1
00:00:02,480 --> 00:00:11,600
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak

2
00:00:11,640 --> 00:00:15,520
Speaker 1: Asia podcast. I'm deg Prisner. TikTok and it's Chinese parent

3
00:00:15,640 --> 00:00:18,799
Speaker 1: have closed a deal to transfer part of TikTok's US

4
00:00:18,840 --> 00:00:23,360
Speaker 1: operations to American investors. Here's Bloomberg's Anabel Droolers.

5
00:00:23,520 --> 00:00:25,239
Speaker 2: What we know is that TikToker is in the US.

6
00:00:25,280 --> 00:00:27,480
Speaker 2: Can probably just breathe a sigh of relief. Of course,

7
00:00:27,480 --> 00:00:29,400
Speaker 2: there's been a lot of questions marks on this or

8
00:00:29,440 --> 00:00:32,360
Speaker 2: over this, and it's certainly been a many months long

9
00:00:32,400 --> 00:00:35,280
Speaker 2: saga essentially, but the framework and the terms of the

10
00:00:35,320 --> 00:00:39,360
Speaker 2: dealer really mapping or conjuring what we've already heard from

11
00:00:39,800 --> 00:00:42,040
Speaker 2: the Trump administration what was announced US back a few

12
00:00:42,080 --> 00:00:45,560
Speaker 2: months ago. But essentially we've got TikTok and buy Dance

13
00:00:45,600 --> 00:00:48,800
Speaker 2: that have established that JV to transfer parts of TikTok's

14
00:00:49,000 --> 00:00:52,520
Speaker 2: US business to non Chinese owners. And so as part

15
00:00:52,560 --> 00:00:55,360
Speaker 2: of that deal, you're going to get essentially a newly

16
00:00:55,400 --> 00:00:58,040
Speaker 2: created US entity. And we've actually already been hearing that

17
00:00:58,360 --> 00:01:00,720
Speaker 2: the staff within the US had all been starting to

18
00:01:00,760 --> 00:01:03,240
Speaker 2: be split into these teams just in the last few weeks,

19
00:01:03,280 --> 00:01:06,000
Speaker 2: so essentially just creating a bit of a firewall around

20
00:01:06,040 --> 00:01:08,760
Speaker 2: what happens in the States. But in terms of who's

21
00:01:08,800 --> 00:01:11,839
Speaker 2: going to be overseeing this, where you've got the three

22
00:01:11,920 --> 00:01:15,679
Speaker 2: managing investors, there's Oracle, there's silver Lake Management as well,

23
00:01:15,680 --> 00:01:18,600
Speaker 2: and then there's the Ibuderby based investment company MGX. So

24
00:01:18,640 --> 00:01:21,039
Speaker 2: they were already the names that we've been reporting on

25
00:01:21,319 --> 00:01:24,000
Speaker 2: as well. But as we said, it really does conclude

26
00:01:24,080 --> 00:01:27,800
Speaker 2: what's been a very long geopolitical cyber and lots of

27
00:01:27,880 --> 00:01:31,119
Speaker 2: concerns around national security in particular, that.

28
00:01:31,120 --> 00:01:34,920
Speaker 1: Was Bloomberg's Annabelle droolers. Ali Baba Group is preparing for

29
00:01:35,000 --> 00:01:37,880
Speaker 1: an IPO of its chip making unit Tea head. Now,

30
00:01:37,920 --> 00:01:41,080
Speaker 1: this unit develops chips for computing and storage, and it's

31
00:01:41,120 --> 00:01:45,280
Speaker 1: become a strong contender domestically thanks to sustained investment from

32
00:01:45,280 --> 00:01:48,720
Speaker 1: Ali Baba. In the Asian session today, tech stocks are

33
00:01:48,720 --> 00:01:51,560
Speaker 1: in focus, and we got some perspective from ivy Ning,

34
00:01:52,160 --> 00:01:56,360
Speaker 1: chief APAC investment officer at DWS. She spoke with Bloomberg

35
00:01:56,360 --> 00:01:58,840
Speaker 1: TV host David Nglase and Devon Mann.

36
00:01:58,960 --> 00:02:01,200
Speaker 3: So the airal, should I look at it as something

37
00:02:01,240 --> 00:02:03,840
Speaker 3: that's speculation or do you think there is actually some

38
00:02:03,920 --> 00:02:07,480
Speaker 3: earnings that is kind of leading to this sort of optimism.

39
00:02:07,520 --> 00:02:10,280
Speaker 4: Now we think definitely the earning part is the main

40
00:02:10,320 --> 00:02:12,440
Speaker 4: focus for us. And then we have seen that like

41
00:02:12,560 --> 00:02:15,480
Speaker 4: particularly when you look at regionally like on Taiwan career

42
00:02:15,960 --> 00:02:18,680
Speaker 4: or even like some of the China tech company, you

43
00:02:18,760 --> 00:02:21,400
Speaker 4: may not see the earning immediately delfifering for the China one,

44
00:02:21,440 --> 00:02:23,480
Speaker 4: but for the career for the Taiwan one, you continue

45
00:02:23,520 --> 00:02:25,760
Speaker 4: to see like the earning driver is a key like

46
00:02:25,840 --> 00:02:28,480
Speaker 4: a focus for the company. That's why every time when

47
00:02:28,520 --> 00:02:30,880
Speaker 4: the results coming up, people all watching out for the

48
00:02:30,919 --> 00:02:34,720
Speaker 4: management guidance regarding their growth rates, and like the big

49
00:02:34,760 --> 00:02:38,040
Speaker 4: tech company in Taiwan has been like a continuously like

50
00:02:38,120 --> 00:02:40,920
Speaker 4: surprise market with the upside. So that's why from our

51
00:02:41,040 --> 00:02:43,880
Speaker 4: point of view, is definitely the earning driver. But haven't

