1 00:00:02,640 --> 00:00:05,200 Speaker 1: This is Bloomberg day Break Weekend, our global look at 2 00:00:05,200 --> 00:00:07,440 Speaker 1: the top stories in the coming week from our Daybreak 3 00:00:07,480 --> 00:00:10,200 Speaker 1: anchors all around the world, and straight ahead on the program, 4 00:00:10,200 --> 00:00:12,800 Speaker 1: but look ahead to some key economic data in the 5 00:00:12,920 --> 00:00:16,599 Speaker 1: US how it may impact pet policy in September. I'm 6 00:00:16,680 --> 00:00:17,960 Speaker 1: Tom Busby in New York. 7 00:00:18,320 --> 00:00:21,120 Speaker 2: I'm Stephen Kyle in London, where we're discussing the gloom 8 00:00:21,120 --> 00:00:24,400 Speaker 2: in Germany and why the Europe's largest economy and shake 9 00:00:24,440 --> 00:00:24,880 Speaker 2: it off. 10 00:00:25,079 --> 00:00:27,760 Speaker 3: I'm Brian Curtis in Hong Kong. At least eleven have 11 00:00:27,880 --> 00:00:31,120 Speaker 3: thrown their hats in the ring. Who would become Japan's 12 00:00:31,200 --> 00:00:32,120 Speaker 3: next bime minister. 13 00:00:35,479 --> 00:00:39,440 Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 14 00:00:39,479 --> 00:00:43,000 Speaker 4: eleve on three OW New York, Bloomberg ninety nine to one, Washington, 15 00:00:43,080 --> 00:00:46,760 Speaker 4: d C, Bloomberg one oh six one, Boston, Bloomberg nine sixty, 16 00:00:46,840 --> 00:00:51,400 Speaker 4: San Francisco, DAB, Digital Radio London, Sirius XM one nineteen 17 00:00:51,640 --> 00:00:54,400 Speaker 4: and around the world on Bloomberg Radio dot com and 18 00:00:54,480 --> 00:00:56,000 Speaker 4: via the Bloomberg Business App. 19 00:01:00,160 --> 00:01:02,000 Speaker 1: Good day to you. I'm Tom Busby, and we begin 20 00:01:02,080 --> 00:01:05,679 Speaker 1: today's program with some key US economic data out this week. 21 00:01:05,959 --> 00:01:10,720 Speaker 1: A second read on Q two GDP and core PCE data. 22 00:01:10,800 --> 00:01:14,400 Speaker 1: The big question, how might this data impact the Fed's 23 00:01:14,440 --> 00:01:15,920 Speaker 1: policies on interest rates? 24 00:01:15,959 --> 00:01:16,479 Speaker 5: And for more. 25 00:01:16,720 --> 00:01:20,119 Speaker 1: We're joined by Edward Harrison Bloomberg, senior editor and author 26 00:01:20,160 --> 00:01:24,000 Speaker 1: of the Everything Risk newsletter. Well, Edward, let's start with 27 00:01:24,040 --> 00:01:27,240 Speaker 1: that second quarter GDP. What you're expecting to see in 28 00:01:27,319 --> 00:01:30,839 Speaker 1: growth and what signs you see that the economy may 29 00:01:31,400 --> 00:01:32,399 Speaker 1: may be slowing a bit. 30 00:01:32,840 --> 00:01:35,720 Speaker 6: Good question and great to talk to you. The GDP 31 00:01:36,240 --> 00:01:39,280 Speaker 6: number is just a rehash of what we saw before, 32 00:01:39,319 --> 00:01:42,400 Speaker 6: as you mentioned, and the prior read was two point 33 00:01:42,440 --> 00:01:46,400 Speaker 6: eight percent annualized growth. We're expecting exactly the same number 34 00:01:47,360 --> 00:01:51,680 Speaker 6: to come up. The interesting bid, however, is that the 35 00:01:51,720 --> 00:01:55,440 Speaker 6: Atlanta Fed has a tracker for Q three because this 36 00:01:55,480 --> 00:01:58,919 Speaker 6: is the growth through June. They're looking at the growth 37 00:01:58,920 --> 00:02:01,840 Speaker 6: in this particular quarter that we're in and that number 38 00:02:01,880 --> 00:02:05,720 Speaker 6: is two percent, and so that number is lower than 39 00:02:05,760 --> 00:02:09,320 Speaker 6: the previous number, which gives the Fed some room to 40 00:02:09,560 --> 00:02:12,840 Speaker 6: cut knowing that the economy is decelerating. 41 00:02:13,639 --> 00:02:16,800 Speaker 1: But we won't know that a preliminary Q three number 42 00:02:16,840 --> 00:02:18,359 Speaker 1: for another two months though. 43 00:02:18,280 --> 00:02:21,640 Speaker 6: Right exactly. Yeah, so we're still in the midst of 44 00:02:21,760 --> 00:02:25,600 Speaker 6: Q three, but we already know that the data that 45 00:02:25,639 --> 00:02:29,680 Speaker 6: have come in since Q two have been weaker and 46 00:02:30,040 --> 00:02:33,120 Speaker 6: just enough if as long as inflation holds, that's the 47 00:02:33,120 --> 00:02:34,679 Speaker 6: PC number that we're going to talk about in a 48 00:02:34,720 --> 00:02:37,840 Speaker 6: little bit. The FED has enough room to start cutting 49 00:02:37,840 --> 00:02:41,359 Speaker 6: it in September. And actually, you know last week when 50 00:02:41,400 --> 00:02:45,880 Speaker 6: we heard from the Fed, we heard the FED minutes 51 00:02:46,400 --> 00:02:49,040 Speaker 6: basically at the July meeting, there were some officials who 52 00:02:49,040 --> 00:02:51,000 Speaker 6: were saying that they would have cut based upon the 53 00:02:51,080 --> 00:02:55,360 Speaker 6: data already in July if they had known, if they 54 00:02:55,360 --> 00:02:58,880 Speaker 6: had prepared the market for that. So a clear majority 55 00:02:58,880 --> 00:03:01,480 Speaker 6: of the FED wants to cut in September. It's priced 56 00:03:01,520 --> 00:03:03,519 Speaker 6: in by the market. It's not going to be any 57 00:03:03,560 --> 00:03:08,720 Speaker 6: surprise irrespective of what we might see between now and 58 00:03:09,840 --> 00:03:10,359 Speaker 6: that meeting. 59 00:03:10,960 --> 00:03:13,440 Speaker 1: Well, let me ask you about that GDP. We're expecting 60 00:03:13,440 --> 00:03:16,359 Speaker 1: two point eight percent, same as the last read two 61 00:03:16,440 --> 00:03:19,320 Speaker 1: point zero for the current quarter, no hint though right 62 00:03:19,360 --> 00:03:22,240 Speaker 1: now of a recession. So what do you see the 63 00:03:22,240 --> 00:03:25,120 Speaker 1: big drivers of that modest growth? But what do you 64 00:03:25,160 --> 00:03:26,200 Speaker 1: see the big drivers are? 65 00:03:27,280 --> 00:03:29,280 Speaker 6: Yeah, I think that the big driver for the FED 66 00:03:29,360 --> 00:03:32,720 Speaker 6: in terms of it's that that slowing of growth from 67 00:03:32,760 --> 00:03:35,400 Speaker 6: two point a to two percent, and really when you 68 00:03:35,440 --> 00:03:38,880 Speaker 6: think about where the FED funds rate is five point 69 00:03:38,960 --> 00:03:41,520 Speaker 6: three percent, and the ability to get a mortgage and 70 00:03:41,560 --> 00:03:45,280 Speaker 6: things like that, we're at a restrictive level, and because 71 00:03:45,320 --> 00:03:49,640 Speaker 6: that growth is slowing, they want to, you know, sort 72 00:03:49,640 --> 00:03:52,480 Speaker 6: of ease the pain so that we don't tip into 73 00:03:52,480 --> 00:03:55,520 Speaker 6: a recession, so that it is just slowing. And the 74 00:03:55,880 --> 00:03:59,480 Speaker 6: key is is that inflation has come down enough where 75 00:03:59,480 --> 00:04:03,400 Speaker 6: they think they can start doing that without having to 76 00:04:03,440 --> 00:04:06,120 Speaker 6: worry about inflation being excessive going forward. 77 00:04:06,400 --> 00:04:09,200 Speaker 1: Well, that of course leads us to that inflation measure, 78 00:04:09,440 --> 00:04:13,080 Speaker 1: the Fed's preferred measure, the personal consumption Core price Index. 79 00:04:13,640 --> 00:04:15,560 Speaker 1: What do you expect to see in that? And what 80 00:04:15,640 --> 00:04:17,799 Speaker 1: did we see just last quarter? 81 00:04:18,320 --> 00:04:21,200 Speaker 6: You know, what I expect to see on a month 82 00:04:21,240 --> 00:04:24,520 Speaker 6: on month basis is a slight uptick zero point two percent, 83 00:04:24,640 --> 00:04:28,160 Speaker 6: which correlates to about where we are roughly. But that 84 00:04:28,279 --> 00:04:31,680 Speaker 6: number is going to be just enough, according to consensus estimates, 85 00:04:32,360 --> 00:04:36,880 Speaker 6: to tick up the number for the PCE price index, 86 00:04:36,920 --> 00:04:38,960 Speaker 6: that's the one that you were talking about. The Fed's 87 00:04:39,000 --> 00:04:41,880 Speaker 6: preferred numbers, so two point five going up to two 88 00:04:41,920 --> 00:04:47,120 Speaker 6: point six. The core number year on year is going 89 00:04:47,200 --> 00:04:49,920 Speaker 6: to be two point six going up to two point seven. 90 00:04:50,000 --> 00:04:54,039 Speaker 6: According to consensus estimates. Those numbers are in the realm 91 00:04:54,120 --> 00:04:57,760 Speaker 6: where the FED can can feel comfortable to start to 92 00:04:57,800 --> 00:05:03,000 Speaker 6: bring down the rate. Question now is how quickly they 93 00:05:03,040 --> 00:05:05,919 Speaker 6: can do so. Two point six two point seven percent 94 00:05:06,120 --> 00:05:08,680 Speaker 6: is lower than it had been in the past, but 95 00:05:08,720 --> 00:05:12,640 Speaker 6: it's not low enough that you can assure that every 96 00:05:12,680 --> 00:05:15,800 Speaker 6: FED member is behind cutting at every single meeting. Because 97 00:05:15,800 --> 00:05:18,200 Speaker 6: you know, we have one hundred basis points one full 98 00:05:18,240 --> 00:05:21,680 Speaker 6: percentage point priced into the market right now to the 99 00:05:21,720 --> 00:05:25,360 Speaker 6: swaps market. I doubt that highly that that's going to happen. 