeto or also, I should say,

342
00:18:54,320 --> 00:18:58,320
Speaker 4: they've also been bleeding support over the past couple of years.

343
00:18:59,040 --> 00:19:00,800
Speaker 4: First of all, she's going to have to make sure

344
00:19:00,840 --> 00:19:05,560
Speaker 4: that she can secure She needs their votes and also

345
00:19:05,640 --> 00:19:08,800
Speaker 4: some other votes to even just become prime minister. At all.

346
00:19:09,320 --> 00:19:14,240
Speaker 4: So either she needs to repair that bridge with the

347
00:19:14,240 --> 00:19:18,680
Speaker 4: coalition partner or potentially find a new coalition partner. There's

348
00:19:19,280 --> 00:19:23,679
Speaker 4: talk of Takeji has sort of like suggested that she

349
00:19:23,840 --> 00:19:27,960
Speaker 4: might seek either a new or another coalition partner, the

350
00:19:28,000 --> 00:19:33,000
Speaker 4: most likely being the DPP. That's going to be the

351
00:19:33,119 --> 00:19:35,520
Speaker 4: very first port of call before she can even be

352
00:19:35,680 --> 00:19:41,320
Speaker 4: confirmed as prime minister, because despite President Trump tweeting his

353
00:19:41,520 --> 00:19:45,000
Speaker 4: congratulations for her being elected prime Minister she hasn't actually

354
00:19:45,000 --> 00:19:47,280
Speaker 4: been elected prime minister yet. That still needs to go

355
00:19:47,320 --> 00:19:48,960
Speaker 4: through Parliament sometime next week.

356
00:19:49,200 --> 00:19:51,760
Speaker 2: So beyond the issue of inflation, a couple of the

357
00:19:51,800 --> 00:19:54,560
Speaker 2: hot button issues right now, from what I understand are

358
00:19:54,800 --> 00:19:59,080
Speaker 2: defense and immigration. Where is Takeiichi in this regard?

359
00:19:59,400 --> 00:20:04,320
Speaker 4: I tend to I think that takei shee her despite

360
00:20:04,359 --> 00:20:09,679
Speaker 4: her reputation as being, you know, sometimes people accuse her

361
00:20:09,760 --> 00:20:12,720
Speaker 4: of being, you know, an ultra conservative or a radical

362
00:20:12,840 --> 00:20:15,280
Speaker 4: right winger. A lot of the stuff that she said

363
00:20:15,280 --> 00:20:18,440
Speaker 4: on immigration, which as you point out, it is definitely

364
00:20:18,520 --> 00:20:21,560
Speaker 4: a huge topic of conversation here at the moment, you know,

365
00:20:21,880 --> 00:20:25,119
Speaker 4: no less than than it is in other places. A

366
00:20:25,119 --> 00:20:27,560
Speaker 4: lot of stuff that she said on this occasion in

367
00:20:27,640 --> 00:20:35,080
Speaker 4: terms of policy was quite practical. She she opposes, you know,

368
00:20:35,160 --> 00:20:39,960
Speaker 4: illegal immigration, visa overstairs people who don't obey the rules.

369
00:20:40,680 --> 00:20:43,719
Speaker 4: I don't particularly consider that to be a radical stance,

370
00:20:43,760 --> 00:20:46,480
Speaker 4: and certainly the Japanese public would not consider that to

371
00:20:46,520 --> 00:20:52,360
Speaker 4: be a radical stance. When whereas other people, other candidates

372
00:20:52,400 --> 00:20:58,760
Speaker 4: for the LDP presidency, they suggested phrases like building a

373
00:20:58,840 --> 00:21:01,720
Speaker 4: society where, you know, where we don't have to depend

374
00:21:01,920 --> 00:21:05,200
Speaker 4: on immigrants. I found that to be a very irresponsible

375
00:21:05,240 --> 00:21:09,239
Speaker 4: thing to say, because with Japan's labor shortage, there is

376
00:21:09,320 --> 00:21:12,480
Speaker 4: no option but to depend on immigrants at the moment.