52
00:02:43,919 --> 00:02:46,760
Speaker 4: say that. We also were cantious about like how about

53
00:02:46,800 --> 00:02:49,679
Speaker 4: the valuation is a valuation CONDI support and you bring

54
00:02:49,760 --> 00:02:51,799
Speaker 4: up a very good point where like what is the

55
00:02:51,880 --> 00:02:54,840
Speaker 4: like return on equity was the ROI and all? But

56
00:02:55,000 --> 00:02:57,880
Speaker 4: I guess like if you look at from a China perspective,

57
00:02:57,919 --> 00:03:00,920
Speaker 4: and if from a China tech perspective, they do have

58
00:03:01,000 --> 00:03:04,400
Speaker 4: some comparative advantage, like the cost is Voldy be lower

59
00:03:04,720 --> 00:03:06,640
Speaker 4: no matter like when you look at the labor costs,

60
00:03:06,639 --> 00:03:09,680
Speaker 4: when even you look at the like number of engineer

61
00:03:10,080 --> 00:03:13,600
Speaker 4: engineer to China produce like is much higher than other country.

62
00:03:13,919 --> 00:03:17,240
Speaker 4: And then the other key thing is the electricity costs

63
00:03:17,440 --> 00:03:20,120
Speaker 4: in China is also like we're low. So all these

64
00:03:20,120 --> 00:03:22,720
Speaker 4: things kind of supporting the oval like type value in

65
00:03:22,720 --> 00:03:23,320
Speaker 4: the market.

66
00:03:24,760 --> 00:03:27,320
Speaker 5: People keep pointing to valuations as a reason for the

67
00:03:27,400 --> 00:03:30,480
Speaker 5: market to correct, but so far they've only pointed to it.

68
00:03:30,639 --> 00:03:34,359
Speaker 5: We haven't seen a correction. And I wonder people talk

69
00:03:34,400 --> 00:03:38,760
Speaker 5: about this as a generational opportunity, and you know, companies

70
00:03:39,120 --> 00:03:41,880
Speaker 5: keep saying they just can't produce enough of it capecks,

71
00:03:41,920 --> 00:03:43,760
Speaker 5: they need to raise so much money to put the

72
00:03:43,760 --> 00:03:47,280
Speaker 5: capecs in. And wonder is it useful to use one

73
00:03:47,320 --> 00:03:51,240
Speaker 5: year earnings? It is my question as a gauge of valuations,

74
00:03:51,240 --> 00:03:54,120
Speaker 5: given that you know, who knows what this looks like

75
00:03:54,160 --> 00:03:55,640
Speaker 5: in a year? We don't know, But what it looks

76
00:03:55,640 --> 00:03:57,040
Speaker 5: like in three year is probably much much more.

77
00:03:57,480 --> 00:04:00,200
Speaker 4: I think it's always better to look at multiple year

78
00:04:00,360 --> 00:04:02,720
Speaker 4: like we generately, like when we look at that, let's

79
00:04:02,720 --> 00:04:04,720
Speaker 4: say the US earning, we always say that like even

80
00:04:04,760 --> 00:04:06,960
Speaker 4: until twenty thirty, we still see a kind of like

81
00:04:07,000 --> 00:04:09,400
Speaker 4: double digit earning growth in the US market. We don't

82
00:04:09,520 --> 00:04:12,320
Speaker 4: look ahead, but the thing is like, okay, market also

83
00:04:12,360 --> 00:04:14,920
Speaker 4: focusing on the short term and especially when the expectation

84
00:04:15,040 --> 00:04:17,720
Speaker 4: is really high the next one year earnings is kind

85
00:04:17,720 --> 00:04:20,080
Speaker 4: of like the key driver, not only just the earning.

86
00:04:20,160 --> 00:04:23,160
Speaker 4: Actually management comment is also a key part. And what

87
00:04:23,200 --> 00:04:26,320
Speaker 4: you're right, we have been saying about like evaluation expensive

88
00:04:26,400 --> 00:04:29,040
Speaker 4: and expensive, but you have seen that, like there is

89
00:04:29,080 --> 00:04:31,919
Speaker 4: also some change in the market while the AI stocks

90
00:04:31,920 --> 00:04:34,920
Speaker 4: start picking up, but regionally you look at the property

91
00:04:35,000 --> 00:04:38,800
Speaker 4: names actually doing pretty well, like surprisingly property you can

92
00:04:38,839 --> 00:04:42,080
Speaker 4: say it's more a value name than anything related to AI. Right,

93
00:04:42,160 --> 00:04:45,320
Speaker 4: So market has been shifting and farm manager has also

94
00:04:45,400 --> 00:04:48,440
Speaker 4: been reallocating some of the money. But for the AI

95
00:04:48,520 --> 00:04:50,760
Speaker 4: one feel like it's a key focus. But they have

96
00:04:50,880 --> 00:04:52,400
Speaker 4: been like diversifying.

97
00:04:53,520 --> 00:04:55,400
Speaker 3: Is there still need to be defensive in this market?

98
00:04:55,480 --> 00:04:57,320
Speaker 3: I just take a look at what's been going on

99
00:04:57,360 --> 00:05:00,240
Speaker 3: with your politics here and it kind of feel this

100
00:05:00,279 --> 00:05:03,359
Speaker 3: whole debasement sort of debate of diversification away from the

101
00:05:03,400 --> 00:05:06,800
Speaker 3: dollar dollar assets to maybe precious metals for example. Do

102
00:05:06,839 --> 00:05:09,159
Speaker 3: you see still a case for that given we've seen

103
00:05:09,160 --> 00:05:11,120
Speaker 3: a massive rally and goal prices already do.