100 00:05:25,800 --> 00:05:28,799 Speaker 6: You might get seventy five basis points, that's my baseline, 101 00:05:28,839 --> 00:05:31,479 Speaker 6: but you might only get two cuts of twenty five 102 00:05:31,520 --> 00:05:33,320 Speaker 6: basis points before the year is over. 103 00:05:33,560 --> 00:05:36,159 Speaker 1: And we have meetings in just a few weeks, but 104 00:05:36,200 --> 00:05:39,520 Speaker 1: also early November mid December, so there's a lot of 105 00:05:39,600 --> 00:05:40,560 Speaker 1: chance for the FED. 106 00:05:40,360 --> 00:05:43,800 Speaker 6: To act exactly. And so you know, the baseline is 107 00:05:43,920 --> 00:05:46,360 Speaker 6: that once the FED acts, it starts to go down 108 00:05:46,440 --> 00:05:51,800 Speaker 6: quickly as long as that PCE number stays with us. 109 00:05:52,000 --> 00:05:54,600 Speaker 6: You know, a PCE number that rises back up to 110 00:05:54,640 --> 00:05:57,800 Speaker 6: three percent will stop them from cutting any more. But 111 00:05:57,839 --> 00:06:00,880 Speaker 6: I think you can look at two or three cuts baseline, 112 00:06:00,960 --> 00:06:05,080 Speaker 6: and likely the pricing in the market will come out 113 00:06:05,120 --> 00:06:08,720 Speaker 6: slightly as a result of the Fed not moving as 114 00:06:08,760 --> 00:06:11,680 Speaker 6: aggressively as the market is pricing, and that might cause 115 00:06:11,760 --> 00:06:15,279 Speaker 6: yields to go up slightly, But generally speaking, because they're 116 00:06:15,320 --> 00:06:18,760 Speaker 6: going to be cutting, it will provide some relief for 117 00:06:18,800 --> 00:06:21,280 Speaker 6: the economy, especially for mortgage rates. 118 00:06:21,800 --> 00:06:24,160 Speaker 1: Now, the FED has always maintained that any decision it 119 00:06:24,240 --> 00:06:26,440 Speaker 1: makes on rates is going to be data driven, and 120 00:06:27,120 --> 00:06:31,000 Speaker 1: the main factor in that has been inflation. But do 121 00:06:31,040 --> 00:06:34,159 Speaker 1: you see the Fed also reacting to what looks like 122 00:06:34,240 --> 00:06:35,880 Speaker 1: a cooling jobs market. 123 00:06:36,320 --> 00:06:36,760 Speaker 7: Yeah. 124 00:06:36,760 --> 00:06:40,039 Speaker 6: I think that that really is their crux right now, 125 00:06:40,360 --> 00:06:43,200 Speaker 6: is the cooling jobs market, which is what's causing growth 126 00:06:43,200 --> 00:06:46,240 Speaker 6: to come down. I think what they're looking at is 127 00:06:46,279 --> 00:06:50,000 Speaker 6: that inflation's low enough that they can start to look 128 00:06:50,160 --> 00:06:54,120 Speaker 6: more at their jobs mandate, and what they see is 129 00:06:54,480 --> 00:06:57,760 Speaker 6: an unemployment rate which has gone up a lot. In fact, 130 00:06:58,040 --> 00:07:01,039 Speaker 6: over the last twelve months, the average over the three 131 00:07:01,080 --> 00:07:04,080 Speaker 6: month average has gone up a zero point five percent, 132 00:07:04,160 --> 00:07:07,000 Speaker 6: which had been in the past consistent with recession. But 133 00:07:07,040 --> 00:07:10,400 Speaker 6: when you look at all the other employment data, like 134 00:07:10,480 --> 00:07:14,320 Speaker 6: the number of job openings, the number of initial jobless claims, 135 00:07:14,480 --> 00:07:18,040 Speaker 6: all of those suggest that we're very far from recession, 136 00:07:18,440 --> 00:07:20,520 Speaker 6: but the fact that the unemployment rate has gone up 137 00:07:20,560 --> 00:07:24,200 Speaker 6: as much as it has really is a cause of 138 00:07:24,200 --> 00:07:26,000 Speaker 6: concern for the Fed, and that's why they're going to 139 00:07:26,000 --> 00:07:26,720 Speaker 6: be cutting. 140 00:07:26,600 --> 00:07:30,000 Speaker 1: Second quarter gdp PCE out this Thursday, ahead of Wall 141 00:07:30,000 --> 00:07:33,840 Speaker 1: Street's opening bellar. Thanks to Edward Harrison, Bloomberg Senior editor, 142 00:07:34,080 --> 00:07:38,720 Speaker 1: author of the Everything Risk newsletter. Businesses have spent billions 143 00:07:38,720 --> 00:07:41,520 Speaker 1: of dollars betting on a future of artificial intelligence, an 144 00:07:41,520 --> 00:07:44,040 Speaker 1: AI chip maker, and Vidia, now the world's second most 145 00:07:44,120 --> 00:07:48,160 Speaker 1: valuable company valued at over three trillion dollars, has been 146 00:07:48,160 --> 00:07:51,280 Speaker 1: a big factor in that paradigm shift. And with the 147 00:07:51,400 --> 00:07:54,960 Speaker 1: current corporate earning season winding down, and Vidia is the 148 00:07:55,040 --> 00:07:58,080 Speaker 1: last of Big Text Magnificent seven to report, posting second 149 00:07:58,160 --> 00:08:01,119 Speaker 1: quarter earnings on Wednesday. For more and what to expect, 150 00:08:01,200 --> 00:08:06,600 Speaker 1: we're joined by kun John Sabani, Bloomberg Intelligence Senior Semiconductor analyst, 151 00:08:06,680 --> 00:08:08,320 Speaker 1: Kuon John, thanks for being here. 152 00:08:08,200 --> 00:08:08,880 Speaker 7: Glad to be here. 153 00:08:09,000 --> 00:08:11,360 Speaker 1: In Vidio had a blowout first quarter thanks to a 154 00:08:11,400 --> 00:08:14,080 Speaker 1: surge and demand for those data center AI chips. Things 155 00:08:14,120 --> 00:08:16,240 Speaker 1: were so good at hiked its dividend, did a ten 156 00:08:16,320 --> 00:08:19,080 Speaker 1: for one stock split, the shares sort to new all 157 00:08:19,120 --> 00:08:22,080 Speaker 1: time highs. That was three months ago. What are you 158 00:08:22,120 --> 00:08:25,160 Speaker 1: expecting to see in Nvidia's second quarter earnings report? 159 00:08:26,840 --> 00:08:29,840 Speaker 7: Well, we again expect solid earnings bought in terms of 160 00:08:29,960 --> 00:08:34,720 Speaker 7: the current quarter and the expected outlook. Nothing has changed 161 00:08:34,760 --> 00:08:37,920 Speaker 7: in terms of demand signals. If anything, they've gotten even 162 00:08:38,000 --> 00:08:40,920 Speaker 7: stronger as we have started this year versus last year. 163 00:08:41,920 --> 00:08:45,000 Speaker 7: You know, the supply for their H one hundred and 164 00:08:45,080 --> 00:08:48,160 Speaker 7: the H two hundred ramping now has continued to ease, 165 00:08:48,520 --> 00:08:51,520 Speaker 7: so that means they can supply more of these chips 166 00:08:51,559 --> 00:08:54,040 Speaker 7: and the demand continues to stay ahead of supply. 167 00:08:55,120 --> 00:08:57,280 Speaker 1: Now you talked about those specific chips. Is that the 168 00:08:57,320 --> 00:09:00,440 Speaker 1: current Hopper line? And what do you expect to hear 169 00:09:00,480 --> 00:09:03,600 Speaker 1: from Nvidio about its upcoming Blackwell line? 170 00:09:05,240 --> 00:09:07,160 Speaker 7: That's correct, that was a Hopper light. I mean, look, 171 00:09:07,200 --> 00:09:11,960 Speaker 7: there has been some concerns around the Blackwell delay, and 172 00:09:12,000 --> 00:09:15,560 Speaker 7: from our channel checks and our estimates, we now believe 173 00:09:16,080 --> 00:09:19,640 Speaker 7: there will be very little volume for black Wells starting 174 00:09:19,679 --> 00:09:22,520 Speaker 7: to ship in the fiscal for Q, which is their 175 00:09:22,640 --> 00:09:27,400 Speaker 7: January quarter, but the real ramp is not likely until 176 00:09:27,520 --> 00:09:31,800 Speaker 7: the next year. However, Look, I mean there's like I said, 177 00:09:31,800 --> 00:09:35,720 Speaker 7: there's enough demand for its Hopper chips, so we believe 178 00:09:35,800 --> 00:09:40,079 Speaker 7: customers who really wanted the first shipments of Blackwell because 179 00:09:40,080 --> 00:09:42,640 Speaker 7: of the delay, could could substitute it for some H 180 00:09:42,760 --> 00:09:45,000 Speaker 7: one hundred and H two hundred and even some B 181 00:09:45,120 --> 00:09:50,320 Speaker 7: one hundred initial shipments. And and there's there's again there's 182 00:09:50,480 --> 00:09:54,280 Speaker 7: enough demand continued in the pipeline that they I don't 183 00:09:54,320 --> 00:09:59,000 Speaker 7: think they'll be significantly impacted from this delay. But that 184 00:09:59,160 --> 00:10:02,000 Speaker 7: is a commentary an outlook that we are keen to 185 00:10:02,040 --> 00:10:03,920 Speaker 7: hear about from this earning skull. 