1 00:00:00,200 --> 00:00:07,680 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,360 --> 00:00:13,319 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:13,320 --> 00:00:15,560 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:15,600 --> 00:00:18,880 Speaker 2: anchors all around the world. Straight Ahead on the program, 5 00:00:18,920 --> 00:00:21,440 Speaker 2: we look to the next policy decision from the Fed. 6 00:00:21,640 --> 00:00:23,440 Speaker 2: I'm Nathan Hager in Washington. 7 00:00:23,680 --> 00:00:25,800 Speaker 3: I'm Carolin Hep getting on to where we discussed how 8 00:00:25,840 --> 00:00:29,080 Speaker 3: Europe's inflation battle may not be over just yet. 9 00:00:29,440 --> 00:00:32,479 Speaker 4: I'm Doug Prisner looking ahead to the meeting between President 10 00:00:32,520 --> 00:00:35,600 Speaker 4: Trump and Japanese Prime Minister son of A takea Ichi. 11 00:00:38,000 --> 00:00:42,040 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 12 00:00:42,080 --> 00:00:45,760 Speaker 1: eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, 13 00:00:46,240 --> 00:00:51,240 Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syria 14 00:00:51,520 --> 00:00:55,000 Speaker 1: XM one twenty one, and around the world on Bloomberg Radio, 15 00:00:55,080 --> 00:00:57,240 Speaker 1: dot Com and the Bloomberg Business App. 16 00:01:02,040 --> 00:01:05,000 Speaker 2: Good day to you. I'm Nathan Hager. We begin today's 17 00:01:05,040 --> 00:01:08,240 Speaker 2: program with the Federal Reserve. The Central Bank begins its 18 00:01:08,319 --> 00:01:11,959 Speaker 2: March policy meeting on Tuesday and issues its decision on 19 00:01:12,120 --> 00:01:16,280 Speaker 2: interest rates Wednesday. For more on what to expect, we're 20 00:01:16,360 --> 00:01:19,959 Speaker 2: joined by Anna Wong chief US economist for Bloomberg Economics 21 00:01:20,000 --> 00:01:23,479 Speaker 2: and Anna just looking at expectations in the market, seems 22 00:01:23,480 --> 00:01:26,080 Speaker 2: like investors are thinking a whole lot of nothing. But 23 00:01:26,920 --> 00:01:28,759 Speaker 2: what are you expecting under the surface. 24 00:01:29,600 --> 00:01:34,440 Speaker 5: I'm expecting the Fed to sharply revise up the PCE 25 00:01:34,840 --> 00:01:41,280 Speaker 5: inflation forecast, So in the December sep it was in 26 00:01:41,319 --> 00:01:45,360 Speaker 5: the mid twues. I think that given where oil price 27 00:01:45,480 --> 00:01:49,360 Speaker 5: is right now, and it looks like it's quite likely 28 00:01:49,560 --> 00:01:53,000 Speaker 5: oil price would stay elevated at around eighty dollars at 29 00:01:53,120 --> 00:01:55,640 Speaker 5: least on average for the rest of this year, and 30 00:01:55,680 --> 00:01:58,640 Speaker 5: that would mean that headline PCE should be going all 31 00:01:58,680 --> 00:02:02,120 Speaker 5: the way up to three ish, So that would be 32 00:02:02,360 --> 00:02:04,040 Speaker 5: quite a sharp upward revision. 33 00:02:04,760 --> 00:02:08,240 Speaker 2: Is that the kind of revision that would cause you 34 00:02:08,480 --> 00:02:12,240 Speaker 2: to revise upward your expectations for interest rates? Are you 35 00:02:12,320 --> 00:02:14,160 Speaker 2: thinking that there could be a chance we see an 36 00:02:14,160 --> 00:02:17,040 Speaker 2: interest rate hike? Maybe not at this meeting, but sometime 37 00:02:17,080 --> 00:02:17,520 Speaker 2: this year. 38 00:02:17,760 --> 00:02:20,440 Speaker 5: A hike is not in my baseline. We're still expecting 39 00:02:20,520 --> 00:02:24,760 Speaker 5: multiple rate cuts, although the chance of a large one 40 00:02:24,880 --> 00:02:28,320 Speaker 5: hundred bis rate cut this year in total, that has 41 00:02:28,440 --> 00:02:33,160 Speaker 5: decreased the chances for that. Nonetheless, I still think that 42 00:02:33,240 --> 00:02:35,959 Speaker 5: on the whole the FED would be easy because an 43 00:02:36,000 --> 00:02:39,560 Speaker 5: oil shock tend to boost headline inflation, but it tends 44 00:02:39,760 --> 00:02:44,639 Speaker 5: to lower core PC inflation. Our estimate is that eighty 45 00:02:44,720 --> 00:02:48,360 Speaker 5: dollars oil would add six hundred and fifty dollars