104
00:05:11,440 --> 00:05:14,159
Speaker 4: Yes, I think it's also understandable. Of course, like go

105
00:05:14,279 --> 00:05:17,000
Speaker 4: price at this level is a little bit expensive. I

106
00:05:17,000 --> 00:05:19,280
Speaker 4: think everyone would agree that. But the thing is like

107
00:05:19,320 --> 00:05:21,640
Speaker 4: whenever it's pull back for like ten percent, let's say,

108
00:05:21,880 --> 00:05:24,520
Speaker 4: for the whole geopolitic tension come down for a little bit,

109
00:05:24,839 --> 00:05:28,120
Speaker 4: then you see like maybe GOI pull back. But while

110
00:05:28,160 --> 00:05:30,080
Speaker 4: we are living in the current world, actually is a

111
00:05:30,160 --> 00:05:34,000
Speaker 4: rising geopolitical tension everywhere you can mention. So that's why

112
00:05:34,080 --> 00:05:36,599
Speaker 4: like for goal price and or for goal particularly in

113
00:05:36,600 --> 00:05:39,520
Speaker 4: the portfolio, we still see its value in a multi

114
00:05:39,520 --> 00:05:41,200
Speaker 4: asset portfolio. It's the way important.

115
00:05:41,520 --> 00:05:44,320
Speaker 5: Okay, you mentioned property. I'm curious about that because that

116
00:05:44,440 --> 00:05:47,320
Speaker 5: started to really come alive. Yes, what do you think

117
00:05:47,360 --> 00:05:49,320
Speaker 5: that is? And is that simply just rotation out of

118
00:05:49,360 --> 00:05:50,800
Speaker 5: the big winners? What's going on there?

119
00:05:51,080 --> 00:05:53,160
Speaker 4: I think they are like two parts, right, It's a

120
00:05:53,279 --> 00:05:55,680
Speaker 4: key part. As I mentioned, market has been looking for

121
00:05:55,760 --> 00:05:58,560
Speaker 4: like some value stock. Where is the way of change?

122
00:05:58,720 --> 00:06:01,200
Speaker 4: And this is the key part. I thinks we're driving

123
00:06:01,240 --> 00:06:03,640
Speaker 4: the property names. If you look at Hong Kong, Hong

124
00:06:03,760 --> 00:06:05,760
Speaker 4: Kong has went for a very tough period of time

125
00:06:06,000 --> 00:06:08,960
Speaker 4: be a residential office and retail whatever you can name.

126
00:06:09,360 --> 00:06:11,719
Speaker 4: But let's pick on the commercial setter first. When you

127
00:06:11,760 --> 00:06:14,000
Speaker 4: look at like particularly on the Hong Kong office, if

128
00:06:14,040 --> 00:06:16,400
Speaker 4: you look at four kills the central win, it's actually

129
00:06:16,440 --> 00:06:18,640
Speaker 4: the first quarter of a quarter pick up in terms

130
00:06:18,680 --> 00:06:21,800
Speaker 4: of the central win after multiple years like that. So

131
00:06:21,880 --> 00:06:24,159
Speaker 4: this is a positive sign. We're seeing the office on

132
00:06:24,240 --> 00:06:26,640
Speaker 4: top of all the transactions we can names last year

133
00:06:26,680 --> 00:06:29,040
Speaker 4: with the central office, with the Costway Bay office, so

134
00:06:29,200 --> 00:06:32,320
Speaker 4: office was where like we see the positive momentum we

135
00:06:32,400 --> 00:06:34,520
Speaker 4: tell in terms of the WNS like I know that

136
00:06:34,600 --> 00:06:37,000
Speaker 4: like the wental version part is still kind of like

137
00:06:37,560 --> 00:06:40,320
Speaker 4: under pressure, but we can see that like with the

138
00:06:40,360 --> 00:06:43,240
Speaker 4: tourists five slowly picking up. We still haven't back to

139
00:06:43,279 --> 00:06:45,960
Speaker 4: the heyday of twenty eighteen, don't get me wrong, but

140
00:06:46,040 --> 00:06:48,480
Speaker 4: like at least for what we have seen the worst,

141
00:06:48,600 --> 00:06:51,560
Speaker 4: like and residential where you see like the st price

142
00:06:51,600 --> 00:06:53,680
Speaker 4: have been picking up. I think the key part for

143
00:06:53,800 --> 00:06:56,560
Speaker 4: a lot of like invessad is when you look at

144
00:06:56,640 --> 00:07:00,200
Speaker 4: last year our residential price of five percent, are i

145
00:07:00,200 --> 00:07:03,120
Speaker 4: mean our secondary volume all picking up by double digits.

146
00:07:03,279 --> 00:07:06,160
Speaker 4: So that's where people getting positive. But don't get me wrong,

147
00:07:06,240 --> 00:07:08,640
Speaker 4: I'm not saying about like the earning will be like

148
00:07:08,680 --> 00:07:11,320
Speaker 4: stood up in the coming march, like it will still

149
00:07:11,360 --> 00:07:14,360
Speaker 4: be like the earning still be under stress for some

150
00:07:14,440 --> 00:07:16,800
Speaker 4: of the names. But the thing is like for market

151
00:07:17,240 --> 00:07:20,080
Speaker 4: is where's the bottom and that is where they see

152
00:07:20,160 --> 00:07:23,200
Speaker 4: the value right before the whole value coming like a

153
00:07:23,200 --> 00:07:25,240
Speaker 4: lot of puppety name. But the Hong Kong pubby name

154
00:07:25,600 --> 00:07:27,800
Speaker 4: was actually training as like a kind of minus one

155
00:07:27,800 --> 00:07:30,120
Speaker 4: said division discount of our navy. Of course the price

156
00:07:30,120 --> 00:07:32,360
Speaker 4: has pick up value I should pick up, but I

157
00:07:32,400 --> 00:07:35,480
Speaker 4: wouldn't see that it's like super expensive now probably more

158
00:07:35,520 --> 00:07:37,680
Speaker 4: at a fair value kind of range right now for

159
00:07:37,720 --> 00:07:38,600
Speaker 4: the Hong kongore py names.