186 00:10:04,800 --> 00:10:08,160 Speaker 1: Now, while it grapples with that delay in the Blackwell chips, 187 00:10:08,200 --> 00:10:11,319 Speaker 1: there is more competition now for Nvidia in the AI 188 00:10:11,400 --> 00:10:15,760 Speaker 1: focused chips, especially in house manufacturing, from the likes of 189 00:10:15,800 --> 00:10:18,040 Speaker 1: Apple and Google. How does that factor in. 190 00:10:20,000 --> 00:10:22,200 Speaker 7: I mean, like what we have said, you know, at 191 00:10:22,280 --> 00:10:25,840 Speaker 7: this point, because the demand is so high, because the 192 00:10:25,920 --> 00:10:29,520 Speaker 7: number of use cases and application continues to increase, an 193 00:10:29,559 --> 00:10:33,520 Speaker 7: adoption of AI data center continues to increase, I think 194 00:10:33,559 --> 00:10:37,360 Speaker 7: at this point that combetition is not likely to slow 195 00:10:37,400 --> 00:10:40,720 Speaker 7: down in media, and media doesn't view them as a 196 00:10:40,720 --> 00:10:43,880 Speaker 7: combetition because they believe they're used for a very different 197 00:10:44,000 --> 00:10:47,600 Speaker 7: kind of workload and use cases and are only specific 198 00:10:47,640 --> 00:10:51,000 Speaker 7: to very few customers. We do believe that in the 199 00:10:51,080 --> 00:10:56,760 Speaker 7: long term, especially when this strong demand normalizes or optimizes. 200 00:10:57,240 --> 00:10:59,920 Speaker 7: This is a headwind for them in a way, not 201 00:11:00,200 --> 00:11:04,839 Speaker 7: directly from a useless perspective, but more of a tamp perspective. 202 00:11:04,880 --> 00:11:07,559 Speaker 7: So look, in the absence of these chips that its 203 00:11:07,559 --> 00:11:10,319 Speaker 7: customers are designing, they would have had to use all 204 00:11:10,440 --> 00:11:13,440 Speaker 7: NBA chips right. So the way it will affect them 205 00:11:13,559 --> 00:11:16,360 Speaker 7: is taking away that wallet dollar share when the wallet 206 00:11:16,480 --> 00:11:17,800 Speaker 7: really gets that squeeze. 207 00:11:18,600 --> 00:11:20,800 Speaker 1: And the spending on these chips is all dependent on 208 00:11:21,320 --> 00:11:26,439 Speaker 1: business capital expenditure. How I mean, they have spent billions already, 209 00:11:26,480 --> 00:11:29,560 Speaker 1: and I know some investors getting a little impatient, but 210 00:11:30,120 --> 00:11:32,920 Speaker 1: do you see the spending continuing to grow. It has 211 00:11:32,960 --> 00:11:36,920 Speaker 1: been an extraordinary trajectory in business spending on AI. 212 00:11:38,880 --> 00:11:41,160 Speaker 7: Yeah. I mean, look, when we entered twenty twenty four, 213 00:11:41,480 --> 00:11:46,000 Speaker 7: we didn't think this year we'll see such a huge increase, 214 00:11:46,200 --> 00:11:48,600 Speaker 7: which right now seems to be in the in the 215 00:11:48,679 --> 00:11:51,280 Speaker 7: range of forty to fifty percent at least for its 216 00:11:51,400 --> 00:11:55,840 Speaker 7: largest hyperscaler and cloud customers. And we are seeing that. 217 00:11:55,960 --> 00:12:00,200 Speaker 7: So I mean again, given the data we're seeing right now, Yes, 218 00:12:00,280 --> 00:12:03,200 Speaker 7: there have been concerns in the earnings calls of those 219 00:12:03,320 --> 00:12:08,440 Speaker 7: large customers. I think investors are more concerned about getting 220 00:12:09,000 --> 00:12:11,959 Speaker 7: the justification of these spending, so which means we need 221 00:12:12,000 --> 00:12:15,520 Speaker 7: to see better and higher monetization from these customers. And 222 00:12:15,559 --> 00:12:17,920 Speaker 7: if we see that soon enough, I don't think the 223 00:12:17,960 --> 00:12:20,440 Speaker 7: spending will slow, but in the absence of that, we 224 00:12:20,520 --> 00:12:24,559 Speaker 7: could see some kind of normalization. But again, you know, 225 00:12:24,640 --> 00:12:27,240 Speaker 7: what we have seen in these scenarios is when they 226 00:12:27,240 --> 00:12:29,160 Speaker 7: do want to cut back spending. We've seen that in 227 00:12:29,200 --> 00:12:31,840 Speaker 7: the sort of general purpose compute areas, but not in 228 00:12:31,880 --> 00:12:34,520 Speaker 7: the AI areas. Now that still bodes well for it. 229 00:12:34,840 --> 00:12:37,640 Speaker 1: Things are looking good and video earnings out this Wednesday 230 00:12:37,960 --> 00:12:41,400 Speaker 1: are thanks to Koon, John so Bonnie Bloomberg Intelligence senior 231 00:12:41,559 --> 00:12:45,080 Speaker 1: semiconductor analysts, and coming up on Bloomberg day Break weekend, 232 00:12:45,080 --> 00:12:47,840 Speaker 1: we'll discuss the gloom in Germany and whether Europe's largest 233 00:12:47,840 --> 00:12:51,040 Speaker 1: economy can shake it off. I'm Tom Busby, and this 234 00:12:51,320 --> 00:13:06,680 Speaker 1: is Bloomberg. This is Bloomberg Day Break Weekend, our global 235 00:13:06,679 --> 00:13:08,800 Speaker 1: look ahead at the top stories for investors in the 236 00:13:08,840 --> 00:13:11,880 Speaker 1: coming week. I'm Tom Busby in New York. Up later 237 00:13:11,920 --> 00:13:13,959 Speaker 1: on our program, we'll look ahead to a key political 238 00:13:14,040 --> 00:13:17,600 Speaker 1: leadership election in Japan and what to expect now that 239 00:13:17,679 --> 00:13:21,960 Speaker 1: Japan's Prime minister announced he's resigning. But first, Europe has 240 00:13:22,040 --> 00:13:25,439 Speaker 1: been booming. The Olympic Games in Paris a big economic success. 241 00:13:25,679 --> 00:13:29,800 Speaker 1: Taylor Swift's blockbuster Aerostore brought a burst of consumer spending. 242 00:13:30,160 --> 00:13:33,160 Speaker 1: But despite all that, the economic performance in one of 243 00:13:33,200 --> 00:13:36,880 Speaker 1: the block's largest power players remains uncertain. And for more, 244 00:13:37,040 --> 00:13:39,760 Speaker 1: let's go to London and bring in Bloomberg Daybreak europe 245 00:13:39,760 --> 00:13:41,440 Speaker 1: banker Steven Carroll. 246 00:13:41,640 --> 00:13:44,440 Speaker 2: Tom the risk of recession in the euro Area has 247 00:13:44,520 --> 00:13:47,400 Speaker 2: receded into the background, but the mood in Europe's largest 248 00:13:47,400 --> 00:13:51,840 Speaker 2: economy remains gloomy. The most recent Composite Purchasing Managers Index 249 00:13:51,880 --> 00:13:54,960 Speaker 2: for Germany signaled a contraction for a second month, while 250 00:13:54,960 --> 00:13:58,000 Speaker 2: the manufacturing index has been shrinking for more than two years. 251 00:13:58,520 --> 00:14:00,599 Speaker 2: Contrast that with a picture from frank which got a 252 00:14:00,640 --> 00:14:04,240 Speaker 2: surprise boost from hosting the Olympic Games. We've been discussing 253 00:14:04,240 --> 00:14:06,760 Speaker 2: the persistent weakness in the German economy with many of 254 00:14:06,760 --> 00:14:09,040 Speaker 2: our guests on Bloomberg Radio. Let's get the view of 255 00:14:09,120 --> 00:14:13,280 Speaker 2: Melanie Baker, senior economist at Royal London Asset Management, in. 256 00:14:13,400 --> 00:14:16,360 Speaker 8: Terms of the sort of growth picture. Again, I mean, 257 00:14:16,679 --> 00:14:19,000 Speaker 8: look in my focus. I haven't got recessions penciled in 258 00:14:19,080 --> 00:14:21,840 Speaker 8: for either of those economies. I'm not sure that we 259 00:14:21,880 --> 00:14:23,640 Speaker 8: are going to see a really big divisions in the 260 00:14:23,680 --> 00:14:25,480 Speaker 8: second half of the year. I'm expecting a bit of 261 00:14:25,520 --> 00:14:29,320 Speaker 8: a slower patch in the US economy for sure, and 262 00:14:29,360 --> 00:14:32,200 Speaker 8: not very exciting growth in the Euro Area. But I'm 263 00:14:32,240 --> 00:14:34,400 Speaker 8: still not convinced we're actually going to see a huge 264 00:14:34,440 --> 00:14:36,880 Speaker 8: divergence in terms of economic picture when it comes down 265 00:14:36,880 --> 00:14:38,080 Speaker 8: to it. In the second half of this year. 266 00:14:38,480 --> 00:14:40,360 Speaker 2: We were hearing from Oli Rn who was speaking at 267 00:14:40,400 --> 00:14:43,480 Speaker 2: event in New York, talking about particularly pointing to weakness 268 00:14:43,480 --> 00:14:45,960 Speaker 2: in the manufacturing sector is bolstering, in his view, the 269 00:14:46,040 --> 00:14:49,240 Speaker 2: case for rake cuts. But I wonder how, because the 270 00:14:49,320 --> 00:14:51,600 Speaker 2: numbers obviously out of Germany haven't been great on a 271 00:14:51,600 --> 00:14:54,760 Speaker 2: whole variety of metrics in recent months, how deep is 272 00:14:54,840 --> 00:14:57,720 Speaker 2: that dip for Germany when we look towards the rest 273 00:14:57,720 --> 00:14:58,200 Speaker 2: of the year. 274 00:14:59,480 --> 00:15:02,680 Speaker 8: Yeah, and kind of dependent really on global growth dynamics 275 00:15:02,680 --> 00:15:05,560 Speaker 8: as much as anything else. So plenty of uncertainty I 276 00:15:05,600 --> 00:15:10,360 Speaker 8: think for the German economy and elsewhere. Actually, I'm not 277 00:15:10,560 --> 00:15:13,560 Speaker 8: overly pessimistic about the Euro Area economy, partly because I 278 00:15:13,560 --> 00:15:16,000 Speaker 8: see quite a bit of potential upside from the consumer 279 00:15:16,680 --> 00:15:20,160 Speaker 8: with really quite robust real pay growth at the moment 280 00:15:20,480 --> 00:15:23,520 Speaker 8: and scope for with you know what already looks like 281 00:15:23,640 --> 00:15:27,240 Speaker 8: increased consumer confidence for a bit less saving from European 282 00:15:27,280 --> 00:15:29,800 Speaker 8: consumers and a bit of a boost from that as well. 283 00:15:30,200 --> 00:15:32,240 Speaker 1: It's very hard to read the US economy right now. 284 00:15:32,280 --> 00:15:33,760 Speaker 8: Is that that's. 285 00:15:33,360 --> 00:15:36,400 Speaker 1: Easier it easier to read the European economy. 