on 46 00:02:48,520 --> 00:02:52,040 Speaker 5: average for the household this year, and so that's six 47 00:02:52,200 --> 00:02:55,200 Speaker 5: hundred and fifty dollars less that they could spend on 48 00:02:55,400 --> 00:02:59,080 Speaker 5: other core goods and services. It's very similar to the 49 00:02:59,120 --> 00:03:02,680 Speaker 5: tariff shock with SAW last year. Recall that when Trump 50 00:03:02,680 --> 00:03:06,840 Speaker 5: announced the Liberation Day tariffs, the stock market plummeted and 51 00:03:07,000 --> 00:03:10,880 Speaker 5: all the services inflation went down Because tariffs are at 52 00:03:10,960 --> 00:03:14,720 Speaker 5: income shock, a contractionary income shock. An oil shock is 53 00:03:14,800 --> 00:03:18,960 Speaker 5: very similar. It's also a constructionary income shock. They have 54 00:03:19,240 --> 00:03:23,560 Speaker 5: less money to spend on movie theaters, on sports admission tickets. 55 00:03:23,600 --> 00:03:27,240 Speaker 5: The stock market is going to respond by falling, and 56 00:03:27,360 --> 00:03:30,880 Speaker 5: all that is going to shave off some a couple 57 00:03:30,919 --> 00:03:34,760 Speaker 5: bits from core PC inflation. So the only time when 58 00:03:34,800 --> 00:03:37,760 Speaker 5: the FEED should be responding to the higher headline but 59 00:03:37,920 --> 00:03:41,880 Speaker 5: not the lower core measure is if they fear that 60 00:03:41,960 --> 00:03:47,000 Speaker 5: inflation expectations are unanchoring, and so far I think the 61 00:03:47,040 --> 00:03:51,600 Speaker 5: majority of THEMC members don't think that's happening. Even the 62 00:03:51,680 --> 00:03:56,560 Speaker 5: most hawkish FOMC member, Beth Hemmick, in her latest speech 63 00:03:56,720 --> 00:03:59,800 Speaker 5: at the Monetary Policy Forum last Friday, for which I was, 64 00:04:00,680 --> 00:04:03,240 Speaker 5: she also talked about how our rates could stay on 65 00:04:03,360 --> 00:04:06,840 Speaker 5: hold for a while. So even the most hawkish member 66 00:04:06,920 --> 00:04:09,400 Speaker 5: is not talking about a hike as in a baseline. 67 00:04:09,440 --> 00:04:13,640 Speaker 5: So I think on the whole, the median FMC member 68 00:04:13,680 --> 00:04:16,320 Speaker 5: would write in one rate cut for this year. 69 00:04:16,440 --> 00:04:19,360 Speaker 2: But even the markets are dialing back their expectations for 70 00:04:19,480 --> 00:04:22,360 Speaker 2: any rate cuts this year. What is the market getting 71 00:04:22,440 --> 00:04:26,320 Speaker 2: wrong and what do you see that's informing your expectation 72 00:04:26,400 --> 00:04:28,560 Speaker 2: that we could still see multiple cuts this year. 73 00:04:28,920 --> 00:04:31,520 Speaker 5: I mean I would be hesitant to say the markets 74 00:04:31,560 --> 00:04:34,479 Speaker 5: was wrong. I mean, the markets oftentimes is very sharp 75 00:04:34,520 --> 00:04:36,839 Speaker 5: on this. But I think where I differ from the 76 00:04:36,920 --> 00:04:41,080 Speaker 5: market is that I still think that core PC inflation 77 00:04:41,360 --> 00:04:44,839 Speaker 5: will go down. I mean, recall last year when again 78 00:04:45,040 --> 00:04:49,520 Speaker 5: a tariff announcement. I keep referring to tariffs because tariffs 79 00:04:49,600 --> 00:04:53,480 Speaker 5: and oil shocks are very similar. They are both supply shocks, 80 00:04:53,760 --> 00:04:58,280 Speaker 5: and they're both transitory if inflation expectations are anchored. Just 81 00:04:58,320 --> 00:05:00,520 Speaker 5: like last year, last year with the mark markets was 82 00:05:00,600 --> 00:05:03,279 Speaker 5: also thinking that the tariffs are going to boost core 83 00:05:03,360 --> 00:05:07,400 Speaker 5: PC inflation, and it didn't happen because it is an 84 00:05:07,440 --> 00:05:11,960 Speaker 5: income shock and it actually lowers core PC inflation. Same 85 00:05:12,040 --> 00:05:14,960 Speaker 5: for core here. Even the Fed's own model, so the 86 00:05:14,960 --> 00:05:18,640 Speaker 5: FED has a workhorse model called the Furbus. It's a 87 00:05:18,720 --> 00:05:23,480 Speaker 5: general equilibrium model. A ten dollars shock on oil tends 88 00:05:23,520 --> 00:05:28,160 Speaker 5: to boost headline PCE by point three percentage point. So 89 00:05:28,480 --> 00:05:31,679 Speaker 5: this is why thirty dollars shock with the point nine 90 00:05:31,760 --> 00:05:35,960 Speaker 5: percentage point on the headline. However, that model also see 91 00:05:36,000 --> 00:05:39,720 Speaker 5: that core PCE should be decreasing, It should be deflationary 92 00:05:40,120 --> 00:05:43,120 Speaker 5: on core PC, and the FED should be actually easing, 93 00:05:43,480 --> 00:05:44,120 Speaker 5: not hiking. 