160
00:07:38,880 --> 00:07:43,080
Speaker 5: Has the environment funding conditions specifically improved enough that some

161
00:07:43,160 --> 00:07:46,560
Speaker 5: of the distress names have been pulled so far away

162
00:07:46,560 --> 00:07:49,200
Speaker 5: from the edge that they're no longer distressed. I'll just

163
00:07:49,200 --> 00:07:50,840
Speaker 5: mention New World for example. We don't have to talk

164
00:07:50,840 --> 00:07:53,040
Speaker 5: about New World, but bonds. Some of the bonds are

165
00:07:53,080 --> 00:07:54,960
Speaker 5: up two hundred percent. It's been in the news this week,

166
00:07:55,000 --> 00:08:00,960
Speaker 5: and have things shifted enough that you know the solvency

167
00:08:01,000 --> 00:08:02,520
Speaker 5: issue should not be an issue anymore.

168
00:08:02,960 --> 00:08:06,040
Speaker 4: Okay, we've not touching a specific name, but over a market,

169
00:08:06,080 --> 00:08:08,600
Speaker 4: we can see how high balls moving last year. Of course,

170
00:08:08,640 --> 00:08:11,280
Speaker 4: the second half eaching a little bit like higher compared

171
00:08:11,320 --> 00:08:13,000
Speaker 4: with the low point we see in the year, but

172
00:08:13,480 --> 00:08:15,720
Speaker 4: when you look at a full year basis, it's still

173
00:08:15,840 --> 00:08:18,760
Speaker 4: pretty healthy and relatively low level. So you have seen

174
00:08:18,840 --> 00:08:22,000
Speaker 4: that in their results or in the coming result for

175
00:08:22,120 --> 00:08:25,920
Speaker 4: the developer or leno, the interest cost pressure will be less.

176
00:08:26,120 --> 00:08:28,000
Speaker 4: So that's why I would say the fund the environments

177
00:08:28,120 --> 00:08:30,600
Speaker 4: is getting more favorable. I would see there is still

178
00:08:30,600 --> 00:08:33,360
Speaker 4: some problem, but as I mentioned about for the fundamental

179
00:08:33,400 --> 00:08:36,000
Speaker 4: it's the same thing like for the worst time poppy

180
00:08:36,160 --> 00:08:36,800
Speaker 4: has passed.

181
00:08:36,920 --> 00:08:41,240
Speaker 1: That is Ivanning, chief APEC Investment Officer at DWS, speaking

182
00:08:41,240 --> 00:08:43,800
Speaker 1: to Bloomberg TV host of von Man and David and

183
00:08:43,840 --> 00:08:53,840
Speaker 1: Glaze here on the Daybreak Asia podcast. Welcome back to

184
00:08:53,880 --> 00:08:57,440
Speaker 1: the Debreak Asia podcast. I'm Derek Kristner. Today in Japan,

185
00:08:57,520 --> 00:09:00,959
Speaker 1: the government reported inflation slowed into December for the first

186
00:09:00,960 --> 00:09:05,520
Speaker 1: time in four months. Government subsidies for gasoline and diesel

187
00:09:05,600 --> 00:09:08,599
Speaker 1: fuel helped to lower those prices, and that was reflected

188
00:09:08,640 --> 00:09:13,320
Speaker 1: in the CPI. Consumer prices excluding fresh food rose at

189
00:09:13,320 --> 00:09:16,240
Speaker 1: an annual rate of two point four percent. But if

190
00:09:16,280 --> 00:09:19,200
Speaker 1: you remove the impact of energy, the so called core

191
00:09:19,360 --> 00:09:22,640
Speaker 1: core CPI rose at an annual rate of two point

192
00:09:22,720 --> 00:09:26,440
Speaker 1: nine percent, and that shows that underlying inflationary pressure in

193
00:09:26,520 --> 00:09:31,040
Speaker 1: Japan remains robust. The daily cost of living has become

194
00:09:31,040 --> 00:09:34,680
Speaker 1: a major concern. Indeed, Prime Minister Takeiichi has proposed a

195
00:09:34,760 --> 00:09:38,600
Speaker 1: temporary tax cut on food, but the notion of less

196
00:09:38,640 --> 00:09:42,439
Speaker 1: tax revenue put a spotlight this week on Japan's fiscal picture,

197
00:09:43,040 --> 00:09:45,839
Speaker 1: and we had a revolt in the bond market. Now,

198
00:09:45,880 --> 00:09:49,040
Speaker 1: the daily cost of living has become a major concern.

199
00:09:49,200 --> 00:09:53,280
Speaker 1: One reason Prime Minister Takeiichi proposed a temporary tax cut

200
00:09:53,280 --> 00:09:56,640
Speaker 1: on food, but the notion of less tax revenue put

201
00:09:56,679 --> 00:09:59,440
Speaker 1: the spotlight this week on Japan's fiscal picture, and the

202
00:09:59,480 --> 00:10:02,440
Speaker 1: bond mark get revolted. Joining me now for a closer

203
00:10:02,480 --> 00:10:07,319
Speaker 1: look is Bloomberg opinion columnist Garode Ready. Garod joins from Tokyo.

204
00:10:07,600 --> 00:10:09,880
Speaker 1: Thank you for being here. So we had this sell

205
00:10:09,920 --> 00:10:13,559
Speaker 1: off on Tuesday in the Japanese bond market and long

206
00:10:13,640 --> 00:10:17,480
Speaker 1: term JGB yield spike to record highs. At the time,

207
00:10:17,760 --> 00:10:20,960
Speaker 1: it seemed like maybe a hair on fire moment, But

208
00:10:21,080 --> 00:10:25,800
Speaker 1: you call it an overreaction. Explain that to me, yeah.