286 00:15:36,000 --> 00:15:38,520 Speaker 8: In some senses? Yes, I mean the US data is 287 00:15:38,600 --> 00:15:41,240 Speaker 8: just very very mixed at the moment. I think in 288 00:15:41,600 --> 00:15:44,840 Speaker 8: terms of Europe where I find I have most difficulties 289 00:15:44,840 --> 00:15:47,040 Speaker 8: probably on the labor market. What we haven't had that 290 00:15:47,120 --> 00:15:48,960 Speaker 8: increase in the unemployment rate that we've seen in the 291 00:15:49,040 --> 00:15:51,280 Speaker 8: US that we've seen in the UK, where the labor 292 00:15:51,280 --> 00:15:53,360 Speaker 8: market looks really tight on that measure, trying to make 293 00:15:53,400 --> 00:15:55,440 Speaker 8: sense of that against the other two economies. But yeah, 294 00:15:55,440 --> 00:15:57,360 Speaker 8: in terms of the US data just very mixed. 295 00:15:58,040 --> 00:16:00,520 Speaker 2: With the question of real pay growth though, I mean, 296 00:16:00,560 --> 00:16:02,880 Speaker 2: is that actually a concern on the flip side, because 297 00:16:02,880 --> 00:16:05,080 Speaker 2: we know that Christine Leaguard has pointed in some repreaiocasions 298 00:16:05,080 --> 00:16:06,880 Speaker 2: expact speaking to you and Dallas and January Front, I 299 00:16:06,920 --> 00:16:08,680 Speaker 2: remember this coming up as well as the importance of 300 00:16:09,200 --> 00:16:12,200 Speaker 2: wage inflation. Is that a worry or is this only 301 00:16:12,240 --> 00:16:13,720 Speaker 2: really a positive story for the moment. 302 00:16:14,680 --> 00:16:16,800 Speaker 8: It may become more of a worry. Absolutely, And it's 303 00:16:16,840 --> 00:16:19,360 Speaker 8: the same as elsewhere. Really, it's that how sticky is 304 00:16:19,360 --> 00:16:21,880 Speaker 8: inflation going to be? In particular how sticky is services 305 00:16:21,880 --> 00:16:24,600 Speaker 8: inflation going to be? And again with that, what looks 306 00:16:24,640 --> 00:16:27,040 Speaker 8: like quite a tight labor markets is a reason for 307 00:16:27,320 --> 00:16:30,600 Speaker 8: concern looking forward to next year, thinking of the possible 308 00:16:30,680 --> 00:16:31,760 Speaker 8: rate path for the year area. 309 00:16:31,800 --> 00:16:35,080 Speaker 2: I think that was Melanie Baker, senior economist at Royal 310 00:16:35,080 --> 00:16:38,080 Speaker 2: London Asset Management. While a sharp slowdown in the Euro 311 00:16:38,160 --> 00:16:42,120 Speaker 2: Area could necessitate swift ECB action, evidence of such a 312 00:16:42,160 --> 00:16:45,920 Speaker 2: scenario remains limited. There's currently a thirty percent probability of 313 00:16:45,920 --> 00:16:48,360 Speaker 2: a recession in the Zone, and the year ahead near 314 00:16:48,400 --> 00:16:51,760 Speaker 2: the lowest for this year. That figure suggests that expectations 315 00:16:51,760 --> 00:16:55,080 Speaker 2: for aggressive easing could be premature. But a raft of 316 00:16:55,160 --> 00:16:58,120 Speaker 2: data on growth, inflation and the business climate in Germany 317 00:16:58,240 --> 00:17:00,640 Speaker 2: that's due in the coming days will give pub maker's 318 00:17:00,760 --> 00:17:04,200 Speaker 2: food for thought. I've been discussing this with Bloomberg's Germany correspondent, 319 00:17:04,240 --> 00:17:06,480 Speaker 2: Oliver Crook, and I started off by asking him what 320 00:17:06,480 --> 00:17:09,960 Speaker 2: we can discern from the latest data, including those PMI surveys. 321 00:17:10,320 --> 00:17:12,600 Speaker 5: Listen, it doesn't tell you anything good at all. I mean, 322 00:17:12,640 --> 00:17:14,399 Speaker 5: we won't start with the sort of worst part of it. 323 00:17:14,440 --> 00:17:16,360 Speaker 5: We'll sort of soften the blow by starting the services, 324 00:17:16,400 --> 00:17:18,480 Speaker 5: which at least saw some kind of expansion that came 325 00:17:18,520 --> 00:17:21,199 Speaker 5: in at fifty one, you know, and that was below 326 00:17:21,280 --> 00:17:24,760 Speaker 5: expectations still, but that is still growing in services though 327 00:17:24,800 --> 00:17:27,760 Speaker 5: albeit you know, perhaps not even close to enough to 328 00:17:28,280 --> 00:17:31,760 Speaker 5: outweigh what is happening in manufacturing, where we were expecting 329 00:17:31,800 --> 00:17:33,960 Speaker 5: that to come in at forty three, which is already 330 00:17:34,000 --> 00:17:37,040 Speaker 5: a very very weak number, is a strong contraction. It 331 00:17:37,080 --> 00:17:39,800 Speaker 5: came in at forty two. That is really not good 332 00:17:39,840 --> 00:17:42,879 Speaker 5: news for the German economy. And it adds to twenty 333 00:17:42,920 --> 00:17:47,560 Speaker 5: six months of consecutive manufacturing contraction within Germany. That means 334 00:17:47,600 --> 00:17:50,560 Speaker 5: more than two years the manufacturing sector within Germany has 335 00:17:50,600 --> 00:17:53,600 Speaker 5: been contracting, which is an even bigger deal in Germany 336 00:17:53,640 --> 00:17:55,960 Speaker 5: than it is for most of the European economies because 337 00:17:56,000 --> 00:17:58,960 Speaker 5: of that strong industrial base that has really generated the 338 00:17:59,040 --> 00:18:01,200 Speaker 5: kind of wealth that has made it the most wealthy 339 00:18:01,200 --> 00:18:04,439 Speaker 5: and most prosperous economy in all of Europe over the 340 00:18:04,480 --> 00:18:06,640 Speaker 5: last few decades, and if you look at the sort 341 00:18:06,640 --> 00:18:09,040 Speaker 5: of surveys ever elsewhere in the economy, it's not looking 342 00:18:09,040 --> 00:18:12,040 Speaker 5: a whole lot better. Whether it's zdw EFO, there is 343 00:18:12,119 --> 00:18:14,840 Speaker 5: really very widespread pessimism within this economy. 344 00:18:15,640 --> 00:18:18,400 Speaker 2: Recession of probability, though in Europe is at its lowest 345 00:18:18,640 --> 00:18:22,000 Speaker 2: this year. Is Germany booking that trend in a bad 346 00:18:22,040 --> 00:18:24,960 Speaker 2: way and showing more signs of indicators of a downturn. 347 00:18:25,560 --> 00:18:27,680 Speaker 5: I think that it is. I mean, you know what's 348 00:18:27,680 --> 00:18:29,840 Speaker 5: interesting about the German economy is that it's not this 349 00:18:29,960 --> 00:18:33,080 Speaker 5: sort of economy that is sort of going to implode suddenly, 350 00:18:33,080 --> 00:18:35,320 Speaker 5: and that is sort of, you know, partially by design. 351 00:18:35,600 --> 00:18:37,320 Speaker 5: It is a kind of economy that would go out 352 00:18:37,400 --> 00:18:39,199 Speaker 5: more with a whimper than with a bang. I mean, 353 00:18:39,240 --> 00:18:41,040 Speaker 5: this is kind of what we've been seeing in Germany 354 00:18:41,080 --> 00:18:44,280 Speaker 5: over the last two years, particularly after Russia's invasion of 355 00:18:44,359 --> 00:18:46,359 Speaker 5: Ukraine and all of the effects that has had on 356 00:18:46,400 --> 00:18:50,159 Speaker 5: the industrial sector, the terms of prices for energy, the 357 00:18:50,280 --> 00:18:52,680 Speaker 5: sort of even the feeding stock gas that goes into 358 00:18:52,840 --> 00:18:56,800 Speaker 5: huge sort of chemical plants like for BASF, and you know, 359 00:18:56,840 --> 00:18:58,960 Speaker 5: you've had a bit of growth here and there, a 360 00:18:59,000 --> 00:19:01,520 Speaker 5: bit of contraction, but the reality of the situation is 361 00:19:01,640 --> 00:19:03,479 Speaker 5: if you get ten basis points of growth or ten 362 00:19:03,520 --> 00:19:06,359 Speaker 5: basis points of contraction, it doesn't really matter. The point 363 00:19:06,440 --> 00:19:08,919 Speaker 5: is things are not really moving forward, but they're not 364 00:19:09,080 --> 00:19:12,800 Speaker 5: bad enough to sort of instigate huge, really difficult changes. 365 00:19:12,800 --> 00:19:15,920 Speaker 5: Because people's sort of standards of living don't fall precipitously. 