1 00:00:02,120 --> 00:00:08,160 Speaker 1: Broadcasting live to New York Bloomberg eleventh, Brio to Washington, 2 00:00:08,240 --> 00:00:13,280 Speaker 1: d C. Bloomberg to Boston Bloomberg twelve hundreds to San Francisco, 3 00:00:13,400 --> 00:00:17,800 Speaker 1: Bloomberg nine to the Country's series Exam General one, and 4 00:00:17,960 --> 00:00:21,800 Speaker 1: around the globe the Bloomberg Radio plus Appen Bloomberg got Gone. 5 00:00:22,120 --> 00:00:26,439 Speaker 1: This is taking stock coming up on taking stock, will 6 00:00:26,440 --> 00:00:29,400 Speaker 1: take stock off the Bank of Japan and it's well 7 00:00:29,600 --> 00:00:33,080 Speaker 1: non action when it comes to stimulus and the economy. 8 00:00:33,240 --> 00:00:36,840 Speaker 1: We've got details. We'll be speaking with the Brendan Brown. 9 00:00:36,920 --> 00:00:39,280 Speaker 1: He is the chief economist and head of economic research 10 00:00:39,360 --> 00:00:42,840 Speaker 1: at Mitsubishi u f J Securities. But right now, let's 11 00:00:42,840 --> 00:00:44,800 Speaker 1: go to Charlie Pett and the Bloomberg News from Corey 12 00:00:44,880 --> 00:00:47,800 Speaker 1: Bloomberg Business Flash, and I think if him Fox, let 13 00:00:47,840 --> 00:00:49,760 Speaker 1: us begin with the Bank of Japan. It kept its 14 00:00:49,840 --> 00:00:55,160 Speaker 1: key monetary tools unchanged and will mount a comprehensive review 15 00:00:55,200 --> 00:00:59,880 Speaker 1: of its policy framework due to quote considerable uncertainty about 16 00:00:59,880 --> 00:01:03,560 Speaker 1: the outlook for inflation, which has consistently underperformed the central 17 00:01:03,560 --> 00:01:07,840 Speaker 1: banks forecast. James Sweeney is chief economist at Credit Suite Securities. 18 00:01:08,319 --> 00:01:10,800 Speaker 1: I think a review makes sense. I mean, they're they're 19 00:01:10,800 --> 00:01:14,720 Speaker 1: closing in on of the bond market owned by the 20 00:01:15,000 --> 00:01:18,560 Speaker 1: BOJ and moving towards fifty and sixty on the on 21 00:01:18,640 --> 00:01:23,039 Speaker 1: the current plans um hasn't worked so far, and market 22 00:01:23,080 --> 00:01:26,720 Speaker 1: expectations are swinging around. I mean, this week, people really 23 00:01:26,760 --> 00:01:30,160 Speaker 1: expected them to come in and and do helicopter money. 24 00:01:30,680 --> 00:01:33,119 Speaker 1: I didn't think it seemed like that reasonable in expectation. 25 00:01:33,280 --> 00:01:36,520 Speaker 1: Now it's been disappointed. The US Commerce Department says the 26 00:01:36,560 --> 00:01:40,199 Speaker 1: economy expanded in the second quarter at a one two 27 00:01:40,200 --> 00:01:44,000 Speaker 1: percent raised, lesser than projected, after an eight tense of 28 00:01:44,080 --> 00:01:46,400 Speaker 1: one percent advance in the first three months of the 29 00:01:46,480 --> 00:01:50,640 Speaker 1: year that was weaker than previously estimated. The medium forecast 30 00:01:50,680 --> 00:01:53,720 Speaker 1: of economists surveyed by Bloomberg called for a two and 31 00:01:53,840 --> 00:01:58,160 Speaker 1: a half percent second quarter increase, and consumer confidence is 32 00:01:58,200 --> 00:02:00,960 Speaker 1: measured by the University of Michigan and slid in July 33 00:02:01,160 --> 00:02:03,560 Speaker 1: from the prior month on tim reviews of the U 34 00:02:03,600 --> 00:02:08,000 Speaker 1: S economy's prospects and lingering concerns among hiring common owners 35 00:02:08,040 --> 00:02:12,600 Speaker 1: about global market conditions, x On Mobile and Chevron, missing 36 00:02:12,639 --> 00:02:17,880 Speaker 1: profit and production estimatess, wildfires, write downs and weak refining margins. 37 00:02:18,200 --> 00:02:22,800 Speaker 1: Battered oil explorers already reeling under a glut driven price collapse. 