94 00:05:44,480 --> 00:05:47,000 Speaker 2: So are you thinking that the bigger risk to the 95 00:05:47,040 --> 00:05:50,160 Speaker 2: Fed's dual mandate is on the labor market side as 96 00:05:50,160 --> 00:05:54,760 Speaker 2: opposed to the inflation side, particularly after that surprise drop 97 00:05:54,920 --> 00:05:57,360 Speaker 2: in non farm payrolls that we saw for February. 98 00:05:57,560 --> 00:06:00,440 Speaker 5: Absolutely, So I think about, you know, as a aster, 99 00:06:00,560 --> 00:06:03,000 Speaker 5: I think about what the FED will do, not the 100 00:06:03,000 --> 00:06:05,080 Speaker 5: FED should do. I just told you that I think 101 00:06:05,120 --> 00:06:08,120 Speaker 5: the FED should be thinking about easing rather than hiking. 102 00:06:08,360 --> 00:06:10,600 Speaker 5: But I think what they would do is that, first 103 00:06:10,600 --> 00:06:13,479 Speaker 5: of all, the Hawks have the upper hand right now, 104 00:06:14,040 --> 00:06:16,719 Speaker 5: and so they are not going to be pushing for 105 00:06:16,839 --> 00:06:19,760 Speaker 5: any cuts in the first half of this year, and 106 00:06:19,839 --> 00:06:22,520 Speaker 5: what likely will happen is that the labor market will 107 00:06:22,520 --> 00:06:27,960 Speaker 5: deteriorate rather rapidly in the spring and going into the summer, 108 00:06:28,080 --> 00:06:31,440 Speaker 5: we are likely to see the unemployment rate climbing very 109 00:06:31,560 --> 00:06:34,839 Speaker 5: much like the last two years. And so by June 110 00:06:35,320 --> 00:06:37,960 Speaker 5: when they have seen that the worst of the oil 111 00:06:37,960 --> 00:06:41,320 Speaker 5: shock should have happened. Also by June, because the oil 112 00:06:41,320 --> 00:06:44,400 Speaker 5: price should show up in CPI in March, in April, 113 00:06:44,680 --> 00:06:46,719 Speaker 5: and then by June it should be already kind of 114 00:06:46,720 --> 00:06:50,800 Speaker 5: coming down. So by June they would be more concerned. 115 00:06:50,960 --> 00:06:53,360 Speaker 5: The focus should be shifting to labor market as the 116 00:06:53,440 --> 00:06:54,719 Speaker 5: unemployment rate climbs. 117 00:06:54,920 --> 00:06:57,640 Speaker 2: Thanks Sanna, great having you on with us. That's Anna Wong, 118 00:06:57,760 --> 00:07:00,880 Speaker 2: chief US economist for Bloomberg Economic. Ahead of the Fed's 119 00:07:00,960 --> 00:07:04,200 Speaker 2: March rate decision this Wednesday and Powell news conference, we 120 00:07:04,279 --> 00:07:07,640 Speaker 2: will have full coverage for you on Bloomberg Radio. Let's 121 00:07:07,640 --> 00:07:09,720 Speaker 2: take a look now, it's some stocks making news in 122 00:07:09,760 --> 00:07:12,360 Speaker 2: the week ahead. I'm Nathan Hager, joined by Bloomberg News 123 00:07:12,360 --> 00:07:16,960 Speaker 2: cross asset reporter Denisa Sikova. Earnings. Denisa, let's start with 124 00:07:17,000 --> 00:07:19,640 Speaker 2: the one that's coming on Thursday, a pretty big bell 125 00:07:19,640 --> 00:07:24,120 Speaker 2: weather on economic activity. What are we expecting from FedEx? 