366 00:19:15,920 --> 00:19:18,359 Speaker 5: They just get really really worried. So you know, there 367 00:19:18,359 --> 00:19:19,600 Speaker 5: are a lot of things that they need to do. 368 00:19:19,640 --> 00:19:22,000 Speaker 5: They need to deal with digitalization is not a very 369 00:19:22,040 --> 00:19:25,080 Speaker 5: digitized economy despite being so wealthy. They need to cut 370 00:19:25,119 --> 00:19:27,560 Speaker 5: out bureaucracy. This is something that we talk a lot about, 371 00:19:27,600 --> 00:19:29,760 Speaker 5: that a lot of politicians talk about, but it doesn't 372 00:19:29,800 --> 00:19:32,760 Speaker 5: really happen. These are very sort of unsexy reforms in 373 00:19:32,880 --> 00:19:35,000 Speaker 5: order to try to get this economy moving again. And 374 00:19:35,040 --> 00:19:36,880 Speaker 5: when you also think about what's going on in terms 375 00:19:36,920 --> 00:19:39,520 Speaker 5: of China, the tariff war and that sort of thing, 376 00:19:39,800 --> 00:19:42,920 Speaker 5: Germany is by far the most exposed economy in Europe 377 00:19:42,960 --> 00:19:45,399 Speaker 5: in terms of exports over to China and many of 378 00:19:45,400 --> 00:19:47,680 Speaker 5: its companies that have businesses there. So all of this 379 00:19:47,720 --> 00:19:49,879 Speaker 5: stuff culminates to a really sort of poor picture for 380 00:19:49,920 --> 00:19:50,760 Speaker 5: the German economy. 381 00:19:51,440 --> 00:19:55,959 Speaker 2: I mean, is this a temporary or chronic situation or both. 382 00:19:56,200 --> 00:19:57,919 Speaker 2: You know, according to the IMF, it sets me the 383 00:19:58,000 --> 00:20:00,560 Speaker 2: G seven slowest growing economy again this year. 384 00:20:00,840 --> 00:20:03,160 Speaker 5: Yeah, I think what's really interesting with the German economy 385 00:20:03,200 --> 00:20:05,119 Speaker 5: is that, again, since nothing is sort of collapsing and 386 00:20:05,119 --> 00:20:07,520 Speaker 5: it sort of keeps on sort of going slowly and slowly, 387 00:20:07,760 --> 00:20:09,520 Speaker 5: the question is what is going to be the actual 388 00:20:09,600 --> 00:20:12,160 Speaker 5: catalyst for growth, Like things can improve a little bit, 389 00:20:12,200 --> 00:20:14,760 Speaker 5: but the reality of the situation is that it's behind 390 00:20:14,800 --> 00:20:17,680 Speaker 5: on some of the many traditional sectors that it's done 391 00:20:17,800 --> 00:20:20,760 Speaker 5: very well in, like the auto industry. It's slow on electrification. 392 00:20:20,840 --> 00:20:23,400 Speaker 5: It is obviously throwing you know, Volkswagen alone is throwing 393 00:20:23,440 --> 00:20:25,840 Speaker 5: something close to two hundred billion dollars in R and 394 00:20:25,920 --> 00:20:27,919 Speaker 5: D to try to deal with that. But again, these 395 00:20:27,960 --> 00:20:30,040 Speaker 5: are the things that they need to get together in 396 00:20:30,160 --> 00:20:33,280 Speaker 5: order for him to move forward. And there's also this 397 00:20:33,320 --> 00:20:36,080 Speaker 5: other question of this sort of political dysfunction, right because 398 00:20:36,080 --> 00:20:39,320 Speaker 5: many of the governing bodies have ideas about how to 399 00:20:39,359 --> 00:20:41,199 Speaker 5: do this. But we have a coalition right now in 400 00:20:41,240 --> 00:20:44,520 Speaker 5: Germany that have three very different parties with three very 401 00:20:44,560 --> 00:20:47,040 Speaker 5: different ideas on how to do this. And by the way, 402 00:20:47,119 --> 00:20:49,560 Speaker 5: two of those three parties would like to do away 403 00:20:49,600 --> 00:20:52,719 Speaker 5: with the constitutional debt break, which would allow Germany to 404 00:20:52,880 --> 00:20:55,320 Speaker 5: raise debt at the levels that many other countries do 405 00:20:55,359 --> 00:20:58,080 Speaker 5: it that could actually finance some of the things. But 406 00:20:58,119 --> 00:21:01,000 Speaker 5: again the person running the finance ministry is a hyperhawk 407 00:21:01,240 --> 00:21:03,040 Speaker 5: and is saying no way that that's going to happen. 408 00:21:03,080 --> 00:21:04,720 Speaker 5: So you have this sort of stalemate and not that 409 00:21:04,840 --> 00:21:05,840 Speaker 5: much is moving. 410 00:21:06,800 --> 00:21:09,119 Speaker 2: And that's a really interesting question to consider for the 411 00:21:09,200 --> 00:21:13,760 Speaker 2: future as well. How are the politicians talking about the 412 00:21:14,200 --> 00:21:18,280 Speaker 2: economic situation and is there any chance that that actually 413 00:21:18,320 --> 00:21:19,960 Speaker 2: debt break could be eased. 414 00:21:20,480 --> 00:21:22,960 Speaker 5: Well, listen, the Schultz and the SPD have said that 415 00:21:22,960 --> 00:21:25,400 Speaker 5: they think that they need some reform. The Greens have been, 416 00:21:25,440 --> 00:21:28,040 Speaker 5: you know, saying the same thing. In fact, Robert Habeck, 417 00:21:28,080 --> 00:21:30,560 Speaker 5: who is the Economy minister but also the leader of 418 00:21:30,560 --> 00:21:33,280 Speaker 5: the Green Party, says that basically Germany is boxing with 419 00:21:33,320 --> 00:21:35,959 Speaker 5: its arms tied behind its back because this debt break 420 00:21:36,200 --> 00:21:38,000 Speaker 5: is so damaging in terms of trying to get a 421 00:21:38,040 --> 00:21:41,280 Speaker 5: competitive advantage that it's trying to do across the world 422 00:21:41,560 --> 00:21:44,240 Speaker 5: and as sort of countries get poorer. No one likes that. 423 00:21:44,320 --> 00:21:46,480 Speaker 5: But you know who really doesn't like it is rich countries. 424 00:21:46,520 --> 00:21:49,000 Speaker 5: And when you feel that slowly happening in Germany, you 425 00:21:49,040 --> 00:21:51,520 Speaker 5: also feel political consequences there, so a lot of these 426 00:21:51,560 --> 00:21:55,240 Speaker 5: mainstream politicians are saying, be wary of what the populists 427 00:21:55,280 --> 00:21:57,439 Speaker 5: are promising. And that's what we've seen in the polls, 428 00:21:57,480 --> 00:21:59,880 Speaker 5: which is that the AfD, the far right, has been 429 00:22:00,080 --> 00:22:03,040 Speaker 5: absolutely surging. And we have three sort of local state 430 00:22:03,080 --> 00:22:05,639 Speaker 5: elections in Germany coming up over the next three weeks 431 00:22:05,960 --> 00:22:08,159 Speaker 5: where you know, in the last few months, the AfD 432 00:22:08,320 --> 00:22:10,440 Speaker 5: was supposed to be the number one party, taking more 433 00:22:10,480 --> 00:22:13,120 Speaker 5: than thirty percent of the vote in each of those regions. 434 00:22:13,440 --> 00:22:15,680 Speaker 5: Now what's been interesting that has happened is actually there's 435 00:22:15,720 --> 00:22:18,199 Speaker 5: been a new party that was founded in Germany. This 436 00:22:18,240 --> 00:22:20,760 Speaker 5: is the far left, the Sarah Vaganakt, who is a 437 00:22:20,800 --> 00:22:23,920 Speaker 5: sort of very nationalist but left leaning party that has 438 00:22:24,000 --> 00:22:26,879 Speaker 5: fractured some of the AfD momentum and taken some of 439 00:22:26,880 --> 00:22:29,919 Speaker 5: the votes away. But overall it doesn't change basically the 440 00:22:29,920 --> 00:22:32,800 Speaker 5: standing of this coalition in those regions. You know, the 441 00:22:32,840 --> 00:22:36,680 Speaker 5: Schultz and the SPD, the Greens and FDP are all 442 00:22:36,720 --> 00:22:40,080 Speaker 5: going to get basically single digit percentages and these sort 443 00:22:40,080 --> 00:22:42,119 Speaker 5: of more populous groups are going to surge up. 444 00:22:42,400 --> 00:22:46,160 Speaker 2: How is Germany starts are on the global stage being affected. 445 00:22:45,680 --> 00:22:46,119 Speaker 9: By all this. 446 00:22:46,560 --> 00:22:48,280 Speaker 5: I mean, I think it's really interesting when you think 447 00:22:48,320 --> 00:22:51,080 Speaker 5: about how kind of Germany has positioned itself. Let's think 448 00:22:51,119 --> 00:22:53,800 Speaker 5: about the example just of Ukraine and what's been happening 449 00:22:54,320 --> 00:22:58,879 Speaker 5: sort of recently, where basically Germany's domestic budgetary concerns are 450 00:22:58,920 --> 00:23:01,240 Speaker 5: basically bearing on whether or not they're going to be 451 00:23:01,320 --> 00:23:03,359 Speaker 5: able to give more money to Ukraine. And this has 452 00:23:03,359 --> 00:23:06,280 Speaker 5: been sort of very controversial. It seems odd that a 453 00:23:06,359 --> 00:23:10,040 Speaker 5: country as important as big as Germany would basically let 454 00:23:10,160 --> 00:23:15,000 Speaker 5: accounting logic govern what is really really important geopolitical signaling, 455 00:23:15,200 --> 00:23:17,040 Speaker 5: which is exactly what's been happening here. 456 00:23:17,119 --> 00:23:17,320 Speaker 9: Right. 