Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg day
Speaker 1: Break Weekend, our global look at the top stories in
Speaker 1: the coming week from our Daybreak anchors all around the world.
Speaker 1: It's great ahead on the program, a look at some
Speaker 1: key inflation data in the US and how it may
Speaker 1: impact FED policy moving forward. I'm Tom Busby in New York.
Speaker 2: I'm Callin Hetgo in London, where we're delving into the
Speaker 2: universe of the world's most famous prizes.
Speaker 3: I'm Brian Curtis in Hong Kong. We look ahead to
Speaker 3: new Japanese Prime Minister's Shighetto Ishiba's idea of Asian NATO.
Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg Eleve,
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Speaker 1: Good day to you. I'm Tom Busby. We begin today's
Speaker 1: program with US inflation data out this week. September's consumer
Speaker 1: price index out this Thursday. On Friday, the producer price
Speaker 1: index for that same month, with less than a month
Speaker 1: ago before its next policy meeting. How might this impact
Speaker 1: the Fed's monetary policy moving forward? Well for more, we're
Speaker 1: joined by Edwin Harrison, senior editor and the author of
Speaker 1: the Everything Risk newsletter Well Edward. Just last week, FED
Speaker 1: Chair Jern Pal said inflation still easing, moving toward the
Speaker 1: central bank's long held goal of two percent, and despite
Speaker 1: a slight up ticket inflation for August, what are you
Speaker 1: expecting to see this week for September?
Speaker 5: Yes, Tom good to talk to you. We are expecting,
Speaker 5: or at least the market's expecting CPI on the tenth
Speaker 5: to come in at two point three percent. But you know,
Speaker 5: without food and enery, which are the valet items that
Speaker 5: are in there, that number is expected to be at
Speaker 5: three point two percent, which is in line with the
Speaker 5: previous read.
Speaker 6: So three point two percent is pretty high.
Speaker 5: The next day, we're going to get a look at
Speaker 5: producer prices and those are expected to go up slightly
Speaker 5: to two point seven percent, also well above the fed's
Speaker 5: two percent targets. So those numbers, you know, they may
Speaker 5: be coming down, they're still relatively high.
Speaker 6: Well.
Speaker 1: One reason oil and gas prices. You know, they have
Speaker 1: been terrific for the consumer for the last few months.
Speaker 1: But wor someing tentions in the Middle East, crude price
Speaker 1: is soaring this past week. That could really impact people's
Speaker 1: wallets and spending. Will that be a big factor, do
Speaker 1: you think? Or not yet in these numbers.
Speaker 6: Not yet.
Speaker 5: In these numbers, Tom, you point out a very good
Speaker 5: thing because when you look at the CPI without food
Speaker 5: and energy, it's at two point three percent. You know,
Speaker 5: you take out food and energy and it's three point
Speaker 5: two percent, so it's higher. You know, the numbers that
Speaker 5: you were talking about coming down have actually suppressed the
Speaker 5: CPI over the last year. But with those numbers going
Speaker 5: up recently, it's going to make the overall CPI higher
Speaker 5: than it otherwise would have been. So down the line,
Speaker 5: we could probably expect that two point three number to
Speaker 5: kick up from here.
Speaker 1: That is troubling data. But we have a lot of
Speaker 1: good news too. Let's talk about this past Friday's jobs report.
Speaker 1: We're showing a lot more ads than forecasting, unemployment rate
Speaker 1: edging lower. This is good news. A GDP in the
Speaker 1: third quarter two point five percent, That is solid growth.
Speaker 7: Yeah.
Speaker 5: I mean, I have to say, it really does change
Speaker 5: the narrative. Instead of people worrying about a recession, now
Speaker 5: people are almost thinking. I've heard the term no landing,
Speaker 5: as in the economy doesn't land, it doesn't slow down,
Speaker 5: It just keeps on chugging.
Speaker 6: That's how good the numbers were.
Speaker 5: You know, just to break it down for you a
Speaker 5: little bit, the unemployment rate kick down to four point
Speaker 5: one percent. We saw the non farm payrolls at two
Speaker 5: hundred and fifty four thousand, which is well above the
Speaker 5: one hundred and fifty that people thought about. It was
Speaker 5: outside of all estimates. And you know, hourly earnings were
Speaker 5: up four point zero percent year on year.
Speaker 6: That's really good.
Speaker 1: Also good now the Boeing strike that is slogging on,
Speaker 1: but we had a bit of a break in that
Speaker 1: long shortman strike at least until January after the November's election.
Speaker 1: You know, that's easing a lot of worriedes minds right now.
Speaker 1: I think no runs on toilet paper at least for now.
Speaker 5: And you know, Tom, you make a good point because
Speaker 5: when you know there's going to be two numbers that
Speaker 5: we get, there was the number that we got on Friday,
Speaker 5: and then there's another one.
Speaker 6: Right before the FED decides in November. And it had been.
Speaker 5: The case that the read that we get in early
Speaker 5: November was going to be sort of sullied by one
Speaker 5: off factors like the long Shortman strike.