38 00:02:23,320 --> 00:02:27,000 Speaker 1: X On Mobile down one point seven percent and Chevron 39 00:02:27,320 --> 00:02:30,200 Speaker 1: is up by four tenths of one percent. Crude Oil 40 00:02:30,240 --> 00:02:33,160 Speaker 1: West Texas Intermediate of one percent forty one of fifty 41 00:02:33,160 --> 00:02:35,960 Speaker 1: three for a barrel of crude gold up eighteen forty 42 00:02:35,960 --> 00:02:39,280 Speaker 1: announced the thirteen fifty SMP of five, a gain of 43 00:02:39,320 --> 00:02:42,000 Speaker 1: two tenths of one percent to thirty two on Wall Street. 44 00:02:42,160 --> 00:02:45,280 Speaker 1: Now we'll look at the other stories making news. Thank you, 45 00:02:45,360 --> 00:02:48,240 Speaker 1: Charlie from the Bloomberg News Room. I'm Jill Schneider. Hillary 46 00:02:48,240 --> 00:02:50,840 Speaker 1: Clinton and running mate Tin Kine are hitting the road today. 47 00:02:50,919 --> 00:02:54,000 Speaker 1: The two were taking a bus trip through two battleground states, 48 00:02:54,040 --> 00:02:57,239 Speaker 1: Pennsylvania and Ohio. Donald Trump is back on the road 49 00:02:57,280 --> 00:03:00,840 Speaker 1: to appearing in Colorado Springs. Trump's run nate Mike Pants 50 00:03:00,880 --> 00:03:03,920 Speaker 1: joined fellow bikers today in his home state of Indiana 51 00:03:04,040 --> 00:03:06,560 Speaker 1: for the annual Motorcycle Ride with the group a bait 52 00:03:06,880 --> 00:03:10,560 Speaker 1: American Bikers aimed towards education. Before he redd off, the 53 00:03:10,600 --> 00:03:13,680 Speaker 1: GOP vice presidential nominee spoke to reporters, Let's make it 54 00:03:13,720 --> 00:03:16,840 Speaker 1: a safe ride. Let's make it a fun ride, but 55 00:03:16,960 --> 00:03:19,000 Speaker 1: let's make it a ride. Let's make it a ride 56 00:03:19,000 --> 00:03:22,720 Speaker 1: that sends a message all over this state that here 57 00:03:22,720 --> 00:03:25,800 Speaker 1: in the state of Indiana, we stand with those who serve. 58 00:03:26,040 --> 00:03:29,400 Speaker 1: There's more fallout from the Flint water controversy. Bloomberg's Michael 59 00:03:29,400 --> 00:03:32,519 Speaker 1: Barr has more. Michigan's attorney general has charged six more 60 00:03:32,560 --> 00:03:35,760 Speaker 1: state employees with crimes related to the lead contaminated water 61 00:03:35,800 --> 00:03:38,720 Speaker 1: crisis in Flint. According to the Flint Journal, a judge 62 00:03:38,720 --> 00:03:41,480 Speaker 1: signed off on the charges filed by Michigan a g 63 00:03:41,760 --> 00:03:45,160 Speaker 1: bill shooting. Flint, a city predominantly black with a population 64 00:03:45,200 --> 00:03:48,080 Speaker 1: of about a hundred thousand people, used the Flint River 65 00:03:48,160 --> 00:03:50,680 Speaker 1: for tap water eighteen months ago to save money, but 66 00:03:50,800 --> 00:03:53,800 Speaker 1: the water was contaminated with lead after it flowed through 67 00:03:53,840 --> 00:03:57,200 Speaker 1: aging pipes. In April, two state regulators and a city 68 00:03:57,200 --> 00:04:01,720 Speaker 1: employee were charged with official misconduct. Michael Barr Bloomberg Radio 69 00:04:02,160 --> 00:04:04,480 Speaker 1: in Connecticut. Today, the public is getting a glimpse of 70 00:04:04,520 --> 00:04:07,400 Speaker 1: the new Sandy Hook Elementary School built to replace the 71 00:04:07,400 --> 00:04:10,800 Speaker 1: one where twenty first graders and six educators were murdered. 72 00:04:11,000 --> 00:04:13,480 Speaker 1: The old facility was torn down in December two thousand 73 00:04:13,520 --> 00:04:16,160 Speaker 1: twelve after the rampage. The new school was built on 74 00:04:16,200 --> 00:04:18,720 Speaker 1: the same property, but not in the old footprint. It's 75 00:04:18,720 --> 00:04:21,760 Speaker 1: scheduled to open next month. Global News twenty four hours 76 00:04:21,760 --> 00:04:25,280 Speaker 1: a day, powered by more than twenty journalists and analysts 77 00:04:25,400 --> 00:04:28,359 Speaker 1: in more than one twenty countries. I'm Jill Schneider, and 78 00:04:28,360 --> 00:04:31,960 Speaker 1: this is Bloomberg, Charlie, and we thank you, and again 79 00:04:32,000 --> 00:04:35,480 Speaker 1: recapping a move higher for US equities SMP five hundred 80 00:04:35,480 --> 00:04:39,720 Speaker 1: index trading very close to a record now up five 81 00:04:39,760 --> 00:04:42,479 Speaker 1: a gain of two tenths of one percent. I'm Charlie Pellett. 