126 00:07:24,640 --> 00:07:28,239 Speaker 6: FedEx definitely a big one. We actually had a great 127 00:07:28,280 --> 00:07:31,600 Speaker 6: story this week on the terminal. FedEx has eclipsed their 128 00:07:32,160 --> 00:07:36,400 Speaker 6: rival ups and it has become the largest US parcel 129 00:07:36,480 --> 00:07:39,640 Speaker 6: carrio by market value for the first time. Definitely an 130 00:07:39,720 --> 00:07:43,080 Speaker 6: interesting thing going into the earnings. What we're seeing for 131 00:07:43,120 --> 00:07:45,920 Speaker 6: this earning season is that the company raised the low 132 00:07:46,080 --> 00:07:49,760 Speaker 6: end of its full year adjusted EPs, so now currently 133 00:07:49,840 --> 00:07:53,720 Speaker 6: is about seventeen dollars and eighty cents, but it increased 134 00:07:53,760 --> 00:07:57,320 Speaker 6: the full year revenue growth range to five six percent, 135 00:07:57,760 --> 00:08:01,280 Speaker 6: so definitely some optimism there. The company is actually up 136 00:08:01,560 --> 00:08:04,760 Speaker 6: twenty four percent this year. The ticker, of course, is 137 00:08:05,200 --> 00:08:09,400 Speaker 6: FDx for FedEx. This has been the latest sign that 138 00:08:09,440 --> 00:08:12,560 Speaker 6: the company's management has won investors over with plans to 139 00:08:12,640 --> 00:08:16,200 Speaker 6: trim costs, boost margins, and spin off its freight business. 140 00:08:16,240 --> 00:08:18,840 Speaker 6: I'm sure investors will be looking for all that. Another 141 00:08:18,920 --> 00:08:23,120 Speaker 6: interesting metric analyst we're expecting is FedEx is expected to 142 00:08:23,160 --> 00:08:27,080 Speaker 6: face approximately six hundred million headwinds in the second half 143 00:08:27,160 --> 00:08:29,600 Speaker 6: of the year. About two hundred and sixty five million 144 00:08:29,680 --> 00:08:33,640 Speaker 6: are attributed to higher variable compensation, so That's one interesting 145 00:08:33,800 --> 00:08:37,600 Speaker 6: number that could perhaps way on the super positive outlook 146 00:08:37,600 --> 00:08:38,640 Speaker 6: going into the earning season. 147 00:08:38,760 --> 00:08:41,600 Speaker 2: Yeah, to your point, I mean the outlook has been strong, 148 00:08:41,640 --> 00:08:44,440 Speaker 2: and this stock has been on a tear as well. 149 00:08:44,480 --> 00:08:47,920 Speaker 2: Does that set the bar even higher for FedEx to outperform? 150 00:08:48,400 --> 00:08:51,960 Speaker 6: For sure? And obviously we're in very high market volativity 151 00:08:52,080 --> 00:08:55,400 Speaker 6: reporting even just a basic earnings reports in the current 152 00:08:55,400 --> 00:08:58,480 Speaker 6: market environment, it's hard. Obviously, we talked about ups and 153 00:08:58,520 --> 00:09:02,240 Speaker 6: the FedEx competition, and investors have been reacting way more 154 00:09:02,320 --> 00:09:05,040 Speaker 6: positively to FedEx and have been quite punishing to EPs. 155 00:09:05,440 --> 00:09:08,680 Speaker 6: So I'm sure those tides could turn quickly. But for now, 156 00:09:08,840 --> 00:09:10,559 Speaker 6: you know, up more than twenty percent. 157 00:09:10,280 --> 00:09:12,400 Speaker 2: This year, Yeah, on a tear, like we say, and 158 00:09:12,440 --> 00:09:14,560 Speaker 2: a day before FedEx. We're going to get results from 159 00:09:14,559 --> 00:09:18,240 Speaker 2: Macy's on Wednesday. Of course, we saw this stock drop 160 00:09:18,320 --> 00:09:21,480 Speaker 2: after Coals reported its results this past week, So what 161 00:09:21,520 --> 00:09:23,720 Speaker 2: should we expect from Macy's this week? 162 00:09:23,960 --> 00:09:27,000 Speaker 6: Quite the opposite story on Macy's. The company is down 163 00:09:27,160 --> 00:09:29,600 Speaker 6: twenty two percent this year. Of course, the ticker is 164 00:09:30,720 --> 00:09:34,520 Speaker 6: the last time reported they reported earning shares declined rapidly 165 00:09:34,920 --> 00:09:38,280 Speaker 6: their forecasts. Their profit forecast for the quarter was disappointing, 166 00:09:38,760 --> 00:09:42,320 Speaker 6: even though the earnings reports was pretty solid. What we 167 00:09:42,640 --> 00:09:46,040 Speaker 6: expected this time is net sales are projected to be 168 00:09:46,080 --> 00:09:49,760 Speaker 6: around seven point five billion. Comparable sales are expected to 169 00:09:49,880 --> 00:09:54,199 Speaker 6: increase about one or two percent, but potentially exceeding the consensus. 170 00:09:54,240 --> 00:09:58,560 Speaker 6: We're obviously coming into this earning season with pretty bearish 171 00:09:58,880 --> 00:10:01,360 Speaker 6: pricing of the company. Dooming Dels is expected to be 172 00:10:01,400 --> 00:10:05,240 Speaker 6: a strong performance. Sales are projected to rise approximately seven percent. 