209
00:10:25,640 --> 00:10:28,360
Speaker 6: And I think you know the subsequent moves that we've

210
00:10:28,360 --> 00:10:31,440
Speaker 6: seen in the markets kind of you know, play that out.

211
00:10:33,080 --> 00:10:35,520
Speaker 6: There was a there was a hairy moment on Tuesday

212
00:10:35,559 --> 00:10:39,559
Speaker 6: when super long eels rose to record highs. Now, also

213
00:10:40,040 --> 00:10:43,199
Speaker 6: the fact that the record highs, you know, doesn't necessarily

214
00:10:43,200 --> 00:10:45,719
Speaker 6: tell the whole story, because both the thirty and the

215
00:10:45,760 --> 00:10:50,880
Speaker 6: fourty year bonds are relatively new nineteen ninety nine first

216
00:10:50,880 --> 00:10:53,360
Speaker 6: issued in nineteenninety nine, two thousand and seven, if I

217
00:10:53,400 --> 00:10:57,920
Speaker 6: recall correctly, and you know, during most of the time

218
00:10:57,960 --> 00:11:01,079
Speaker 6: that those bonds have existed, Japan's either been in deflation

219
00:11:01,559 --> 00:11:06,040
Speaker 6: or yields have been suppressed due to the vj's yield

220
00:11:06,040 --> 00:11:09,000
Speaker 6: curve control. Now what you're seeing is you're seeing, you know,

221
00:11:09,160 --> 00:11:12,920
Speaker 6: normalization of policy, and you're going to see a couple

222
00:11:12,960 --> 00:11:15,320
Speaker 6: of bumps along the way. And I think that's what

223
00:11:15,360 --> 00:11:18,199
Speaker 6: we saw on Tuesday. And I think once people got

224
00:11:18,280 --> 00:11:20,400
Speaker 6: used to that and saw that it wasn't you know,

225
00:11:21,240 --> 00:11:24,760
Speaker 6: Liz trust moment or a physical crisis, I think, you know,

226
00:11:24,800 --> 00:11:25,920
Speaker 6: things calm down a little bit.

227
00:11:26,520 --> 00:11:29,320
Speaker 1: That said, this week at the World Economic Forum, we

228
00:11:29,360 --> 00:11:32,160
Speaker 1: heard from Ken Griffin and he said the heavy selling

229
00:11:32,160 --> 00:11:35,319
Speaker 1: in the Japanese bond market that we saw on Tuesday

230
00:11:35,400 --> 00:11:39,320
Speaker 1: should serve as an explicit warning. Maybe he was focused

231
00:11:39,320 --> 00:11:42,200
Speaker 1: more on the situation in the United States, But I'm

232
00:11:42,240 --> 00:11:45,920
Speaker 1: wondering whether what Griffin had to say applies equally to

233
00:11:46,000 --> 00:11:47,080
Speaker 1: lawmakers in Japan.

234
00:11:48,200 --> 00:11:54,720
Speaker 6: It's certainly worth Tatichi Prime, mister Takaichi in particular, having

235
00:11:54,760 --> 00:11:58,559
Speaker 6: a little bit more caution about what she says. This

236
00:11:58,640 --> 00:12:02,760
Speaker 6: isn't just limited actually to markets. I would say she

237
00:12:02,880 --> 00:12:05,960
Speaker 6: has a little bit of a tendency to kind of

238
00:12:06,000 --> 00:12:10,040
Speaker 6: speak off the cuff a little bit. Perhaps we saw

239
00:12:10,080 --> 00:12:14,640
Speaker 6: that with the flare up with China last year, and

240
00:12:14,720 --> 00:12:16,800
Speaker 6: maybe this is another warning that she should just be

241
00:12:16,840 --> 00:12:19,200
Speaker 6: a little bit careful about some of the stuff that

242
00:12:19,520 --> 00:12:26,000
Speaker 6: she says. She was very bullish on spending in her

243
00:12:26,040 --> 00:12:29,480
Speaker 6: speech on Monday evening. That's kind of like the you know,

244
00:12:29,520 --> 00:12:35,960
Speaker 6: the closest thing before the flare up in bonds on Tuesday.

245
00:12:37,200 --> 00:12:39,840
Speaker 6: And of course the main thing that got people going

246
00:12:40,080 --> 00:12:46,280
Speaker 6: was her plan to eliminate the temporarily, shall we say,

247
00:12:46,280 --> 00:12:48,640
Speaker 6: cut to zero, the sales tax on food, which is

248
00:12:48,679 --> 00:12:50,800
Speaker 6: eight percent of the moment that would cost about a

249
00:12:50,800 --> 00:12:54,040
Speaker 6: plan that would cost about five trillion yen. Now I

250
00:12:54,080 --> 00:12:58,160
Speaker 6: think this is a bad plan. I would not. If

251
00:12:58,240 --> 00:13:00,920
Speaker 6: Japan has five trillion yen to spend, I think they

252
00:13:00,960 --> 00:13:05,079
Speaker 6: could get much better results on doing it elsewhere, and

253
00:13:05,240 --> 00:13:08,079
Speaker 6: I think it will also not have the impact on

254
00:13:08,360 --> 00:13:12,240
Speaker 6: low income households that are suffering with inflation that Takaichi

255
00:13:12,280 --> 00:13:15,880
Speaker 6: wants it to have. However, in the grand scheme of things,

256
00:13:15,880 --> 00:13:17,480
Speaker 6: it's not a huge amount of money, you know, it's

257
00:13:17,520 --> 00:13:21,719
Speaker 6: one percent of GDP in Japan's tax revenue has been

258
00:13:21,720 --> 00:13:26,280
Speaker 6: going up in general a lot. But Takeichi needs to

259
00:13:26,320 --> 00:13:29,440
Speaker 6: make that case, you know, more forcefully. She didn't really

260
00:13:29,520 --> 00:13:31,640
Speaker 6: you know, make that She just kind of talks about

261
00:13:31,920 --> 00:13:35,120
Speaker 6: handing out money. And so from from that perspective, yeah,

262
00:13:35,160 --> 00:13:37,079
Speaker 6: she does need to be a little bit more cautious

263
00:13:37,360 --> 00:13:40,160
Speaker 6: about how she handles things and maybe think a little

264
00:13:40,200 --> 00:13:41,960
Speaker 6: bit more about how the market will react.