457 00:23:17,359 --> 00:23:19,320 Speaker 5: They're saying we're not going to give any new money 458 00:23:19,400 --> 00:23:21,720 Speaker 5: to Ukraine. And even if that is the case, because 459 00:23:21,720 --> 00:23:24,760 Speaker 5: they already have large commitments and they've contributed more than 460 00:23:24,760 --> 00:23:27,959 Speaker 5: any other European country, doesn't tend to be something that 461 00:23:28,000 --> 00:23:30,640 Speaker 5: you say out loud in quite that way, right, because 462 00:23:30,640 --> 00:23:32,600 Speaker 5: it really undermines you when you say, hey, this is 463 00:23:32,600 --> 00:23:35,119 Speaker 5: where our red line is, because you're sending a signal 464 00:23:35,160 --> 00:23:38,000 Speaker 5: to Moscow, but you're also sending a signal to the 465 00:23:38,080 --> 00:23:41,040 Speaker 5: White House and the potential Trump presidency where they could 466 00:23:41,200 --> 00:23:44,360 Speaker 5: very easily. Say, listen, if Germany's not even adding more 467 00:23:44,359 --> 00:23:47,040 Speaker 5: money to Ukraine, why should the United States. So it's 468 00:23:47,080 --> 00:23:49,520 Speaker 5: an economic problem that is also weighing on it. Obviously, 469 00:23:49,560 --> 00:23:51,320 Speaker 5: the economy is weak. That doesn't put them in a 470 00:23:51,320 --> 00:23:54,160 Speaker 5: strong position. We've talked about some of the issues within 471 00:23:54,200 --> 00:23:56,879 Speaker 5: the coalition, the debt break. But it's also frankly a 472 00:23:56,960 --> 00:23:59,840 Speaker 5: leadership problem because Schultz just does not have the inc 473 00:24:00,200 --> 00:24:02,159 Speaker 5: nation it seems to want to take that kind of 474 00:24:02,240 --> 00:24:05,600 Speaker 5: leadership role in Europe, you know, not like say Macon 475 00:24:05,680 --> 00:24:08,439 Speaker 5: who tried. Maybe he didn't succeed, but at least he tried. 476 00:24:09,119 --> 00:24:09,399 Speaker 9: Oliver. 477 00:24:09,440 --> 00:24:10,920 Speaker 2: In the coming days, we're going to get a whole 478 00:24:11,000 --> 00:24:15,639 Speaker 2: raft of economic data from Germany, inflation growth, some of 479 00:24:15,680 --> 00:24:18,600 Speaker 2: the measures as well, what we'll be watching out for 480 00:24:18,840 --> 00:24:21,639 Speaker 2: to sort of put a data point on the broad 481 00:24:21,680 --> 00:24:23,240 Speaker 2: weakness that you've been talking about. 482 00:24:23,560 --> 00:24:26,240 Speaker 5: Yeah, so listen, inflation is super important for every country 483 00:24:26,280 --> 00:24:28,399 Speaker 5: within Europe and really around the world. Right now. You know, 484 00:24:28,440 --> 00:24:31,000 Speaker 5: the last print in Germany was a two point six percent, 485 00:24:31,000 --> 00:24:33,800 Speaker 5: which was at the higher end of what analysts had anticipated. 486 00:24:33,960 --> 00:24:37,400 Speaker 5: We're going to get the last reading of inflation before 487 00:24:37,720 --> 00:24:40,720 Speaker 5: the next ECB meeting, so that will be absolutely crucial. 488 00:24:41,280 --> 00:24:43,480 Speaker 5: But the picture really in Germany is this is one 489 00:24:43,480 --> 00:24:46,439 Speaker 5: of weaker growth and really persistent inflation, which is not 490 00:24:46,560 --> 00:24:49,320 Speaker 5: really a dynamic any economy wants to be dealing with. 491 00:24:49,680 --> 00:24:51,520 Speaker 5: And it could also set up a kind of debate 492 00:24:51,560 --> 00:24:55,840 Speaker 5: at the ECB right with Germany's Bundesbank members being tending 493 00:24:55,880 --> 00:24:58,920 Speaker 5: to be much more hawkish, much more skeptical about cutting 494 00:24:59,000 --> 00:25:02,600 Speaker 5: rates and really concerned about price stability, and for Germany 495 00:25:02,600 --> 00:25:04,400 Speaker 5: at the time when the economy is kind of slowing, 496 00:25:04,600 --> 00:25:06,720 Speaker 5: it's not you know, a great dynamic, and you can 497 00:25:06,760 --> 00:25:08,720 Speaker 5: see this from the market pricing, by the way, and 498 00:25:08,720 --> 00:25:10,800 Speaker 5: in terms of what is being expected at the ECB, 499 00:25:10,920 --> 00:25:13,760 Speaker 5: you've seen things go from basically a ninety nine percent 500 00:25:13,840 --> 00:25:16,600 Speaker 5: chance of a cut in September to you know, sixty percent. 501 00:25:16,760 --> 00:25:18,560 Speaker 5: So it's been all over the place. So these data 502 00:25:18,560 --> 00:25:20,960 Speaker 5: prints will be very crucial going into the coming months. 503 00:25:21,560 --> 00:25:25,000 Speaker 2: Thanks to Bloomberg's Germany correspondent to Oliver Kruk, I'm Stephen 504 00:25:25,040 --> 00:25:27,600 Speaker 2: Carol in London. You can catch us every weekday morning 505 00:25:27,600 --> 00:25:30,240 Speaker 2: here for Bloomberg Daybreak Europe, beginning at six am in 506 00:25:30,280 --> 00:25:32,840 Speaker 2: London and one am on Wall Streets. Tom. 507 00:25:33,200 --> 00:25:36,080 Speaker 1: Thank you Steven and coming up on Bloomberg day Break weekend, 508 00:25:36,160 --> 00:25:39,720 Speaker 1: Japan's ruling Liberal Democratic Party has set a date for 509 00:25:39,760 --> 00:25:43,320 Speaker 1: its leadership election. We'll discuss what we can expect next. 510 00:25:43,720 --> 00:25:58,000 Speaker 1: I'm Tom Busby and this is Bloomberg. This is Bloomberg 511 00:25:58,040 --> 00:26:00,000 Speaker 1: day Break Weekend, our global look ahead at the time, 512 00:26:00,240 --> 00:26:03,160 Speaker 1: stories for investors in the coming week. I'm Tom Busby 513 00:26:03,240 --> 00:26:06,800 Speaker 1: in New York. Japan's ruling Liberal Democratic Party has set 514 00:26:06,840 --> 00:26:10,879 Speaker 1: September twenty seventh for its next leadership election. Now that 515 00:26:10,920 --> 00:26:14,400 Speaker 1: comes after Prime Minister Kashida said he plans to step down. 516 00:26:14,440 --> 00:26:16,800 Speaker 1: And for more on what's next, let's get to Bloomberg 517 00:26:16,880 --> 00:26:18,880 Speaker 1: Daybreak Asia host Brian Curtis. 518 00:26:19,160 --> 00:26:22,200 Speaker 3: Tom whoever takes the reins at the LDP is likely 519 00:26:22,280 --> 00:26:26,159 Speaker 3: to become prime minister given the party's historical dominance in Japan. 520 00:26:26,760 --> 00:26:29,560 Speaker 3: The vote is held among LDP lawmakers and rank and 521 00:26:29,600 --> 00:26:32,879 Speaker 3: file party members. The general public does not take part 522 00:26:33,000 --> 00:26:37,000 Speaker 3: in the process. That process gets underway on September twelfth, 523 00:26:37,000 --> 00:26:41,080 Speaker 3: but the jockeying is already under way. Earlier, Bloomberg's Paul 524 00:26:41,119 --> 00:26:44,320 Speaker 3: Allen and I spoke with Brian Fowler, Bloomberg Senior editor 525 00:26:44,359 --> 00:26:47,480 Speaker 3: for Northeast Asia. He helped us lay the groundwork on 526 00:26:47,520 --> 00:26:48,479 Speaker 3: what comes next. 527 00:26:49,400 --> 00:26:52,520 Speaker 9: It's going to be a really exciting month or so 528 00:26:52,720 --> 00:26:56,640 Speaker 9: here in Tokyo. First, the big question is who's going 529 00:26:56,680 --> 00:26:59,280 Speaker 9: to be the next prime minister. And at this point 530 00:26:59,680 --> 00:27:02,440 Speaker 9: we know at least half a dozen people who are 531 00:27:02,680 --> 00:27:07,320 Speaker 9: expected to submit their applications as candidates this week, and 532 00:27:07,760 --> 00:27:10,720 Speaker 9: the number could get to as many as twelve or so, 533 00:27:11,560 --> 00:27:14,159 Speaker 9: And so the first thing is who's going to be 534 00:27:14,200 --> 00:27:17,000 Speaker 9: the front runner, And then the second thing is what 535 00:27:17,040 --> 00:27:20,359 Speaker 9: do we know about these people in terms of how 536 00:27:20,400 --> 00:27:22,959 Speaker 9: they view policy and what they've said in the past. 537 00:27:23,040 --> 00:27:25,720 Speaker 9: And some of them have made comments, and a lot 538 00:27:25,760 --> 00:27:28,960 Speaker 9: of them really haven't gone there. And I think that 539 00:27:29,560 --> 00:27:32,080 Speaker 9: kind of has to do with the fact that for 540 00:27:32,119 --> 00:27:36,199 Speaker 9: such a long time, Japanese interest rates were, you know, 541 00:27:36,359 --> 00:27:40,880 Speaker 9: zero or on either side of zero, and prices were stagnant. 542 00:27:41,440 --> 00:27:44,760 Speaker 9: So for a very long time, even up until when 543 00:27:44,800 --> 00:27:48,760 Speaker 9: Kashita took office three years ago, really monetary policy wasn't 544 00:27:48,800 --> 00:27:51,159 Speaker 9: something anyone ever had to talk about. But now it 545 00:27:51,240 --> 00:27:53,320 Speaker 9: is a subject that matters. 546 00:27:53,480 --> 00:27:57,600 Speaker 10: Yeah, and some candidates, and I'm thinking Tarakano particularly is 547 00:27:57,920 --> 00:28:00,400 Speaker 10: fond of a pining on what he thinks the Bank 548 00:28:00,400 --> 00:28:02,280 Speaker 10: of Japan should do. And of course the boj is 549 00:28:02,320 --> 00:28:04,359 Speaker 10: meant to be a political and all the rest of it, 550 00:28:04,600 --> 00:28:08,200 Speaker 10: but we have had some speculation that it does come 551 00:28:08,240 --> 00:28:12,280 Speaker 10: unto political pressure. Is that separation of church and state 552 00:28:12,400 --> 00:28:13,359 Speaker 10: going to continue? 553 00:28:13,480 --> 00:28:15,760 Speaker 9: Yeah, well, well, let me just point out kind of 554 00:28:15,800 --> 00:28:20,359 Speaker 9: an interesting historical thing going back to nineteen eighty seven. 