82 00:04:42,720 --> 00:04:48,200 Speaker 1: That's a Bloomberg business flash. You're listening to taking Stock 83 00:04:48,360 --> 00:04:54,560 Speaker 1: with Pim Fox and Kathleen Hayes on Broomberg Radio. All right, 84 00:04:54,720 --> 00:04:56,919 Speaker 1: Matt Miller here with Pim Fox. We're gonna bring in 85 00:04:56,920 --> 00:05:00,479 Speaker 1: Brendan Brown, Chief Economists and head of Economic Research MITSUBI 86 00:05:00,720 --> 00:05:03,600 Speaker 1: U f J Securities on what I think is one 87 00:05:03,640 --> 00:05:07,200 Speaker 1: of the most interesting topics of the week of the month. Really, 88 00:05:07,279 --> 00:05:09,880 Speaker 1: I think the Bank of Japan is more exciting right 89 00:05:09,880 --> 00:05:12,760 Speaker 1: now than a Bank of England, Bank of Europe, Bank 90 00:05:12,800 --> 00:05:16,120 Speaker 1: of England e C B OR or the Fed. Brendan 91 00:05:17,320 --> 00:05:19,440 Speaker 1: to me, it's the idea, even though it's kind of 92 00:05:19,440 --> 00:05:22,520 Speaker 1: been shot down of helicopter money, that keeps this story 93 00:05:22,600 --> 00:05:27,320 Speaker 1: so fascinating. Why can't Carona do anything to get inflation going? Well, 94 00:05:27,360 --> 00:05:31,440 Speaker 1: But they have been having a helicopter money for two years. 95 00:05:31,560 --> 00:05:35,840 Speaker 1: We've had the budget deficit running at six of GDP 96 00:05:35,960 --> 00:05:38,839 Speaker 1: and effectively of the Bank of Japan has been buying 97 00:05:38,880 --> 00:05:43,039 Speaker 1: bonds essentially the next day after the issued from the banks. 98 00:05:43,440 --> 00:05:46,760 Speaker 1: So helicopter money is here. But the reality is you 99 00:05:46,800 --> 00:05:50,960 Speaker 1: can only get inflation up if there's about of strong growth. 100 00:05:51,040 --> 00:05:53,760 Speaker 1: You need to have strong demand growth in the economy, 101 00:05:53,880 --> 00:05:57,280 Speaker 1: and that they failed to have all together. And I 102 00:05:57,320 --> 00:05:59,920 Speaker 1: would say the main two reasons for that have been, 103 00:06:00,400 --> 00:06:04,520 Speaker 1: first of all, the extent of uncertainty created by all 104 00:06:04,600 --> 00:06:09,640 Speaker 1: this monetary experimentation, and secondly, of course we've had the 105 00:06:09,760 --> 00:06:13,240 Speaker 1: complete lack of economic reform, which was meant to be 106 00:06:13,360 --> 00:06:16,360 Speaker 1: the third pillar of the RB economic But Brendon, how 107 00:06:16,360 --> 00:06:19,360 Speaker 1: can it be impossible to get inflation going if you're 108 00:06:19,360 --> 00:06:22,040 Speaker 1: just sitting there printing money. And the Bank of Japan 109 00:06:22,200 --> 00:06:24,719 Speaker 1: now has a balance sheet that's the size of or 110 00:06:24,760 --> 00:06:29,600 Speaker 1: surpassing the Feds any day now, Um, it's more than 111 00:06:29,720 --> 00:06:32,960 Speaker 1: I think eight percent of their entire g d P. 112 00:06:33,440 --> 00:06:36,320 Speaker 1: And if you're just printing money, willy nilly, who's going 113 00:06:36,360 --> 00:06:39,800 Speaker 1: to continue to put faith in your fee currency. Well, 114 00:06:39,839 --> 00:06:44,000 Speaker 1: that's a big question the Japanese themselves. When are they 115 00:06:44,040 --> 00:06:46,080 Speaker 1: going to run out of the end? When are we 116 00:06:46,120 --> 00:06:48,680 Speaker 1: going to get capital flight out of Japan. What we 117 00:06:48,760 --> 00:06:50,440 Speaker 1: had in the first two or three years of urb 118 00:06:50,560 --> 00:06:53,960 Speaker 1: economics is there was a huge amount of speculation against 119 00:06:54,000 --> 00:06:57,520 Speaker 1: the end, essentially foreigners going short in the end borrowing yen. 120 00:06:58,080 --> 00:07:02,000 Speaker 1: But the Japanese themselves and not go head over tails 121 00:07:02,160 --> 00:07:06,680 Speaker 1: into buying foreign assets, so they continue to have this 122 00:07:06,880 --> 00:07:10,040 Speaker 1: bias in favor of their domestic market. For the for 123 00:07:10,160 --> 00:07:15,080 Speaker 1: the policy to um produce high inflation, you either have 124 00:07:15,200 --> 00:07:18,160 Speaker 1: to have some sort of capital flight like in the 125 00:07:18,240 --> 00:07:22,320 Speaker 1: ultimate you had in them republic um, or you have 126 00:07:22,440 --> 00:07:26,600 Speaker 1: to have very strong domestic demand being stimulated by this. 127 00:07:26,760 --> 00:07:29,560 Speaker 1: But but neither of that have happened. I think one 128 00:07:29,680 --> 00:07:31,800 Speaker 1: or two of those will happen if they continued with 129 00:07:31,840 --> 00:07:34,320 Speaker 1: this policy for the next five years. You know, if 130 00:07:34,320 --> 00:07:35,960 Speaker 1: you if you look at the future for Japan, there 131 00:07:36,000 --> 00:07:39,400 Speaker 1: will be a discontinuous shift at some point into high inflation. 132 00:07:39,720 --> 00:07:42,000 Speaker 1: But it's not something that happens gradually. It happens in 133 00:07:42,000 --> 00:07:48,000 Speaker 1: a discontinuous version. Is there a bond bubble definitely there's 134 00:07:48,000 --> 00:07:50,480 Speaker 1: a bond bubble because you're looking at ten year yields 135 00:07:50,480 --> 00:07:54,040 Speaker 1: in the j GB market, which slightly negative minus nor 136 00:07:54,120 --> 00:07:58,280 Speaker 1: point two. Yet if you take any reasonable scenario approaches 137 00:07:58,320 --> 00:08:00,360 Speaker 1: to what's going to be happening in Japan the next 138 00:08:00,360 --> 00:08:02,880 Speaker 1: five to ten years, you would have to put a 139 00:08:02,960 --> 00:08:10,000 Speaker 1: significant probability on this high inflation the yen collapse at 140 00:08:10,000 --> 00:08:12,600 Speaker 1: some point. So anyone buying jgbs at these sort of 141 00:08:13,160 --> 00:08:18,040 Speaker 1: yields um using some sort of fantasy, fantasy calculation, I 142 00:08:18,040 --> 00:08:21,120 Speaker 1: would say nobody is buying bonds at these low yields 143 00:08:21,160 --> 00:08:23,679 Speaker 1: and negative yields except for the Bank of Japan itself 144 00:08:23,840 --> 00:08:27,000 Speaker 1: or foreigners doing an arbitrage in two dollars and getting 145 00:08:27,040 --> 00:08:30,080 Speaker 1: a hundred basis points over treasuries. So the bubble is 146 00:08:30,080 --> 00:08:32,200 Speaker 1: actually in the sense that you've got a lot of 147 00:08:32,200 --> 00:08:35,680 Speaker 1: institutions and investors holding these bonds that huge profits compared 148 00:08:35,720 --> 00:08:37,600 Speaker 1: to where they bought them, but they're not going out 149 00:08:37,640 --> 00:08:40,600 Speaker 1: and taking the profits. At some point they will that's 150 00:08:40,600 --> 00:08:43,080 Speaker 1: when the bubble will best, all right. So that's describing 151 00:08:43,080 --> 00:08:45,080 Speaker 1: what's going on at the Bank of Japan with the 152 00:08:45,120 --> 00:08:48,880 Speaker 1: Government of Japan. They are proposing a twenty three cent 153 00:08:48,960 --> 00:08:52,400 Speaker 1: an hour increase in the minimum wage. They also want 154 00:08:52,440 --> 00:08:55,360 Speaker 1: to increase the benefit to low income individuals for about 155 00:08:55,440 --> 00:08:58,080 Speaker 1: ninety five dollars a year, and they want to lower 156 00:08:58,160 --> 00:09:01,959 Speaker 1: the unemployment insurance pre meum over a number of years. 