265
00:13:42,240 --> 00:13:45,280
Speaker 1: So, right after we saw the ructions in the Japanese

266
00:13:45,360 --> 00:13:49,679
Speaker 1: bond market, Japanese Finance Minister Katayama was on the sidelines

267
00:13:49,720 --> 00:13:54,680
Speaker 1: at Davos asking market participants to calm down. Is there

268
00:13:54,720 --> 00:13:57,199
Speaker 1: the risk that we see a return of this type

269
00:13:57,200 --> 00:14:01,280
Speaker 1: of market behavior, that that Japan is basically viewed as

270
00:14:01,320 --> 00:14:05,320
Speaker 1: a major exporter of bond market volatility, And.

271
00:14:05,679 --> 00:14:08,440
Speaker 6: I certainly think it's I certainly think it's a risk.

272
00:14:08,840 --> 00:14:11,480
Speaker 6: I think, you know, we're in a situation now where

273
00:14:11,800 --> 00:14:14,000
Speaker 6: you have a lot of people who are in the

274
00:14:14,120 --> 00:14:17,160
Speaker 6: Japanese bond market who maybe were not in it before

275
00:14:17,280 --> 00:14:19,120
Speaker 6: because you know, for many years it was not a

276
00:14:19,240 --> 00:14:23,240
Speaker 6: very interesting market. So now you're maybe seeing people who

277
00:14:23,280 --> 00:14:28,760
Speaker 6: are you maybe overreacting a little bit to to you know,

278
00:14:29,000 --> 00:14:34,560
Speaker 6: to two events, and you know you're you're you're also seeing,

279
00:14:35,120 --> 00:14:38,960
Speaker 6: you know, a situation where Japan is going through us

280
00:14:39,000 --> 00:14:40,440
Speaker 6: you know, as I was saying, is it's going through

281
00:14:40,440 --> 00:14:43,440
Speaker 6: this long normalization. You know, it's only two years or

282
00:14:43,480 --> 00:14:48,440
Speaker 6: it's less than two years since the BOJ ended yield

283
00:14:48,480 --> 00:14:54,520
Speaker 6: curve control. Japan itself is becoming you know, is getting

284
00:14:54,640 --> 00:14:58,320
Speaker 6: used to the idea that inflation is here to stay.

285
00:14:58,680 --> 00:15:01,000
Speaker 6: You know, if you had said that five years ago,

286
00:15:01,360 --> 00:15:04,440
Speaker 6: no one would have believed you. Now there's the sense

287
00:15:04,480 --> 00:15:06,920
Speaker 6: that inflation is is going to be here, that it

288
00:15:07,000 --> 00:15:10,960
Speaker 6: is sticky, and you're seeing things, you know, being repriced

289
00:15:11,040 --> 00:15:13,960
Speaker 6: in order to take that into account to that extent,

290
00:15:14,040 --> 00:15:16,360
Speaker 6: you know, some of this is is is quite healthy,

291
00:15:16,560 --> 00:15:18,800
Speaker 6: you know the normalization of the market, and I think

292
00:15:18,920 --> 00:15:23,600
Speaker 6: to Finance Minister's Finance Minister Katama's comments. You know, she

293
00:15:23,760 --> 00:15:25,560
Speaker 6: was kind of making that point as well, that you know,

294
00:15:26,360 --> 00:15:29,520
Speaker 6: policymakers here are are are well aware that you know,

295
00:15:30,280 --> 00:15:32,720
Speaker 6: they're well aware of, you know, some of the changes

296
00:15:32,720 --> 00:15:34,440
Speaker 6: that are happening, and indeed, like a lot of these

297
00:15:34,480 --> 00:15:38,240
Speaker 6: changes are intensible. You know, the boj gave up the

298
00:15:38,440 --> 00:15:40,960
Speaker 6: clort of control on purpose, not because you know they

299
00:15:40,960 --> 00:15:43,720
Speaker 6: couldn't they couldn't sustain it anymore. But you will certainly

300
00:15:43,760 --> 00:15:45,800
Speaker 6: see I think, you know, more bumps along the road.

301
00:15:45,840 --> 00:15:47,680
Speaker 6: This isn't the first one that we've seen in this

302
00:15:47,760 --> 00:15:51,200
Speaker 6: normalization process. There was there was a similar moment you know,

303
00:15:51,560 --> 00:15:54,520
Speaker 6: last year in May. If I recall correctly, and I

304
00:15:54,560 --> 00:15:56,480
Speaker 6: do think you will, you will see this and it's important,

305
00:15:56,520 --> 00:16:00,800
Speaker 6: I think for policymakers to come out and make make comments, admit,

306
00:16:00,920 --> 00:16:05,760
Speaker 6: you know, telegraph there you know they're thinking a little

307
00:16:05,760 --> 00:16:06,120
Speaker 6: bit better.