173 00:10:05,600 --> 00:10:09,120 Speaker 6: Everyone will looking for the earningsco It's expected to focus 174 00:10:09,240 --> 00:10:12,199 Speaker 6: on the progress of its makeover, and one thing we've 175 00:10:12,240 --> 00:10:15,319 Speaker 6: been talking a lot about is the potential sex store acquisition, 176 00:10:15,480 --> 00:10:17,760 Speaker 6: so I'm sure everyone will be listening about that as well. 177 00:10:17,840 --> 00:10:22,199 Speaker 2: Oh definitely, that's one to scoop up after their bankruptcy 178 00:10:22,240 --> 00:10:25,800 Speaker 2: for sure, and before both those names report deny. So 179 00:10:25,840 --> 00:10:28,960 Speaker 2: we're going to hear from Lulu Lemon on Tuesday. Talk 180 00:10:29,040 --> 00:10:32,840 Speaker 2: about struggles. This company seems to exemplify it. 181 00:10:33,160 --> 00:10:36,200 Speaker 6: Yeah, the company has really suffered a lot, anything from 182 00:10:36,320 --> 00:10:39,400 Speaker 6: just so many scandals about different leggings and whether they're 183 00:10:39,440 --> 00:10:43,040 Speaker 6: transparent or not, to just kind of broader challenges. Lul 184 00:10:43,200 --> 00:10:48,120 Speaker 6: Lemon stocks are down almost seventy percent since the start 185 00:10:48,160 --> 00:10:51,600 Speaker 6: of twenty twenty four, activist investor Elliott Investment Management has 186 00:10:51,600 --> 00:10:54,200 Speaker 6: amassed a more than one billion stake in the company. 187 00:10:54,760 --> 00:10:58,160 Speaker 6: We had the company founder, Chip Wilson stepping up his 188 00:10:58,240 --> 00:11:01,400 Speaker 6: campaign against the company's board in the midst of search 189 00:11:01,440 --> 00:11:04,600 Speaker 6: of a new CEO, so we have all this tension 190 00:11:04,800 --> 00:11:08,400 Speaker 6: going into the earning season. Of course, the ticker is 191 00:11:09,360 --> 00:11:13,400 Speaker 6: lul Lemon updated guidance in January indicating that net revenue 192 00:11:13,440 --> 00:11:16,880 Speaker 6: and diluted earnings per share for the fourth quarter will 193 00:11:16,920 --> 00:11:19,920 Speaker 6: be towards the higher end, so definitely some optimism there. 194 00:11:20,120 --> 00:11:22,560 Speaker 6: They expect between three point five billion and a little 195 00:11:22,559 --> 00:11:26,719 Speaker 6: bit higher than this tariff risks, which what everyone has 196 00:11:26,720 --> 00:11:29,920 Speaker 6: been looking at. Unless we're saying that tariff risks have 197 00:11:30,040 --> 00:11:32,920 Speaker 6: been reduced, so that could support the company. But we 198 00:11:33,000 --> 00:11:35,840 Speaker 6: have that CEO search, we have all those candles this year, 199 00:11:35,960 --> 00:11:39,880 Speaker 6: so it's a high bar for investors to be impressed. 200 00:11:40,040 --> 00:11:42,559 Speaker 2: Yeah, you know, for all these companies, DEANIZI, you might 201 00:11:42,600 --> 00:11:45,680 Speaker 2: think that there's a risk around tariffs as well as 202 00:11:45,880 --> 00:11:48,439 Speaker 2: you know, some of the geopolitical risk that we're seeing 203 00:11:48,440 --> 00:11:50,719 Speaker 2: on the war in the Middle East as well. I mean, 204 00:11:50,760 --> 00:11:52,439 Speaker 2: how could all that play out into some of these 205 00:11:52,480 --> 00:11:54,040 Speaker 2: earnings that we're expecting this way. 206 00:11:54,520 --> 00:11:56,640 Speaker 6: For sure, that's adding a lot of tension. I feel 207 00:11:56,679 --> 00:11:59,720 Speaker 6: so now tariffs has taken a step back, and everyone's 208 00:11:59,720 --> 00:12:02,480 Speaker 6: worth about others things. Consumers are not doing so well. 209 00:12:02,600 --> 00:12:05,400 Speaker 6: For example, Macy's in their last reports, it was all 210 00:12:05,400 --> 00:12:08,479 Speaker 6: about the consumer. They said that those low income consumers 211 00:12:08,480 --> 00:12:11,000 Speaker 6: are stepping back, but still they're seeing a lot of 212 00:12:11,040 --> 00:12:14,160 Speaker 6: support from their middle income to high income consumer. And 213 00:12:14,200 --> 00:12:16,480 Speaker 6: I'm sure a lot of those brands and companies we 214 00:12:16,559 --> 00:12:19,280 Speaker 6: talked about are dealing with the same thing. Are our 215 00:12:19,360 --> 00:12:23,280 Speaker 6: low income customers coming back, our middle income and high 216 00:12:23,320 --> 00:12:28,520 Speaker 6: income customers spending enough to compensate for that laws of 217 00:12:28,559 --> 00:12:29,439 Speaker 6: low income spending. 