Speaker 6: But now we're going to get a good read.
Speaker 5: And when you add in how good this number was,
Speaker 5: with the potential that that's also a potentially good number
Speaker 5: that we can use as a real data point, it
Speaker 5: says that instead of thinking the FED would ease fifty
Speaker 5: basis point potentially, the market could start thinking, wait a minute,
Speaker 5: the Fed's not.
Speaker 6: Going to ease at all at one of these next meetings.
Speaker 1: Oh so there's whispers now not even a twenty five
Speaker 1: basis point cut.
Speaker 5: If the data continue to be as good as they
Speaker 5: are one of these next meetings, not necessarily the one
Speaker 5: in November, but December or January, the market could price
Speaker 5: in no cut for those meetings.
Speaker 6: Wow.
Speaker 1: But we did hear from a chairman pal this past
Speaker 1: week and it sounds like if the economic data remains consistent,
Speaker 1: another cut in November, you know, four weeks from now,
Speaker 1: possibly another small cut in December. So there is a
Speaker 1: lot of hope that that's going to happen. But it's
Speaker 1: all as they say, dat it dependent.
Speaker 6: That's very true.
Speaker 5: And so now with the data looking as good as
Speaker 5: it is, I think that we can breathe a sigh
Speaker 5: of relief.
Speaker 6: And I think that will be.
Speaker 5: Very helpful for the equity markets going forward, because ultimately,
Speaker 5: when people are making four percent more in their paychecks,
Speaker 5: they're able to spend more. That's going to support corporate
Speaker 5: earnings and as a result, we should continue to see
Speaker 5: stocks rally from here.
Speaker 1: Well September CPI data out this Thursday, PPI on Friday.
Speaker 1: Our thanks to Edward Harrison, Bloomberg Senior Editor, the author
Speaker 1: of the Everything risk newsletter Time Flies and to prove it.
Speaker 1: A new earning season kicking off this week, two of
Speaker 1: the nation's biggest banks, JP Morgan Chase and Wells Fargo
Speaker 1: will report their third quarter earnings this Friday. What will
Speaker 1: the results tell us about the health of the banking system,
Speaker 1: the US economy and the US consumer? For more, we're
Speaker 1: joined by Alison Williams, Bloomberg Intelligence Senior Analyst, Global Banks
Speaker 1: and Asset Manager. Allison, what are you expecting to see
Speaker 1: from JP Morgan Chase and Wells Fargo later this week.
Speaker 8: So generally expecting solid quarter for the banks. Of course,
Speaker 8: it's all about the outlook and a few things that
Speaker 8: we'll be focusing on. First, the outlook for net interest
Speaker 8: income is certainly top of mind with investors given the
Speaker 8: FED cuts that we saw in September and the implied
Speaker 8: cuts in the months ahead, and our view it's really
Speaker 8: about loan growth and if we can see that loan
Speaker 8: growth to help improve the net interest income. On the
Speaker 8: positive side of things, the beginning of the rate cut
Speaker 8: cycle I think removes some of the concerns around higher
Speaker 8: deposit costs. The banks still have a very big deposit bases,
Speaker 8: core deposits where they're getting free funding and so there's
Speaker 8: less risk to those deposits in that price saying with
Speaker 8: the FED beginning to ease. But again, what's happening with
Speaker 8: loan growth to some extent that also relates to the
Speaker 8: economic outlook. On the capital market side, we expect that
Speaker 8: trading will continue to be resilient at all of the banks,
Speaker 8: and so this is obviously a bigger source of revenue
Speaker 8: for JP Morgan. But Wells Fargo has certainly been making
Speaker 8: strides to invest and improve their business. Equities trading is
Speaker 8: really going to be the highlight. The world's market capitalization
Speaker 8: reached a record high in Bloomberg data in September, and
Speaker 8: we think that the prime brokerage business has certainly gotten
Speaker 8: some help from the stronger equity prices. We expect that
Speaker 8: equities trading will outperform fixed income trading, but that fixed
Speaker 8: income trading will be relatively resilient, helped from the credit
Speaker 8: trading side of things. The fee revenue side is really
Speaker 8: where investors are focusing on in terms of the outlook
Speaker 8: for twenty twenty five. It's a smaller revenue source but
Speaker 8: certainly helps the profitability of the banks M and A,
Speaker 8: which is an area that we think we could see
Speaker 8: a lift next year coming off of some very low levels.
Speaker 8: We think that the dialogues have been very active, but
Speaker 8: also to the extent that the FED cuts and the
Speaker 8: FED actions helped to improve CEO confidence, we could get
Speaker 8: an uplift in deals. On the equity underwriting side, we
Speaker 8: have seen some better trends, especially in the US market
Speaker 8: this year, although it was slowed down certainly more than
Speaker 8: investors would have liked to see in September, just given
Speaker 8: some of the volatility, But turning to the debt side,
Speaker 8: very strong activity that to help both for the banks,
Speaker 8: but we want to hear what's on tap for the
Speaker 8: months ahead in the debt market. We do suspect that
Speaker 8: there has been a little bit of pull forward of refinancing,
Speaker 8: just based on some of the experts comments here in
Speaker 8: BI as well as some of the banks, and so
Speaker 8: that I think is a key question for the earnings calls.