308
00:16:06,120 --> 00:16:09,080
Speaker 1: I would say so in cases where maybe we see

309
00:16:09,080 --> 00:16:12,360
Speaker 1: another return to this type of volatility, maybe we get

310
00:16:12,360 --> 00:16:15,520
Speaker 1: a drop in bond prices. I'm wondering about the degree

311
00:16:15,520 --> 00:16:18,280
Speaker 1: to which that would be a big negative for banks

312
00:16:18,280 --> 00:16:21,680
Speaker 1: in Japan, particularly the larger regional banks.

313
00:16:23,520 --> 00:16:27,960
Speaker 6: Yeah, certainly the regional banks, you know, Jman's regional banking

314
00:16:28,160 --> 00:16:33,880
Speaker 6: sector is exposed to We see this, you know, every

315
00:16:33,880 --> 00:16:36,440
Speaker 6: time there is a little you know, above all kind

316
00:16:36,440 --> 00:16:39,840
Speaker 6: of anywhere in the world. We saw this with you know,

317
00:16:39,920 --> 00:16:42,400
Speaker 6: some of the private credit stuff that was going on

318
00:16:42,440 --> 00:16:44,640
Speaker 6: in the US last year. It always seems to be

319
00:16:44,920 --> 00:16:49,520
Speaker 6: some Japanese regional bank always turns up being involved in it.

320
00:16:50,800 --> 00:16:52,840
Speaker 6: I do think, I do think that is sort of

321
00:16:52,920 --> 00:16:55,600
Speaker 6: like a long term concern. But I also think, you know,

322
00:16:56,400 --> 00:16:59,200
Speaker 6: the authorities are aware of that, and they are keeping

323
00:16:59,240 --> 00:17:02,440
Speaker 6: an eye on that, are pressuring, you know, particularly the

324
00:17:02,920 --> 00:17:05,280
Speaker 6: regional banks. I think that you know, the megabanks are

325
00:17:05,400 --> 00:17:08,480
Speaker 6: are far better diversified, but the regional banks, you know

326
00:17:08,480 --> 00:17:12,560
Speaker 6: that they are keeping an eye on that, and you know,

327
00:17:13,040 --> 00:17:14,879
Speaker 6: I think authorities are broadly across that.

328
00:17:15,280 --> 00:17:17,880
Speaker 1: So what I'm hearing is that you're against this two

329
00:17:17,960 --> 00:17:21,479
Speaker 1: year consumption tax on food. But imagine a world in

330
00:17:21,520 --> 00:17:25,280
Speaker 1: which you're an advisor now to Prime Minister Takei Ichi,

331
00:17:25,400 --> 00:17:28,440
Speaker 1: and you can agree that the economy in Japan needs

332
00:17:28,680 --> 00:17:31,679
Speaker 1: some form of stimulus. What would you recommend the government do?

333
00:17:33,160 --> 00:17:36,080
Speaker 6: Well, I guess there are two things. One, you know,

334
00:17:36,119 --> 00:17:38,640
Speaker 6: the reason that that Takeichi is doing this this two

335
00:17:38,720 --> 00:17:43,600
Speaker 6: year cut or say they say she is only proposing it.

336
00:17:43,680 --> 00:17:46,440
Speaker 6: She she is saying that, you know, let's talk about it.

337
00:17:46,560 --> 00:17:50,639
Speaker 6: I think it's entirely possible that no conclusion is reached

338
00:17:50,840 --> 00:17:54,520
Speaker 6: within the LDP even after winning the election, and it

339
00:17:54,560 --> 00:17:56,920
Speaker 6: never actually comes to pass. So so that that's one thing.

340
00:17:57,080 --> 00:17:59,040
Speaker 6: But the reason that she is doing it is because

341
00:17:59,280 --> 00:18:04,760
Speaker 6: you know, there is very high, particularly food inflation in Japan,

342
00:18:05,119 --> 00:18:08,879
Speaker 6: and it's particularly a shock to Japan because Japan for

343
00:18:08,920 --> 00:18:14,119
Speaker 6: so long had you know, either static or falling prices,

344
00:18:14,400 --> 00:18:16,919
Speaker 6: and there are a lot of low income households that

345
00:18:17,040 --> 00:18:19,480
Speaker 6: are suffering with the price of food. The price of

346
00:18:19,560 --> 00:18:22,440
Speaker 6: rice was a big story last year. So you certainly

347
00:18:22,480 --> 00:18:25,600
Speaker 6: do have to do something for those for those households,

348
00:18:25,600 --> 00:18:28,719
Speaker 6: that's one thing. So you know, for that instead of

349
00:18:28,760 --> 00:18:34,560
Speaker 6: doing an across the board cut to the sales tax

350
00:18:34,600 --> 00:18:38,480
Speaker 6: on food, which benefits you know, rich households, well off

351
00:18:38,480 --> 00:18:42,639
Speaker 6: households as much as it does low income households. And also,

352
00:18:42,720 --> 00:18:45,919
Speaker 6: I would say almost certainly most of that will be

353
00:18:45,960 --> 00:18:50,760
Speaker 6: absorbed by distributors and producers and retailers who know that,

354
00:18:50,960 --> 00:18:53,200
Speaker 6: you know, we have clear price signals for how much

355
00:18:53,240 --> 00:18:57,639
Speaker 6: consumers are going to pay for specific goods, so I

356
00:18:57,720 --> 00:19:01,119
Speaker 6: also think it would be ineffective in and actually helping

357
00:19:01,119 --> 00:19:05,360
Speaker 6: consumers out. I would say have a more targeted either

358
00:19:05,480 --> 00:19:10,520
Speaker 6: you know, tax cut or particularly social security is quite

359
00:19:10,600 --> 00:19:14,520
Speaker 6: takes a lot out of net pay for low income,

360
00:19:14,720 --> 00:19:17,600
Speaker 6: you know, working households, So I would favor doing something

361
00:19:17,640 --> 00:19:20,920
Speaker 6: that that more specifically targets the you know, low income

362
00:19:20,920 --> 00:19:24,439
Speaker 6: households people who are struggling, rather than and across the

363
00:19:24,480 --> 00:19:27,280
Speaker 6: board cut that the benefits everyone. For something that's going

364
00:19:27,320 --> 00:19:31,040
Speaker 6: to benefit the economy, I do think there is a

365
00:19:31,080 --> 00:19:33,920
Speaker 6: lot that you know, Japan does need to be spending on.