377
00:21:13,119 --> 00:21:15,919
Speaker 4: She didn't say stuff like that, and she also passed

378
00:21:16,000 --> 00:21:22,119
Speaker 4: up the opportunity to advocate for, let's say, a restriction

379
00:21:22,560 --> 00:21:25,760
Speaker 4: on how many immigrants are brought in per year. So

380
00:21:25,840 --> 00:21:30,440
Speaker 4: I think she's perfectly reasonable, at least in terms of

381
00:21:30,640 --> 00:21:34,399
Speaker 4: the policy she's advocating. The tone that she brought up

382
00:21:34,560 --> 00:21:37,840
Speaker 4: was a little a little reckless in terms of the

383
00:21:37,840 --> 00:21:39,720
Speaker 4: tone that she was using, But I think if you

384
00:21:39,760 --> 00:21:42,320
Speaker 4: look at the substance, I'm not I think she's quite

385
00:21:42,359 --> 00:21:45,520
Speaker 4: practical on that front, and there is a big conversation

386
00:21:45,600 --> 00:21:52,840
Speaker 4: to be had that the country has not had over immigration. Essentially,

387
00:21:53,000 --> 00:21:57,399
Speaker 4: Japan has had quite a large not large compared to

388
00:21:57,480 --> 00:22:00,480
Speaker 4: shall we say, the US, or to many other Western countries,

389
00:22:00,480 --> 00:22:04,040
Speaker 4: but compared to its past, it has had a big

390
00:22:04,119 --> 00:22:09,359
Speaker 4: policy of bringing in immigrants. Over the last decade, it

391
00:22:09,400 --> 00:22:14,439
Speaker 4: has not had the conversation around that, and that is

392
00:22:14,640 --> 00:22:18,639
Speaker 4: I think a mistake by the late Shinzo Abbe, and

393
00:22:18,680 --> 00:22:22,440
Speaker 4: I think it's important now to have that conversation and

394
00:22:23,040 --> 00:22:27,399
Speaker 4: to to talk about what Japanese society should look like,

395
00:22:27,560 --> 00:22:33,359
Speaker 4: and how society wants to integrate and assimilate immigrants, and

396
00:22:33,400 --> 00:22:35,879
Speaker 4: how it's going to deal with some of the challenges

397
00:22:36,160 --> 00:22:42,080
Speaker 4: around that, including around tourism, around over tourism, around foreign

398
00:22:42,119 --> 00:22:46,280
Speaker 4: purchases of real estate, which is a big topic of

399
00:22:46,320 --> 00:22:51,639
Speaker 4: conversation at the moment. So that's immigration. On defense, I

400
00:22:51,680 --> 00:22:55,720
Speaker 4: think she's obviously she is a conservative. On defense. She

401
00:22:55,880 --> 00:22:59,800
Speaker 4: wants a strong nation, she wants a strong she wants

402
00:22:59,800 --> 00:23:02,520
Speaker 4: me Aultimately, she wants a country that can declare that

403
00:23:02,560 --> 00:23:06,879
Speaker 4: it has a strong army. Any talk of constitutional revision

404
00:23:06,880 --> 00:23:09,040
Speaker 4: obviously that is going to be further, much further down

405
00:23:09,119 --> 00:23:11,640
Speaker 4: the line. But I think she's going to be very

406
00:23:11,640 --> 00:23:14,760
Speaker 4: practical on that, and I think certainly President Trump will

407
00:23:14,760 --> 00:23:17,720
Speaker 4: find someone who he can talk to who's going to

408
00:23:17,760 --> 00:23:21,280
Speaker 4: want to spend on defense and going to want to

409
00:23:22,040 --> 00:23:26,160
Speaker 4: make a strong a nation that has a strong ability

410
00:23:26,200 --> 00:23:26,919
Speaker 4: to defend itself.

411
00:23:26,960 --> 00:23:28,960
Speaker 2: Garoad will leave it there. Thank you so very much.

412
00:23:29,080 --> 00:23:32,640
Speaker 2: Bloomberg's Gerode Ready. He is an opinion columnist helping us

413
00:23:32,760 --> 00:23:36,480
Speaker 2: understand the weekend election win by Sanai taka Ichi as

414
00:23:36,560 --> 00:23:40,160
Speaker 2: leader of Japan's LDP here on the Daybreak Asia podcast.

415
00:23:42,400 --> 00:23:45,760
Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

416
00:23:45,920 --> 00:23:49,280
Speaker 2: Asia Edition podcast. Each weekday, we look at the story

417
00:23:49,359 --> 00:23:53,720
Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

418
00:23:53,760 --> 00:23:57,840
Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

419
00:23:57,960 --> 00:24:01,520
Speaker 2: or anywhere else you listen once again tomorrow for insight

420
00:24:01,600 --> 00:24:05,880
Speaker 2: on the market moves from Hong Kong to Singapore and Australia.

421
00:24:06,280 --> 00:24:08,760
Speaker 2: I'm Doug Prisoner and this is Bloomberg