Speaker 1: And have banks put aside more money for credit losses
Speaker 1: and some of those commercial real estate losses.
Speaker 8: They have, they've been putting aside money for commercial real
Speaker 8: estate losses, but credit card has really been the area
Speaker 8: where banks have been reserving, and that really relates to
Speaker 8: a lot of the growth. Card is really the area
Speaker 8: that we've continued to see strong growth, especially at the
Speaker 8: big universal banks that I cover, which as you know,
Speaker 8: are over indexed to that product versus some of the
Speaker 8: regional banks, and so a lot of it is just
Speaker 8: the fact that this is a general only higher loss product,
Speaker 8: and so when you get the growth and you're looking
Speaker 8: out over the life of the loan, which is the
Speaker 8: accounting change that we saw back in twenty twenty, that
Speaker 8: does tend to lead to relatively bigger reserves. But I
Speaker 8: think what of users are going to be focusing on
Speaker 8: as well as ourselves are you know, what are the
Speaker 8: trends in charge offs and delinquencies. We did see a
Speaker 8: pickup in the first half, but the seasonal trends generally
Speaker 8: support things improving, and so we'll be looking for evidence
Speaker 8: of that at the banks.
Speaker 1: Now you spoke about an uptick in M and A activity,
Speaker 1: are you also seeing any IPO activity on the horizon
Speaker 1: picking up?
Speaker 8: We have seen some pick up this year. We did
Speaker 8: see a very strong July which was boosted by one
Speaker 8: particular IPO in the US, so that is helpful to fees.
Speaker 8: But I think that is something that we'd like to
Speaker 8: see sort of more of a pickup in the months ahead.
Speaker 8: Certainly with the strength of the equity markets, we would
Speaker 8: expect to see a little bit more strength than we have.
Speaker 8: But I think, you know, that disappointment really relates to
Speaker 8: the fact that a couple of years ago we saw
Speaker 8: some of the valuation rounds for some of the private
Speaker 8: companies come at much higher valuation levels, and so while
Speaker 8: the global equity markets are reaching a new high, that's
Speaker 8: not necessarily true for all companies, and for a lot
Speaker 8: of the companies waiting to go public, they are still
Speaker 8: waiting on a little bit more valuation improvement.
Speaker 1: Oh boy, okay, so trading revenue, net interest income. The
Speaker 1: new earning season kicking off this Friday, a lot to
Speaker 1: look forward to. Our thanks to Alison Williams, Bloomberg Intelligence
Speaker 1: Senior analyst, Global Banks and Asset Managers. Coming up on
Speaker 1: Bloomberg day Break Weekend will delve into the universe of
Speaker 1: the world's most famous prizes. I'm Tom Busby and this
Speaker 1: is Bloomberg. This is Bloomberg day Break Weekend, our global
Speaker 1: look ahead at the top stories for investors in the
Speaker 1: coming week. I'm Tom Busby in New York. Up later
Speaker 1: in our program, we'll discuss what's next for Japan after
Speaker 1: selecting a new leader for its ruling party. But first,
Speaker 1: in the coming days, the Nobel Prizes will be handed
Speaker 1: out in chemistry, economics, literature, and more. The Swedish Academy
Speaker 1: recognizing and rewarding an impressive list of industry leaders in
Speaker 1: its one hundred and twenty three years. But what is
Speaker 1: the influence of the awards today? For more, Let's go
Speaker 1: to London and bring in Bloomberg Daybreak Europe anchor Caroline.
Speaker 2: Hepgar tom Before Alfred Nobel, a nineteenth century businessman and chemist,
Speaker 2: created his eponymous awards. He was best known for inventing dynamite.
Speaker 2: The explosives soon became popular in construction and mining, as
Speaker 2: well as in the weapons industry. It made Nobel a
Speaker 2: very rich man. Perhaps it also made him think about
Speaker 2: his legacy, because towards the end of his life he
Speaker 2: decided to use his vast fortune to fund annual prizes
Speaker 2: to those who, during the preceding year have conferred the
Speaker 2: greatest benefit to humankind in the modern world. Some argue
Speaker 2: that the Nobel Prizes project has an aura of being
Speaker 2: above the political fray focus solely on the benefits of humanity,
Speaker 2: but the institution isn't a stranger to controversy. The Peace
Speaker 2: and Literature Awards in particular, are sometimes accused of bias.
Speaker 2: Critics question where the winners are selected because their work
Speaker 2: is truly outstanding or because it aligns with the political
Speaker 2: preferences of the judges. The Norwegian Nobel Committee responsible for
Speaker 2: the Peace Prize insists that it is independent, with the
Speaker 2: sole mission of carrying out the will of Alfred Nobel. However,
Speaker 2: it does have links to Norway's political system. The five
Speaker 2: members are appointed by the Norwegian Parliament, so the panel's
Speaker 2: composition reflects the power balance in the legislature. The body's
Speaker 2: efforts to remain neutral don't always protect against a backlash either.