218 00:12:29,679 --> 00:12:31,960 Speaker 2: Yeah, a lot of reason to keep attention on the 219 00:12:32,000 --> 00:12:34,480 Speaker 2: earnings this week. Thank you for this, toditsa really great 220 00:12:34,520 --> 00:12:37,560 Speaker 2: having you on with us. That's Dnitza Sikova, cross asset 221 00:12:37,640 --> 00:12:40,959 Speaker 2: reporter for Bloomberg News, and coming up on Bloomberg day 222 00:12:40,960 --> 00:12:44,320 Speaker 2: Break weekend, we'll discuss how Europe's inflation battle may not 223 00:12:44,360 --> 00:12:48,320 Speaker 2: be over just yet. I'm Nathan Hager, and this is 224 00:12:48,360 --> 00:13:02,880 Speaker 2: Bloomberg's Bloomberg Daybreak Weekend, our global look ahead at the 225 00:13:02,880 --> 00:13:05,600 Speaker 2: top stories for investors in the coming week. I'm Nathan 226 00:13:05,600 --> 00:13:08,720 Speaker 2: Hager in Washington. Up later in the program, we'll discuss 227 00:13:08,760 --> 00:13:11,800 Speaker 2: what to expect when Japan's Prime minister meets with President 228 00:13:11,840 --> 00:13:16,000 Speaker 2: Donald Trump in Washington. But first, Europe's inflation battle may 229 00:13:16,040 --> 00:13:19,400 Speaker 2: not be over just yet. After months of progress, central 230 00:13:19,440 --> 00:13:21,800 Speaker 2: bankers have begun to signal the worst of the price 231 00:13:21,840 --> 00:13:24,880 Speaker 2: shock was behind them, but a renewed surgeon oil prices 232 00:13:24,960 --> 00:13:28,240 Speaker 2: driven by conflict in the Middle East is complicating that narrative. 233 00:13:28,520 --> 00:13:30,840 Speaker 2: Next week, the Bank of England and the European Central 234 00:13:30,840 --> 00:13:34,160 Speaker 2: Bank both set interest rates, facing fresh questions about whether 235 00:13:34,200 --> 00:13:37,240 Speaker 2: they've really done enough to tame inflation, especially with the 236 00:13:37,280 --> 00:13:40,840 Speaker 2: memories of the last inflation shock still fresh. Let's get 237 00:13:40,840 --> 00:13:44,840 Speaker 2: more from Bloomberg Daybreak. Europanker Caroline Hebger in London, Nathan. 238 00:13:44,920 --> 00:13:47,600 Speaker 3: At the beginning of this year, the focus had been 239 00:13:47,760 --> 00:13:51,040 Speaker 3: on the euro rivaling the dollar and whether Europe would 240 00:13:51,040 --> 00:13:55,160 Speaker 3: try to la pen prove institutions, including the ECB, but 241 00:13:55,240 --> 00:13:59,200 Speaker 3: those issues have been overtaken by worries about an inflation 242 00:13:59,280 --> 00:14:03,080 Speaker 3: shock that could Europe harder than elsewhere. The Bank of 243 00:14:03,120 --> 00:14:06,280 Speaker 3: England and the European Central Bank go into next week's 244 00:14:06,360 --> 00:14:11,600 Speaker 3: meetings facing different domestic backdrops, but the same global uncertainty. 245 00:14:12,040 --> 00:14:15,400 Speaker 3: Earlier this week, we asked Paul Markham, investment director and 246 00:14:15,480 --> 00:14:19,880 Speaker 3: head of Global Equities at GAM, about what separates the two. 247 00:14:20,720 --> 00:14:24,480 Speaker 7: Generally, the Eurozone inflationary environment is much more benign than 248 00:14:24,520 --> 00:14:28,640 Speaker 7: the UK. The UK historically has always been quite a 249 00:14:28,680 --> 00:14:32,880 Speaker 7: cyclical economy actually, and one where you know, the potential 250 00:14:32,920 --> 00:14:35,840 Speaker 7: for inflation has always been a little bit higher. And 251 00:14:35,920 --> 00:14:39,360 Speaker 7: of course because of certain labor policies that we now 252 00:14:39,480 --> 00:14:42,000 Speaker 7: have you know around you know, the minimum wage and 253 00:14:42,040 --> 00:14:44,840 Speaker 7: that kind of thing, and you know the impacts that 254 00:14:44,840 --> 00:14:48,160 Speaker 7: that has. I think that's exacerbated the problem business costs 255 00:14:48,160 --> 00:14:50,280 Speaker 7: of risen as well. And then you know, we had 256 00:14:50,480 --> 00:14:54,120 Speaker 7: never really completely squeezed out the inflationary impacts that came 257 00:14:54,160 --> 00:14:56,440 Speaker 7: around as a result of COVID, and the bangling had 258 00:14:56,440 --> 00:14:58,680 Speaker 7: never really quite gone on top of that. So I think, yes, 259 00:14:58,720 --> 00:15:00,760 Speaker 7: it does have another problem there, and I think that 260 00:15:00,880 --> 00:15:03,920 Speaker 7: the expected rate cuts that were due to come through 261 00:15:03,960 --> 00:15:06,120 Speaker 7: this year are much less likely to do so now 262 00:15:06,160 --> 00:15:09,000 Speaker 7: as a result of this despike an energy prices. 263 00:15:09,280 --> 00:15:12,280 Speaker 3: That was Gamm's pull mark him speaking to Bloomberg Radio. 264 00:15:12,440 --> 00:15:15,360 Speaker 3: Well I enjoined now by Bloomberg's chief UK economist, Dan 265 00:15:15,440 --> 00:15:18,720 Speaker 3: Hanson and Janna Randau, who runs our coverage of the 266 00:15:18,760 --> 00:15:21,720 Speaker 3: Western European economy. Thank you to both of you for 267 00:15:21,760 --> 00:15:25,680 Speaker 3: being with me. Yana, can I start with you? Firstly? Really, 268 00:15:25,880 --> 00:15:31,080 Speaker 3: how is the war in Iran now affecting the Eurozone economy? 269 00:15:31,120 --> 00:15:32,920 Speaker 3: How are people thinking about it? 270 00:15:33,520 --> 00:15:37,720 Speaker 8: Confidence of course is down everywhere across the Eurozone, across 271 00:15:37,720 --> 00:15:41,359 Speaker 8: the wider continent, which is bad for consumption, for investment, 272 00:15:41,800 --> 00:15:44,160 Speaker 8: and those of course are the drivers of growth that 273 00:15:44,280 --> 00:15:47,479 Speaker 8: the ECB had been counting on to drive the recovery. 274 00:15:47,800 --> 00:15:51,360 Speaker 8: Much will depend on how long the conflict lasts, but 275 00:15:51,560 --> 00:15:55,080 Speaker 8: it's probably fair to say that because of higher old prices, 276 00:15:55,160 --> 00:15:58,920 Speaker 8: higher gas prices, that energy rely on countries and sectors 277 00:15:58,960 --> 00:16:02,600 Speaker 8: are more effect than others. And you can add one 278 00:16:02,640 --> 00:16:05,640 Speaker 8: and one and that puts the spotlight on the German economy. 279 00:16:05,840 --> 00:16:10,720 Speaker 8: Yet again, we've seen some terrible data recently about January, 280 00:16:11,240 --> 00:16:13,600 Speaker 8: and I really wouldn't hold my breath that things will 281 00:16:13,640 --> 00:16:16,800 Speaker 8: bounce back quickly after what we've seen in the Middle East. 282 00:16:17,000 --> 00:16:20,040 Speaker 8: But more importantly, I want to talk quickly about inflation 283 00:16:20,520 --> 00:16:24,080 Speaker 8: because the memories of the last inflation shock twenty twenty two, 284 00:16:24,440 --> 00:16:27,840 Speaker 8: they haven't really faded. So the threshold for businesses to 285 00:16:27,880 --> 00:16:30,880 Speaker 8: pass on higher costs, for consumers to ask for wage 286 00:16:30,880 --> 00:16:35,240 Speaker 8: increases that is much lower now. And of course those 287 00:16:35,280 --> 00:16:38,920 Speaker 8: are the famous second round effects that turn an external 288 00:16:38,920 --> 00:16:43,000 Speaker 8: shock into very domestic problems for the central Bank. Yeah. 289 00:16:43,120 --> 00:16:46,120 Speaker 3: Indeed, of course what's happening in the Middle East is 290 00:16:47,000 --> 00:16:50,480 Speaker 3: hugely disturbing and distressing to so many people on human level, 291 00:16:50,480 --> 00:16:54,000 Speaker 3: but we also have to think about it economically too. 292 00:16:54,200 --> 00:16:57,600 Speaker 3: And this major shock, as you say, Yanna, where do 293 00:16:57,680 --> 00:17:00,720 Speaker 3: you think it will leave the Europeans and bank and 294 00:17:00,800 --> 00:17:05,720 Speaker 3: therefore the outlook for interest rates really as leaders around 295 00:17:05,760 --> 00:17:09,040 Speaker 3: the world kind of grapple with this huge wall. 296 00:17:09,440 --> 00:17:13,080 Speaker 8: So the ECB was essentially done with rate cuts. It 297 