555 00:28:20,640 --> 00:28:23,800 Speaker 9: May of nineteen eighty seven, Nakasone was the prime minister 556 00:28:24,440 --> 00:28:26,800 Speaker 9: and he went to the US and he met with 557 00:28:26,920 --> 00:28:32,040 Speaker 9: Ronald Reagan and he promised Reagan that Japan would take 558 00:28:32,119 --> 00:28:35,040 Speaker 9: interest rates lower in a move that was meant to 559 00:28:35,040 --> 00:28:39,800 Speaker 9: stabilize the dollar. And so, you know, back then there 560 00:28:39,800 --> 00:28:42,719 Speaker 9: certainly was not a separation of church and state. And 561 00:28:42,760 --> 00:28:44,760 Speaker 9: then of course that was the peak of the bubble. 562 00:28:45,200 --> 00:28:48,000 Speaker 9: A couple of years later, the bubble bursts and we 563 00:28:48,120 --> 00:28:52,360 Speaker 9: enter this you know, two decade period of stagnation, and 564 00:28:52,800 --> 00:28:54,960 Speaker 9: it kind of was very easy at that point to 565 00:28:55,240 --> 00:28:57,600 Speaker 9: separate them, and you know, it was very clear. But 566 00:28:57,840 --> 00:29:01,240 Speaker 9: I think at this point, as you said, Kono is 567 00:29:01,320 --> 00:29:04,840 Speaker 9: one another one another one we expect is Toshi meets Motegi. 568 00:29:04,880 --> 00:29:09,400 Speaker 9: He's the Secretary General for the LDP. He also has 569 00:29:09,480 --> 00:29:13,440 Speaker 9: come out in favor of normalization of BOJ policy. We 570 00:29:13,600 --> 00:29:17,920 Speaker 9: have one potential candidate, a woman, and I Takaichi, who's 571 00:29:18,080 --> 00:29:22,880 Speaker 9: in the cabinet. She's actually backed keeping policy settings easy, 572 00:29:23,520 --> 00:29:26,720 Speaker 9: so we do have we have some candidates on either side. 573 00:29:27,000 --> 00:29:29,920 Speaker 3: Well, you probably lay the groundwork for what you were 574 00:29:29,960 --> 00:29:32,080 Speaker 3: going to talk about, is that no matter who the 575 00:29:32,160 --> 00:29:35,240 Speaker 3: new premiere is, there is a possibility of an election 576 00:29:35,480 --> 00:29:38,560 Speaker 3: being called. And I'm curious what would be the thinking 577 00:29:38,720 --> 00:29:42,480 Speaker 3: behind that given the sort of massive control that you 578 00:29:42,520 --> 00:29:45,560 Speaker 3: have from the LDP, particularly with its coalition partner. 579 00:29:45,960 --> 00:29:49,680 Speaker 9: Yeah, so the LDP has looked pretty weak for quite 580 00:29:49,720 --> 00:29:52,840 Speaker 9: a while, but it's great advantages of course that there's 581 00:29:52,840 --> 00:29:56,400 Speaker 9: nobody on the opposition side who can really thretten the 582 00:29:56,400 --> 00:29:59,960 Speaker 9: oldp's leadership. So the thinking would be okay, so Kishita 583 00:30:00,040 --> 00:30:04,640 Speaker 9: steps down, he takes responsibility for the political funding scandal, 584 00:30:05,160 --> 00:30:08,040 Speaker 9: Maybe he takes he also tries to take some responsibility 585 00:30:08,080 --> 00:30:12,480 Speaker 9: for inflation that's that's boosting costs of living, and maybe 586 00:30:12,480 --> 00:30:15,520 Speaker 9: the LDP gets a new mandate to lead with its 587 00:30:15,600 --> 00:30:18,720 Speaker 9: new leader. I think that that would be the idea, 588 00:30:18,760 --> 00:30:21,520 Speaker 9: But of course that election would still be taking place 589 00:30:21,600 --> 00:30:24,560 Speaker 9: at a period when we've had more than two years 590 00:30:24,720 --> 00:30:29,239 Speaker 9: of persistent, sticky inflation at or above the boj's two 591 00:30:29,320 --> 00:30:33,080 Speaker 9: percent target, So they will talk about prices. Whoever it 592 00:30:33,200 --> 00:30:35,240 Speaker 9: is they're going to be talking about it, whether it's 593 00:30:35,320 --> 00:30:40,400 Speaker 9: monetary policy or subsidies to offset higher utility bills. 594 00:30:40,920 --> 00:30:44,000 Speaker 3: Bloomberg's Brian Fowler and joining us now for some further 595 00:30:44,040 --> 00:30:48,560 Speaker 3: insight is Isabelle Reynolds Bloomberg Tokyo Bureau a Chief. So Isabelle. 596 00:30:48,600 --> 00:30:50,840 Speaker 3: We can see though that the race is pretty wide open. 597 00:30:51,360 --> 00:30:54,960 Speaker 3: What's interesting, I think to some is it's, you know, 598 00:30:55,040 --> 00:30:59,200 Speaker 3: whoever's most popular with the public is not really always 599 00:30:59,200 --> 00:31:02,040 Speaker 3: the one that winds up as party leader. It's a 600 00:31:02,040 --> 00:31:05,480 Speaker 3: democratic process. But then there's a lot of old fashioned 601 00:31:05,520 --> 00:31:06,360 Speaker 3: backroom dealing. 602 00:31:07,120 --> 00:31:10,000 Speaker 11: Oh yes, there absolutely is. And one of the interesting 603 00:31:10,040 --> 00:31:12,880 Speaker 11: things this time is that backroom dealing has often in 604 00:31:12,920 --> 00:31:16,560 Speaker 11: the past involved the factions within the LDP, each of 605 00:31:16,600 --> 00:31:18,840 Speaker 11: which had their own leader and would sort of jockey 606 00:31:18,880 --> 00:31:21,000 Speaker 11: to get that leader into the top job, or at 607 00:31:21,080 --> 00:31:24,440 Speaker 11: least into a very senior position in the cabinet as 608 00:31:24,480 --> 00:31:27,680 Speaker 11: part of that horse trading process. Now, due to this 609 00:31:27,840 --> 00:31:31,840 Speaker 11: massive scandal that's been ongoing for what seems like years now, 610 00:31:31,880 --> 00:31:34,440 Speaker 11: that Kisha had tried and failed to put a lid 611 00:31:34,480 --> 00:31:37,280 Speaker 11: on One of the things he did was to stop 612 00:31:37,320 --> 00:31:41,120 Speaker 11: the factions from basically having that power of a money 613 00:31:41,440 --> 00:31:44,480 Speaker 11: and from seeking positions. They should be just a kind 614 00:31:44,520 --> 00:31:50,080 Speaker 11: of policy study groups, he said. So those groups maybe 615 00:31:50,080 --> 00:31:52,880 Speaker 11: don't have much power anymore, so that leaves them fields 616 00:31:52,960 --> 00:31:56,120 Speaker 11: even more open and the whole situation even more chaotic. 617 00:31:56,200 --> 00:31:58,760 Speaker 11: Anyone could pop up from anywhere. We don't know who 618 00:31:58,800 --> 00:32:00,800 Speaker 11: is going to get support from who. Several people have 619 00:32:00,880 --> 00:32:03,240 Speaker 11: said they won't rely on the sort of form of 620 00:32:03,280 --> 00:32:07,360 Speaker 11: factions to get those the twenty signatures that they need 621 00:32:07,400 --> 00:32:10,120 Speaker 11: to run in the race. So yes, it's all to 622 00:32:10,200 --> 00:32:11,400 Speaker 11: play for at this stage. 623 00:32:11,680 --> 00:32:14,360 Speaker 3: So as you say the scandals really hurt Kishida and 624 00:32:14,440 --> 00:32:18,120 Speaker 3: have changed politicking, what are the biggest issues at the moment? 625 00:32:19,080 --> 00:32:22,680 Speaker 11: Yes, well, I think the scandals actually do remain one 626 00:32:22,680 --> 00:32:25,440 Speaker 11: of the biggest issues. So I think one of the 627 00:32:25,480 --> 00:32:28,640 Speaker 11: things people will be looking at is who can sort 628 00:32:28,640 --> 00:32:32,960 Speaker 11: of portray a cleaner image for the LDP. And that's 629 00:32:33,000 --> 00:32:36,160 Speaker 11: pretty difficult because so many of these people have been 630 00:32:36,200 --> 00:32:38,720 Speaker 11: in factions. Even if they weren't directly involved in what 631 00:32:38,840 --> 00:32:42,160 Speaker 11: was a slush fund scandal, it was hiding hiding income. 632 00:32:42,800 --> 00:32:45,280 Speaker 11: They are sort of slightly tainted, So it's the question 633 00:32:45,320 --> 00:32:48,640 Speaker 11: over whether they can sort of put a lid on 634 00:32:48,680 --> 00:32:52,400 Speaker 11: that finally after all these months. Other than that, I 635 00:32:52,400 --> 00:32:55,320 Speaker 11: think it's definitely going to be cost of living. Kishuda 636 00:32:55,440 --> 00:32:58,120 Speaker 11: did do what he could on that. He provided a 637 00:32:58,200 --> 00:33:03,760 Speaker 11: tax break over the summer. He also he provided these 638 00:33:04,000 --> 00:33:08,120 Speaker 11: subsidies for household bills power bills, but that hasn't really 639 00:33:08,160 --> 00:33:12,960 Speaker 11: made much difference to his support rate. So it's questionable 640 00:33:13,080 --> 00:33:16,440 Speaker 11: over you know, these new candidates may promise that they're 641 00:33:16,440 --> 00:33:18,160 Speaker 11: going to tackle this issue that's at the top of 642 00:33:18,160 --> 00:33:20,960 Speaker 11: the people's minds, but whether they can do anything that 643 00:33:21,000 --> 00:33:23,400 Speaker 11: satisfies people, that's a big question. 644 00:33:24,000 --> 00:33:29,000 Speaker 3: So Brian mentioned several candidates. Could Yoko Kamikawa win and 645 00:33:29,120 --> 00:33:31,120 Speaker 3: become the first woman to be prime minister? 646 00:33:31,840 --> 00:33:36,080 Speaker 11: I considered that fairly unlikely, to be honest, and it's sadly. 