Speaker 2: When the imprisoned Chinese dissident Liu Xiaobo won the Peace
Speaker 2: Prize in twenty ten, Beijing responded by freezing trade talks
Speaker 2: with Norway. It took years for Norway China relations to
Speaker 2: be restored. External scrutiny can also become intense when high
Speaker 2: profile winners are involved, such as in two thousand and
Speaker 2: nine when President Barack Obama won the Peace Prize less
Speaker 2: than a year after taking office. But despite the occasional backlash,
Speaker 2: honorees enjoy wide ranging influence after taking home a Nobel.
Speaker 2: Their opinions on the issues of the day often carry
Speaker 2: weight for many. Joseph Stiglitz, the winner of the two
Speaker 2: thousand and one Nobel Prize in Eco Nomics, often shares
Speaker 2: his insights on matters of global importance. Here he is
Speaker 2: discussing the upcoming US presidential election.
Speaker 7: I think both candidates will have policies that recognize that
Speaker 7: we went too far in books sometimes called hyperglobalization, and
Speaker 7: the evidence was that during two thousand, during the pandemic,
Speaker 7: the United States couldn't produce even simple products like face
Speaker 7: masks and protective gear.
Speaker 6: You're let alone ventilators.
Speaker 7: We got to own ventilators or even tests. And Europe
Speaker 7: had become totally dependent on Russian gas. In a book
Speaker 7: at one of the books I wrote was called Making
Speaker 7: Globalization Work. After I wrote this book called Globalization Discontent
Speaker 7: that explained what was wrong, my wife said, you have
Speaker 7: to get the answers. You can't just be a critic.
Speaker 7: So I wrote that book. But in that one of
Speaker 7: the things I said was it is really crazy for
Speaker 7: Germany to be so dependent on Russian gas, and indeed
Speaker 7: it was, and indeed it was. You know, Bush could
Speaker 7: look in the eyes of Putlin said there's somebody I
Speaker 7: could trust. But I think the rest of the world
Speaker 7: didn't feel quite quite so comfortable. So there will be
Speaker 7: an adjustment from hyper globalization in both parties. But the
Speaker 7: difference is one in which I think Harris is committed
Speaker 7: to a global framework working with what she views, you know,
Speaker 7: with our partners, close partners of those you know, like
Speaker 7: our NATO allies, but also our partners in the South,
Speaker 7: and so it's trying to avoid of rupture and doing
Speaker 7: everything we can't as we adjust our economy to embrace
Speaker 7: the rest of the world. But the other one is
Speaker 7: I think the way to understand Trump is his view
Speaker 7: of the world is a zero sum, and that means
Speaker 7: if the US does better, other countries will do worse.
Speaker 7: Other countries do better. You saw the charts about how
Speaker 7: other countries were doing. His view is that's at the
Speaker 7: expense of the United States. And so any of you
Speaker 7: who study at economics know that we believe it's positive sum.
Speaker 7: If the developing countries and emerging markets grow, it's a
Speaker 7: better global world and helps us. So it's not zero sum,
Speaker 7: it's positive some and that is the fundamental philosophical difference
Speaker 7: between the two candidates.
Speaker 2: That was Joseph Stiglitz speaking at the Bloomberg New Economy
Speaker 2: Forum in New York last month. So, as we look
Speaker 2: ahead to upcoming announcements about the twenty twenty four crop
Speaker 2: of Nobel Prize recipients, I've been discussing the history of
Speaker 2: the Nobel Awards, the diplomatic tension and past winners along
Speaker 2: with the current challenges in choosing who to recognize today
Speaker 2: with Bloomberg's Nor Dick Managing editor Katy poian Palo.
Speaker 9: So, we've got six prizes being awarded starting next week,
Speaker 9: and each one of them can be shared by up
Speaker 9: to three persons. With the Peace Prize, it can actually
Speaker 9: also go to an organization. So it's a selection process
Speaker 9: that is shrouded in secrecy. Who is considered for the
Speaker 9: award is not known, and the list of people nominated
Speaker 9: is sealed for fifty years. There's even some people who
Speaker 9: get nominated dozens of times before they end up getting
Speaker 9: the award or or not.
Speaker 2: So remind us of what sort of work has won
Speaker 2: in the past. Then, if the process is so secretive.
Speaker 9: What we've got the science awards, you know, medicine or
Speaker 9: physiologies one of them. We've got physics, we've got chemistry,
Speaker 9: and these ones tend to award a lot of sort
Speaker 9: of scientific work that is foundational science. It's things that
Speaker 9: can underpin other discoveries, things that can be used in
Speaker 9: a number of fields. So as an example, last year,
Speaker 9: the Chemistry prize went to something that was called quantum dots,
Speaker 9: and these are extremely tiny in animal particles that can
Speaker 9: be used on things like TVs and lead lamps, or
Speaker 9: they can guide surgeons when they've removed tumor tissue for example.