366
00:19:34,119 --> 00:19:36,919
Speaker 6: I think Takichi is right when she says that Japan

367
00:19:37,000 --> 00:19:42,160
Speaker 6: has been too conservative and too much in a sort

368
00:19:42,160 --> 00:19:45,399
Speaker 6: of austerity mood over the past several years, and you

369
00:19:45,440 --> 00:19:47,880
Speaker 6: see this in the lack of you know, capital investment.

370
00:19:47,960 --> 00:19:52,879
Speaker 6: Japan needs to invest a lot more in AI, in energy,

371
00:19:53,200 --> 00:19:58,520
Speaker 6: in many different sectors, in education, particularly in higher level education, researchers,

372
00:19:58,520 --> 00:20:01,760
Speaker 6: PhD s, stuff like this, semiconductor engineers. Japan has a

373
00:20:01,800 --> 00:20:03,680
Speaker 6: lot of stuff that it needs to invest in. That's

374
00:20:03,720 --> 00:20:06,240
Speaker 6: where I would say put that money in and that

375
00:20:06,280 --> 00:20:09,400
Speaker 6: will have returns further down the road rather than this

376
00:20:09,480 --> 00:20:12,320
Speaker 6: one time you know, essentially politically motivated.

377
00:20:12,320 --> 00:20:14,480
Speaker 1: Cut gerol before I let you go. We do have

378
00:20:14,520 --> 00:20:16,840
Speaker 1: the BOJ meeting at the end of the week, and

379
00:20:16,960 --> 00:20:20,720
Speaker 1: we're expecting a decision that essentially will not change policy.

380
00:20:20,760 --> 00:20:23,640
Speaker 1: But I'm wondering whether or not what we have seen

381
00:20:23,680 --> 00:20:26,480
Speaker 1: in the course of the last week would maybe unnerve

382
00:20:26,520 --> 00:20:28,080
Speaker 1: the Bank of Japan just a little bit.

383
00:20:29,320 --> 00:20:32,520
Speaker 6: You know, I think governmentwate that tends to be he

384
00:20:32,640 --> 00:20:37,240
Speaker 6: is a very sort of he's not moved by temporary

385
00:20:37,600 --> 00:20:41,520
Speaker 6: you know, volatility in the market very much. So I

386
00:20:41,560 --> 00:20:45,040
Speaker 6: think the LOOKAP is and especially now that we see

387
00:20:45,200 --> 00:20:47,119
Speaker 6: or you know, at least when I'm talking to you,

388
00:20:47,359 --> 00:20:49,840
Speaker 6: it was just one day indeed, sort of like one

389
00:20:49,880 --> 00:20:53,000
Speaker 6: half of a trading session where this was happening. So

390
00:20:53,200 --> 00:20:55,760
Speaker 6: I don't think they'll be particularly unnerved about it. You know,

391
00:20:55,800 --> 00:21:00,760
Speaker 6: we had yesterday, we had the boj's regular skateud'll purchase

392
00:21:00,840 --> 00:21:04,040
Speaker 6: of bonds. I think it's the BAJA wanted to signal anything.

393
00:21:04,119 --> 00:21:07,520
Speaker 6: They could have increased that amount as they you know,

394
00:21:07,520 --> 00:21:09,879
Speaker 6: they have a framework to do. They chose not to

395
00:21:09,920 --> 00:21:11,920
Speaker 6: do that, and I think that was probably the right

396
00:21:11,960 --> 00:21:15,840
Speaker 6: thing to do. So I suspect that Governor Leda will

397
00:21:16,600 --> 00:21:19,320
Speaker 6: essentially brush it off and say, you know something along

398
00:21:19,320 --> 00:21:21,919
Speaker 6: the lines of, you know, we're watching markets, and you

399
00:21:21,960 --> 00:21:25,280
Speaker 6: know we'll we'll when when action needs to take place

400
00:21:25,320 --> 00:21:26,800
Speaker 6: that they will, but they will take action.

401
00:21:27,000 --> 00:21:30,000
Speaker 1: OK, good stuff. We'll leave it there. Gerod Redi is

402
00:21:30,320 --> 00:21:33,960
Speaker 1: Bloomberg opinion columnists joining from Tokyo here on the Daybreak

403
00:21:33,960 --> 00:21:38,920
Speaker 1: Asia Podcast. Thanks for listening to today's episode of the

404
00:21:38,960 --> 00:21:43,119
Speaker 1: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at

405
00:21:43,119 --> 00:21:47,640
Speaker 1: the story shaping markets, finance, and geopolitics in the Asia Pacific.

406
00:21:47,880 --> 00:21:51,160
Speaker 1: You can find us on Apple, Spotify, the Bloomberg Podcast

407
00:21:51,200 --> 00:21:54,560
Speaker 1: YouTube channel, or anywhere else you listen. Join us again

408
00:21:54,600 --> 00:21:57,840
Speaker 1: tomorrow for insight on the market moves from Hong Kong

409
00:21:58,040 --> 00:22:02,439
Speaker 1: to Singapore and Australia. I'm Doug Prisoner and this is

410
00:22:02,480 --> 00:22:03,000
Speaker 1: Bloomberg

411
00:22:10,080 --> 00:22:10,119
Speaker 5: M