647 00:33:36,320 --> 00:33:38,600 Speaker 11: I would love to see the first female prime minister 648 00:33:38,640 --> 00:33:40,200 Speaker 11: in Japan, of course, and I thought a lot of 649 00:33:40,240 --> 00:33:42,360 Speaker 11: I think a lot of people would as a sign 650 00:33:42,360 --> 00:33:44,920 Speaker 11: of a new era. She doesn't have a lot of 651 00:33:44,960 --> 00:33:48,800 Speaker 11: personal popularity as one thing. Also, she was previously when 652 00:33:48,800 --> 00:33:51,280 Speaker 11: the factions kind of existed. She was a member of 653 00:33:51,360 --> 00:33:54,760 Speaker 11: Kishida's factions, so she would be seen as a continuity candidate, 654 00:33:55,120 --> 00:33:57,160 Speaker 11: and if they're trying to turn over a new leaf 655 00:33:57,240 --> 00:33:59,840 Speaker 11: and portray a new image, I don't think she's the 656 00:34:00,160 --> 00:34:00,960 Speaker 11: than they would choose. 657 00:34:01,160 --> 00:34:03,520 Speaker 3: Well, Taro Kono is an interesting one, and that he 658 00:34:03,920 --> 00:34:06,640 Speaker 3: is pretty popular with the public, but he doesn't seem 659 00:34:06,640 --> 00:34:08,760 Speaker 3: to be so popular with his peers in Parliament. 660 00:34:09,400 --> 00:34:13,520 Speaker 11: Yes, that's absolutely right. The thing is he's very outspoken. 661 00:34:13,760 --> 00:34:18,080 Speaker 11: He says what he thinks. He criticizes people publicly, and 662 00:34:18,120 --> 00:34:21,160 Speaker 11: that goes down well with the public, who are often dissatisfied, 663 00:34:21,160 --> 00:34:24,040 Speaker 11: obviously with what the government is doing. But when it 664 00:34:24,040 --> 00:34:25,799 Speaker 11: comes to the people who are actually doing that work 665 00:34:25,800 --> 00:34:28,080 Speaker 11: and who are being criticized in public, of course they 666 00:34:28,239 --> 00:34:30,759 Speaker 11: don't like it at all. So he doesn't have that 667 00:34:30,840 --> 00:34:34,480 Speaker 11: many friends within parliament. I mean. Having said that, could 668 00:34:34,480 --> 00:34:37,960 Speaker 11: be that if they want to again create a new 669 00:34:38,160 --> 00:34:41,359 Speaker 11: image from themselves, if they feel kind of desperate enough, 670 00:34:41,400 --> 00:34:44,080 Speaker 11: they could turn to him. They've done that once in 671 00:34:44,120 --> 00:34:47,680 Speaker 11: the past with Koizumi, the previous Prime minister, who was 672 00:34:47,760 --> 00:34:50,719 Speaker 11: Prime Minister about twenty years ago. Things were going very 673 00:34:50,800 --> 00:34:53,399 Speaker 11: badly for the LDP at that point, so they chose 674 00:34:53,400 --> 00:34:55,520 Speaker 11: someone who was kind of a maverick and an outsider, 675 00:34:56,239 --> 00:34:57,880 Speaker 11: and that worked very well at that point. 676 00:34:57,960 --> 00:35:00,520 Speaker 3: So you never know what are so of the ways 677 00:35:00,520 --> 00:35:03,280 Speaker 3: that the candidates will actually compete with one another. 678 00:35:04,920 --> 00:35:07,439 Speaker 11: Well, they only have a couple of weeks to sort 679 00:35:07,440 --> 00:35:10,360 Speaker 11: of really lay out their wares. It tends to be 680 00:35:10,520 --> 00:35:13,319 Speaker 11: a whole load of televised debates, but apart from that, 681 00:35:13,320 --> 00:35:16,760 Speaker 11: they're going to go out and make speeches on the street. Basically, 682 00:35:17,200 --> 00:35:20,120 Speaker 11: there are a lot of restrictions that the electoral laws 683 00:35:20,120 --> 00:35:22,200 Speaker 11: in Japan are quite strict, so you know, you can't 684 00:35:22,200 --> 00:35:23,960 Speaker 11: be knocking on doors or anything. I mean, not that 685 00:35:23,960 --> 00:35:25,920 Speaker 11: the general public are involved, but you probably would want 686 00:35:25,920 --> 00:35:29,000 Speaker 11: to get them behind you. So, yes, it's televised debates 687 00:35:29,040 --> 00:35:31,680 Speaker 11: and it's I guess street speeches. 688 00:35:32,480 --> 00:35:34,480 Speaker 3: So we talked about some of the issues. So you 689 00:35:34,560 --> 00:35:38,440 Speaker 3: mentioned the scandals, and of course inflation and the weakness 690 00:35:38,520 --> 00:35:42,960 Speaker 3: in the end that has troubled many What about the 691 00:35:43,000 --> 00:35:46,560 Speaker 3: issue of independence between the government and the Bank of Japan. 692 00:35:46,640 --> 00:35:49,360 Speaker 3: I know that it's not quite the same as it 693 00:35:49,400 --> 00:35:52,520 Speaker 3: could be in some countries, but has that been tarnished 694 00:35:52,560 --> 00:35:56,480 Speaker 3: a little bit whatever sort of de facto independence there. 695 00:35:56,280 --> 00:36:00,359 Speaker 11: Was, Yes, I think it's it's always been a little 696 00:36:00,400 --> 00:36:06,719 Speaker 11: bit in question. Obviously under Abbe with his ebonomics program 697 00:36:07,080 --> 00:36:11,000 Speaker 11: that was all about really central bank policy. So he 698 00:36:11,480 --> 00:36:14,080 Speaker 11: brought in a Bank of Japan governor who would do 699 00:36:14,120 --> 00:36:17,480 Speaker 11: exactly what he wanted. And although he wasn't, I mean 700 00:36:18,600 --> 00:36:20,799 Speaker 11: from what the then Bank of Japan governor said and 701 00:36:20,840 --> 00:36:23,960 Speaker 11: his memoirs, Abbe was not directing him or telling him 702 00:36:24,000 --> 00:36:27,160 Speaker 11: to do things, it was very obvious what was wanted 703 00:36:27,360 --> 00:36:31,000 Speaker 11: from the Prime Minister's side, and that's exactly what happened. 704 00:36:31,520 --> 00:36:33,960 Speaker 11: So it's hard to imagine that the Bank of Jakapan 705 00:36:34,000 --> 00:36:36,200 Speaker 11: governor will go in a very different direction from what 706 00:36:36,239 --> 00:36:40,520 Speaker 11: the Prime minister of the time wants. So independence, I 707 00:36:40,520 --> 00:36:43,960 Speaker 11: think yes or no in a way on the sort 708 00:36:44,000 --> 00:36:47,520 Speaker 11: of monthly basis of the decisions that made. Yes, there's independence, 709 00:36:48,400 --> 00:36:51,959 Speaker 11: but the overall direction is very much I think set 710 00:36:52,000 --> 00:36:52,800 Speaker 11: by the Prime minister. 711 00:36:53,320 --> 00:36:56,160 Speaker 3: We probably can't close at least without at least a 712 00:36:56,160 --> 00:37:00,120 Speaker 3: little mention of the former Defense Minister, Shirou Ishida. He 713 00:37:00,160 --> 00:37:02,560 Speaker 3: would seem to be one of the favorites, right. 714 00:37:03,440 --> 00:37:06,640 Speaker 11: Yes, yes, he's been pretty popular with the public for 715 00:37:06,680 --> 00:37:08,560 Speaker 11: a long time. But I think the main reason why 716 00:37:08,600 --> 00:37:11,960 Speaker 11: he's popular is that he's always distanced himself from the 717 00:37:12,040 --> 00:37:16,160 Speaker 11: current government. So anyone who's dissatisfied with the government, they 718 00:37:16,280 --> 00:37:19,399 Speaker 11: don't tend to support the opposition parties. They're not seen 719 00:37:19,440 --> 00:37:22,480 Speaker 11: as competent at this point, so they would throw their 720 00:37:22,480 --> 00:37:25,799 Speaker 11: support behind Ishaba, who's someone who's an outsider. So he's 721 00:37:25,800 --> 00:37:28,879 Speaker 11: good at criticizing, at finding the things that are wrong 722 00:37:28,960 --> 00:37:31,640 Speaker 11: with the current government. But I don't know how many 723 00:37:31,680 --> 00:37:34,320 Speaker 11: people would actually want him to be prime minist and 724 00:37:34,360 --> 00:37:36,120 Speaker 11: people within the party would actually want him to be 725 00:37:36,200 --> 00:37:39,000 Speaker 11: prime minist. So obviously he's been very critical and he 726 00:37:39,120 --> 00:37:41,399 Speaker 11: hasn't really laid out a vision of how he does 727 00:37:41,440 --> 00:37:44,040 Speaker 11: want things to be. You know, he's been kind of 728 00:37:44,480 --> 00:37:48,279 Speaker 11: negative and critical. But on the other hand, you know, 729 00:37:48,440 --> 00:37:50,680 Speaker 11: what would be his vision is my big question to. 730 00:37:50,719 --> 00:37:54,520 Speaker 3: Him, Isabelle. Thank you so much for joining us. Isabill Reynolds, 731 00:37:54,520 --> 00:37:58,800 Speaker 3: Bloomberg's Tokyo bureau chief. I'm Brian Curtis along with Doug Krisner. 732 00:37:58,880 --> 00:38:02,520 Speaker 3: You can catch us every weekday here for Bloomberg Daybreak Asia. 733 00:38:02,840 --> 00:38:05,359 Speaker 3: We begin at eight am in Hong Kong and eight 734 00:38:05,400 --> 00:38:06,800 Speaker 3: pm on Wall Street. 735 00:38:07,040 --> 00:38:09,520 Speaker 1: Tom Thank you, Brian, and that does it for this 736 00:38:09,680 --> 00:38:12,480 Speaker 1: edition of Bloomberg day break weekend, Join us again Monday 737 00:38:12,520 --> 00:38:14,560 Speaker 1: morning at five am Wall Street Time for the latest 738 00:38:14,600 --> 00:38:17,080 Speaker 1: on markets overseas and the news you need to start 739 00:38:17,120 --> 00:38:20,520 Speaker 1: your day. I'm Tom Buzzby. Stay with us. Top stories 740 00:38:20,520 --> 00:38:23,120 Speaker 1: and global business headlines are coming up right now