Speaker 9: Some of the other discoveries that we have had, for example,
Speaker 9: in medicine in twenty to ten you had individual fertilization.
Speaker 9: When the award discoveries of various viruses such as the HIV,
Speaker 9: the human papilloma viruses. They've also been awarded back in
Speaker 9: the day and one hundred years ago the discovery of
Speaker 9: insulin got the award. Now for physics, you also you
Speaker 9: tend to get a lot of awards for science that
Speaker 9: is indecipherable for a layman. But some years you get
Speaker 9: things like the development of lithium ion batteries or you know,
Speaker 9: some several several decades ago there was an award for
Speaker 9: how to preserve animal fodder, so that keeps over winter.
Speaker 9: For the Peace and the Literature Prize, it can really
Speaker 9: vary what sort of work is awarded, but really really
Speaker 9: it's supposed to award work that have had the greatest
Speaker 9: benefits to humankind, as by the will of Alfred Noble.
Speaker 2: In terms of the issues sometimes around the prize I
Speaker 2: mean Norway has faced backlash for perhaps not the scientific
Speaker 2: names as much, but certainly for the Nobel Peace Prize.
Speaker 2: Is there a risk that there is going to be
Speaker 2: some controversy maybe this year too well.
Speaker 9: Definitely is that risk. So five of the prizes are
Speaker 9: handed out in Sweden and the Peace Prize in Norway,
Speaker 9: and this also according to Alfred Nobel's will that set
Speaker 9: out these awards, and what we've seen in Norway. For example,
Speaker 9: in twenty ten, prize was awarded to Chinese dissident Liu Chielbo,
Speaker 9: and that really ended up straining China's ties with Norway,
Speaker 9: and the Norwegian government had nothing to do with awarding
Speaker 9: this prize, so it's taken years for them to improve
Speaker 9: that relationship between the two countries. And so what tends
Speaker 9: to happen is sometimes the Peace Prize goes to a contemporary,
Speaker 9: a very highly controversial political actor, and in that case
Speaker 9: that can drive a controversy. Or other times you see
Speaker 9: more focus being put on some national conflict, for example,
Speaker 9: and then local authorities interpret that as interference in their
Speaker 9: national matters.
Speaker 2: Who makes up the judging committee then.
Speaker 9: You actually need to talk about a selection process with
Speaker 9: this because it's not a competition as such. Prizes themselves
Speaker 9: are awarded by a number of different institutions in Sweden
Speaker 9: and then also in the Norway, and each of them
Speaker 9: have a handful of voting members who ultimately get to
Speaker 9: choose who it becomes a Nobel Laureate. How they get
Speaker 9: the names though, is they send out requests to qualified
Speaker 9: people who can nominate them. These include previous laureates, people
Speaker 9: who've been awarded in the past, university professors in a
Speaker 9: relevant subject in the Nordic countries for example, and they
Speaker 9: could also just reach out to other scientists who they've
Speaker 9: specifically selected to give their views, and then they draw
Speaker 9: up you know, long list, shortlist, and ultimately there is
Speaker 9: a vote.
Speaker 2: Why do some people think then that the judging, the adjudication,
Speaker 2: the thought around this, especially around the Peace Prize then
Speaker 2: is kind of biased or maybe even influenced in terms
Speaker 2: of the Nobel Prizes. How does that play out?
Speaker 9: Controversies really from the politics surrounding this. So, for example,
Speaker 9: if you look at the Peace Prize, when it gets
Speaker 9: awarded to a dissident in a country, the government of
Speaker 9: that country would likely feel that that is against them
Speaker 9: and call a bias.
Speaker 2: Is the Nobel still relevant? Does its influence on the
Speaker 2: Nobel Prize winners?
Speaker 9: I think many would argue that the Nobels are relevant.
Speaker 9: There is a lot of prestige that comes with the prize,
Speaker 9: and a lot of these laureates can actually, you know,
Speaker 9: they can become superstars of the science world. It can
Speaker 9: tremendously help the universities raise funds for peace laureates. It
Speaker 9: shines a light on the cause that they are advocating for.
Speaker 9: But there are some problems as well, and on the
Speaker 9: science side. Really a big problem is that scientific research
Speaker 9: is increasingly collaborative in nature, and so you don't have
Speaker 9: these loan geniuses anymore. And when you can only give
Speaker 9: the prize to up to three people, what do you
Speaker 9: do in cases where the science is actually the papers
Speaker 9: are written by hundreds, if not even thousands of people,
Speaker 9: so it can feel rather hard to sell, like who's
Speaker 9: the winner, why shouldn't another person get it? And then
Speaker 9: additionally you can see discoveries being made simultaneously by different teams,
Speaker 9: so they can feel unfair. Then also, one more thing
Speaker 9: is that there are a lot of fields where there
Speaker 9: is no Nobel Mathematics, computer science, climate, science. There is
Speaker 9: no Nobel Prize for these because these were not set
Speaker 9: out in the will of Alfred Nobel as the fields
Speaker 9: for which there should be a prize.