157 00:09:02,600 --> 00:09:06,040 Speaker 1: Why do all of these very small things if they're 158 00:09:06,080 --> 00:09:11,800 Speaker 1: not going to have any effect on the larger picture. Well, 159 00:09:11,960 --> 00:09:15,560 Speaker 1: as you say, in in and arithmetic terms, the budget 160 00:09:15,559 --> 00:09:19,559 Speaker 1: proposals which have been leaked out of the RB administration 161 00:09:20,720 --> 00:09:23,760 Speaker 1: amount net net net about nor point six or nor 162 00:09:23,800 --> 00:09:26,520 Speaker 1: point seven percent of GDP, So that's not going to 163 00:09:26,520 --> 00:09:29,400 Speaker 1: be a game changer. Although I would say that when 164 00:09:29,440 --> 00:09:33,440 Speaker 1: you take account of all the subsidized lending that explodes 165 00:09:33,480 --> 00:09:36,400 Speaker 1: that package by about three times, I would very much 166 00:09:36,400 --> 00:09:40,000 Speaker 1: expect the credit rating agencies to be downgrading japan debt 167 00:09:40,040 --> 00:09:41,880 Speaker 1: and that may be one of the triggers eventually two 168 00:09:41,880 --> 00:09:45,080 Speaker 1: a week a year and bursting the bond bubble. But 169 00:09:45,160 --> 00:09:47,800 Speaker 1: I but I think the package, once seen so far 170 00:09:48,120 --> 00:09:51,840 Speaker 1: as one knows about it, it's very much carrying out 171 00:09:51,960 --> 00:09:54,400 Speaker 1: the pledges that were made in the Upper House elections 172 00:09:54,440 --> 00:09:57,719 Speaker 1: two weeks ago and rewarding basically the core groups for 173 00:09:57,840 --> 00:10:00,600 Speaker 1: support the LDP governments, such as the construc auction companies, 174 00:10:00,640 --> 00:10:03,839 Speaker 1: so you're seeing a package which has weighted towards those 175 00:10:03,880 --> 00:10:07,920 Speaker 1: political interests. Brendan Corona Themes seems to want to have 176 00:10:08,000 --> 00:10:09,880 Speaker 1: a rethink here. What do you think he's going to 177 00:10:09,960 --> 00:10:12,000 Speaker 1: come up with? Is it possible that we'll get in 178 00:10:12,000 --> 00:10:16,680 Speaker 1: about face. I don't think Kuroda himself doing an about faith. 179 00:10:16,720 --> 00:10:19,319 Speaker 1: Central bankers don't in general, and I don't think Coroda 180 00:10:19,400 --> 00:10:23,400 Speaker 1: is an exception um walk back on their policies in 181 00:10:23,440 --> 00:10:25,760 Speaker 1: that way. If it's going to be any change to 182 00:10:25,840 --> 00:10:29,720 Speaker 1: the monetary targets or monetary policy in Japan, it would 183 00:10:29,760 --> 00:10:32,840 Speaker 1: have to come from RB himself deciding to replace the 184 00:10:32,920 --> 00:10:36,120 Speaker 1: leadership in the Bank of Japan and explaining that the 185 00:10:36,240 --> 00:10:38,960 Speaker 1: policy has failed. But I don't see any signs of that. 186 00:10:39,360 --> 00:10:41,600 Speaker 1: Thank you very much for joining us Brendan Brown as 187 00:10:41,679 --> 00:10:45,720 Speaker 1: chief economist and head of economic research at Mitsubishi u 188 00:10:45,840 --> 00:10:50,000 Speaker 1: f J Securities, giving us his perspective on the Bank 189 00:10:50,040 --> 00:10:54,200 Speaker 1: of Japan and their efforts to stimulate the economy. This 190 00:10:54,800 --> 00:11:02,760 Speaker 1: is Bloomberg. This Hampton's Commuter Minute is brought to you 191 00:11:02,800 --> 00:11:05,280 Speaker 1: by land Rover. When towers seem like trees and roads 192 00:11:05,320 --> 00:11:07,320 Speaker 1: become rivers, the range Rover evoke as they are, to 193 00:11:07,320 --> 00:11:09,680 Speaker 1: guide you through the twists and turns of the urban jungle. 194 00:11:09,920 --> 00:11:13,120 Speaker 1: Visit your Tristate area Landrover retailer for special offers. 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