Speaker 2: My warm thanks to Bloomberg's Katty Poyan Paalo speaking to
Speaker 2: me from Norway as we think about the Nobel Prizes
Speaker 2: being awarded this year between the seventh and fourteenth of October.
Speaker 2: I'm Kline Hepke here in London and you can catch
Speaker 2: us every weekday morning for Bloomberg Daybreak you at beginning
Speaker 2: at six am in London. That's one am on Wall Street.
Speaker 1: Tom, Thanks Caroline, And coming up on Bloomberg day Break Weekend,
Speaker 1: Japan's ruling party has a new leader. We'll discuss his
Speaker 1: defense policy approach.
Speaker 6: Next.
Speaker 1: I'm Tom Busby and this is Bloomberg. This is Bloomberg
Speaker 1: day Break Weekend, our global look ahead at the top
Speaker 1: stories for investors in the coming week. I'm Tom Busby
Speaker 1: in New York. Japan's ruling party has pict suregeru Ishiba
Speaker 1: as its new leader in a surprise result. Let's get
Speaker 1: to Bloomberg Daybreak Asia co host Brian Curtis to discuss
Speaker 1: more on Aeshiba's defense policy approach.
Speaker 3: Tom. Japan's new Prime Minister Shigoto Ishiba, floated the idea
Speaker 3: of an Asian NATO security apparatus that could deter aggression
Speaker 3: in the region. In essence, he believes that collective security
Speaker 3: works best when it is obligatory. It's a plan that's
Speaker 3: very much fraught with risk. China, for instance, has blasted
Speaker 3: the idea of such an alliance. The US itself has
Speaker 3: repeatedly said that it's not looking for the creation of
Speaker 3: an Asian NATO, and India's Foreign Minister su Ramanyam Jaishankar
Speaker 3: said that India is not sharing in this vision. So
Speaker 3: the odds might be against the idea in the short term,
Speaker 3: but nonetheless, Shigeto Ishiba has made it a top issue
Speaker 3: and the LDP did elect him to be their leader
Speaker 3: and he wants to explore it. As a result, we
Speaker 3: too would like to examine it more closely and work
Speaker 3: through some of the pros and cons of the framework.
Speaker 3: Joining us now on the program is Bill Ferries, Bloomberg
Speaker 3: Senior editor and Gerode Reedy, Bloomberg opinion columnist. To take
Speaker 3: a closer look, Bill, let me start with you. It's
Speaker 3: one of these ideas that seems perhaps good on paper,
Speaker 3: but might be very difficult to implement.
Speaker 10: If so, why well, I think when you look across Asia,
Speaker 10: I mean, if you're really taking this idea of a
Speaker 10: kind of a pan Asian security alliance seriously in the
Speaker 10: way that you see kind of a traditional NATO concept
Speaker 10: in Europe, there's some pretty big divergences in opinion in
Speaker 10: terms of how to approach China, whether to join these
Speaker 10: kind of blocks that might provoke China or might be
Speaker 10: seen as provoking China versus just trying to ensure your
Speaker 10: own collective defense. So, you know, I think we saw
Speaker 10: that most dramatically, perhaps over the last several years with
Speaker 10: the Philippines, which had a leader Rodrigo de Tte, who
Speaker 10: really kind of started to turn his back on the
Speaker 10: traditional US Philippines military alliance and really tried to work
Speaker 10: a lot more closely with China, including on things like
Speaker 10: the South China Sea. And then you have one election,
Speaker 10: and the Philippines foreign policy and its approach towards China
Speaker 10: and the US really went almost one hundred and eighty
Speaker 10: degrees in the opposite direction, where the US military started
Speaker 10: getting more access to Philippine military facilities, and there was
Speaker 10: a much stronger, tighter alliance. So I think when you
Speaker 10: look across Asia you do see kind of those differences.
Speaker 10: So whereas when you talk about NATO and Europe having
Speaker 10: I think it's thirty two members who are all agreed
Speaker 10: to come to each other's collective defense when attacked, it's
Speaker 10: a lot harder to imagine that kind of a framework
Speaker 10: in Asia. Would South Korea really come to Japan's defensive attacked? Well,
Speaker 10: you know some nations are they really interested in coming
Speaker 10: to Taiwan's defense, particularly if attacked. So that's one reason
Speaker 10: you just don't have more of the uniformity or views
Speaker 10: about the common threat that you do. You did when
Speaker 10: NATO was formed in the Soviet Union was looming over
Speaker 10: much of Europe.
Speaker 3: So Gerod we pose the idea at the beginning that
Speaker 3: this is something that Issiba wants. Why does he want
Speaker 3: it when it seems, as Bill suggested, so difficult to implement.
Speaker 11: I think that's a very good question, and to be honest,
Speaker 11: you know, I don't have a particularly good answer for this.
Speaker 11: Ishiba is to my knowledge, the only you know, major
Speaker 11: politician in Japan who is promoting this, and this is
Speaker 11: one of you know, one of his you know, policies
Speaker 11: that he has suggested. He's I mean, he outlined a
Speaker 11: long time ago as well as over a decade that
Speaker 11: he first sort of introduced the idea. But like a
Speaker 11: lot of Ishiba's policies, obviously, most people were not expecting
Speaker 11: him to win the election and become Prime minister, so
Speaker 11: a lot of people are having to deal with and suddenly,
Speaker 11: you know, look up what his policies actually are. And
Speaker 11: I think what a lot of people are finding, including myself,
Speaker 11: is that he has these ideas, but they aren't really
Speaker 11: fleshed out. There isn't a lot of substance to them.
Speaker 11: He talks about things like, you know, in terms of
Speaker 11: his domestic policy, you know, he talks about you know,
Speaker 11: revitalizing the regions. Okay, great idea, how do you go
Speaker 11: about that? He hasn't said how he's going to do that.
Speaker 11: In foreign policy, he talks about you know, Asian He
Speaker 11: also talks about you know, reviewing the you know, the
Speaker 11: security alliance with the US to make Japan a more
Speaker 11: equal partner. Ye again, fine idea, how are you actually
Speaker 11: going to go about that in practice? And I think,
Speaker 11: you know, when it comes to Asian NATO is like,
Speaker 11: assuming you did want to set this up, obviously, the
Speaker 11: first thing that you need is the involvement and the
Speaker 11: sign off of the United States, And when I thought,
Speaker 11: it's not really going anywhere.
Speaker 3: So it's difficult to get a real clear picture of
Speaker 3: exactly who he is and what he wants. He seems
Speaker 3: like an opposite, a polar opposite to the former Prime
Speaker 3: Minister Shinzo Abe, who is pretty successful. One of the
Speaker 3: things that Abbe really wanted was a strong Japan. It
Speaker 3: seems that Ishiba does not have that same ambition. Is
Speaker 3: that right? And how does that kind of figure into
Speaker 3: wanting some sort of formalized security alliance if you're not
Speaker 3: necessarily pushing for a very strong Japan itself.
Speaker 11: I think the difference between Ishuba and Abbe is that, Yeah,
Speaker 11: Abbe wanted a strong Japan that you know, projected. It's
Speaker 11: that are that had the ability to project its force,
Speaker 11: you know, so in line with what a large you know,
Speaker 11: what a large country and what a large economy it is.
Speaker 11: Ishiba seems a little bit more isolationist. Would would be
Speaker 11: taking it too far, but I do think he wants
Speaker 11: stability rather than you know, necessarily a Japan that can
Speaker 11: exert its influence further in the region. And I guess
Speaker 11: this is maybe where he has approached the idea of
Speaker 11: Asian NATO from in that he's not incorrect to point
Speaker 11: out that, you know, the reason that, you know, one
Speaker 11: of the reasons that the Ukraine was invaded in other
Speaker 11: countries haven't been invaded is because it wasn't a member
Speaker 11: of NATO and didn't have those security guarantees. So I
Speaker 11: think he is sort of a more like a safety
Speaker 11: first kind of approach, certainly compared to Abbe. And you know,
Speaker 11: as I say, like it is a fine idea to
Speaker 11: say collective self defense would decrease the risk of any
Speaker 11: one partner being involved. That's not an incorrect take to have,
Speaker 11: It's just how how do you get there? I don't
Speaker 11: believe he has articulated that within his own head, has
Speaker 11: he decided.
Speaker 3: That bill If he continues to talk about it, how
Speaker 3: much would this increase tensions with the United States? And
Speaker 3: I guess also part of that question is why would
Speaker 3: the US oppose it.
Speaker 10: It's interesting to have a leader in Japan who's espousing
Speaker 10: these views now because I will say it, in some
Speaker 10: ways it does dovetail with some of the trends that
Speaker 10: we've seen in terms of, you know, the geopolitics of
Speaker 10: the region. I mean, you've seen this trend over years
Speaker 10: of Japan seeming to be a little bit more comfortable
Speaker 10: promoting its own military kinds of missions, its military undertakes.
Speaker 10: I mean, we just saw, you know, a Japanese ship
Speaker 10: sailing through the Strait of Taiwan for the first time.
Speaker 10: We have seen this bigger embrace with the US. You know,
Speaker 10: Japan is now talking about improving some of its shipbuilding
Speaker 10: ship repair facility for visiting US Navy ships. So I
Speaker 10: think actually some of this, or quite a bit of
Speaker 10: it might dovetail quite well if you're sitting in Washington
Speaker 10: thinking about national security issues in Asia. I mean, you
Speaker 10: want to have more partners in the region doing more
Speaker 10: on defense, and frankly, it kind of dovetails well with
Speaker 10: talking about the US election. Whoever wins. I mean, I
Speaker 10: think there's been this Trumpification of foreign policy where there
Speaker 10: was a lot of questions about whether the US under
Speaker 10: Trump would really stand by some of these alliances. So
Speaker 10: I think what we have in Japan now is talk about, well, listen,
Speaker 10: we need to be able to do more on our own.
Speaker 10: We need to be stronger at home, and a lot
Speaker 10: of these policies, like building up the military budget, the
Speaker 10: defense budget, that plays into that. It also plays well
Speaker 10: into a more traditional foreign policy stance of the US
Speaker 10: wants to work with partners in Asia. So I think
Speaker 10: it's going to work pretty well with We're kind of
Speaker 10: regardless of who's in the White House.
Speaker 3: If there was some sort of security apparatus like this,
Speaker 3: it would reduce the cost of the United States bill
Speaker 3: in Asia, which might be seen as a good thing
Speaker 3: by some Republicans, I guess because Trump has been big
Speaker 3: on this. But would it diminish the influence of the
Speaker 3: United States in the region. Is that one reason why
Speaker 3: the US would be kind of careful about it.
Speaker 10: Well, yeah, I think. I mean it's a little bit
Speaker 10: of a hedge, I think on Japan's part, depending on
Speaker 10: you know, we've seen US policies. I talked about how
Speaker 10: the Philippines changed policy was with respect to China early on.
Speaker 10: I mean, we've seen, you know, the US drastically go
Speaker 10: in different directions in terms of how it approaches alliances.
Speaker 10: And you know, Donald Trump spent a lot of time
Speaker 10: saying Japan and South Korea just weren't spending enough on
Speaker 10: their collective defense. They weren't paying enough for US troops.
Speaker 10: So this is I think this approach we're seeing in
Speaker 10: Japan is a little bit of an insurance policy to
Speaker 10: kind of protect against that kind of a scenario.
Speaker 3: Gerod, you say that the LDP had to skew radical
Speaker 3: with this choice, and it did so, and you mentioned
Speaker 3: that you know, this is a bit of a surprise,
Speaker 3: So I guess it's kind of a radical idea to
Speaker 3: pick shigetto Ishiba. What else about him kind of tilts
Speaker 3: to radical.
Speaker 11: I think he nailed it kind of earlier in the
Speaker 11: conversation when you said that he's almost the anti Abbe
Speaker 11: so within the party for close to a decade now,
Speaker 11: he has been on the outskirts. Abbe famously defeated him
Speaker 11: in twenty twelve to become the leader of the LDP
Speaker 11: for the second time, and then shortly after that Abbe
Speaker 11: became Prime minister when they.
Speaker 6: Had the election.
Speaker 11: Ishiba initially was kind of like welcomed in to Abbe's cabinet,
Speaker 11: but he was always a sort of critical voice within it,
Speaker 11: and then since around twenty fifteen, or twenty sixteen, I
Speaker 11: can't remember exactly which. He has just been on the
Speaker 11: outside and not involved in power.
Speaker 6: You know.
Speaker 11: As a result of this, he has just become sort
Speaker 11: of more or a more critical voice within the LDP.
Speaker 11: There are many people within the LDP who consider him
Speaker 11: to be a traitor, not just for you know, being critical,
Speaker 11: but you know he left the party once in the
Speaker 11: nineteen nineties, only to come back to it later. I
Speaker 11: do think that in a different, you know, a more
Speaker 11: shall we say, a more normal leadership election, he would
Speaker 11: not have had a chance to win. It was only
Speaker 11: because the LDP is in such a bind between the
Speaker 11: slush fund scandal, unification church issue, and Keishida's own lack
Speaker 11: of popularity that they turned to someone like Ishiba, who is,
Speaker 11: as I say, represents completely different wing of the LDP
Speaker 11: to those that have dominated power for the last you know,
Speaker 11: over a decade. Obviously, Abbe came from the right, Kishita
Speaker 11: was more of a centrist, but without let's say, it's
Speaker 11: sort of like a strong vision. Ishiba's election very much
Speaker 11: turns the party to more of its you know, again,
Speaker 11: the more lift leaning side. Obviously, he's still a conservative
Speaker 11: politician and it's still a conservative party, but he represents
Speaker 11: a very very different side from what people might be.
Speaker 3: Us to grow. Thank you so much, Bill, You two,
Speaker 3: Gerode Reedy. There Bloomberg opinion columnists with us along with
Speaker 3: Bill Ferries, Bloomberg Senior Editor. I'm Brian Curtis, along with
Speaker 3: Doug Krisner. You can catch us every weekday here for
Speaker 3: Bloomberg Daybreak Asia, beginning at eight am in Hong Kong
Speaker 3: and eight pm on Wall Street. Tom.
Speaker 1: Thank you, Brian, and that does it for this edition
Speaker 1: of Bloomberg day Break Weekend. Join us again Monday morning
Speaker 1: at five am Wall Street time for the latest on
Speaker 1: markets overseas and the news you need to start your day.
Speaker 1: I'm Tom Busby. Stay with us. Top stories and global
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