00:17:13,200 --> 00:17:15,840 Speaker 8: had been on hold for a couple of months, and 298 00:17:16,080 --> 00:17:20,320 Speaker 8: while some people left the door open to another move down, 299 00:17:21,040 --> 00:17:23,240 Speaker 8: I think it's fair to say that now rate cuts 300 00:17:23,240 --> 00:17:26,240 Speaker 8: are off the table. And the president herself, Christine la 301 00:17:26,320 --> 00:17:29,280 Speaker 8: Guard was among those saying that the ECB won't allow 302 00:17:29,320 --> 00:17:32,600 Speaker 8: inflation to take hold. Now you could say that's her job, 303 00:17:32,960 --> 00:17:36,240 Speaker 8: but in the current situation that contains a very clear 304 00:17:36,240 --> 00:17:40,399 Speaker 8: policy message. The upcoming meeting is probably too soon for 305 00:17:41,000 --> 00:17:44,639 Speaker 8: specific decisions. But it's very fair to say that hike's 306 00:17:45,040 --> 00:17:48,560 Speaker 8: rate increases are moving onto the agenda. And now it's 307 00:17:48,600 --> 00:17:52,000 Speaker 8: difficult to say when how many. If we've looked at 308 00:17:52,040 --> 00:17:55,760 Speaker 8: market pricing over the past couple of days, traders price 309 00:17:55,960 --> 00:18:00,320 Speaker 8: between not quite one and two. It moves around, you know, 310 00:18:00,400 --> 00:18:03,840 Speaker 8: almost on an hourly basis, so it's very difficult to project. 311 00:18:03,920 --> 00:18:06,760 Speaker 8: But I had a chance to speak to Pita Kashimir, 312 00:18:06,800 --> 00:18:09,320 Speaker 8: the head of the Slovak Central Bank, just before the 313 00:18:09,359 --> 00:18:14,359 Speaker 8: black O period starts, before the ECB meeting, and he 314 00:18:14,600 --> 00:18:18,400 Speaker 8: was saying a rate hike is potentially closer than many 315 00:18:18,440 --> 00:18:21,679 Speaker 8: people think. And that is of course a very different 316 00:18:21,760 --> 00:18:24,600 Speaker 8: language than just a couple of days and weeks ago, 317 00:18:25,000 --> 00:18:27,840 Speaker 8: when it was very much about we're in a good place, 318 00:18:27,960 --> 00:18:30,520 Speaker 8: we'll need to see the data. So a lot of 319 00:18:30,520 --> 00:18:34,400 Speaker 8: people worry. Kashmir is not alone. We've heard similar, similar 320 00:18:34,600 --> 00:18:38,480 Speaker 8: language from other policy makers. So an interesting meeting we 321 00:18:38,520 --> 00:18:41,119 Speaker 8: will learn a lot, even though we will probably not 322 00:18:41,200 --> 00:18:44,399 Speaker 8: see action at that point. But yeah, rate hikes is 323 00:18:44,720 --> 00:18:45,920 Speaker 8: where the ECB is headed. 324 00:18:46,680 --> 00:18:49,480 Speaker 3: Okay, so quite a big rethink. As you say, then 325 00:18:49,560 --> 00:18:53,000 Speaker 3: for Europe, where does that leave the UK? Then in 326 00:18:53,040 --> 00:18:56,840 Speaker 3: the Bank of England, Dan, turning to you, the main 327 00:18:56,880 --> 00:18:59,280 Speaker 3: focus of the Bank of England had been the strength 328 00:18:59,280 --> 00:19:02,320 Speaker 3: of the lack of in the UK economy. How has 329 00:19:02,359 --> 00:19:04,800 Speaker 3: that changed since the start of the conflict? 330 00:19:05,119 --> 00:19:07,240 Speaker 9: So, I mean, if you go back to February, you 331 00:19:07,760 --> 00:19:10,199 Speaker 9: had a Bank of England that was I think more 332 00:19:10,280 --> 00:19:14,240 Speaker 9: dubbish than almost everyone expected. You had a much tighter 333 00:19:14,320 --> 00:19:17,119 Speaker 9: vote split around whether or not to cut interest rates, 334 00:19:17,440 --> 00:19:20,399 Speaker 9: and you essentially had a central bank calling victory on 335 00:19:20,440 --> 00:19:23,560 Speaker 9: inflation and signaling that there were probably one, maybe two 336 00:19:23,640 --> 00:19:26,240 Speaker 9: more rate cuts coming over the course of the year 337 00:19:26,320 --> 00:19:28,320 Speaker 9: and getting down to a neutral level. Now, of course 338 00:19:28,320 --> 00:19:30,880 Speaker 9: that means that the Bank of England has started from 339 00:19:30,920 --> 00:19:33,280 Speaker 9: a different place to the ECB coming into this. The 340 00:19:33,320 --> 00:19:36,600 Speaker 9: ECB arguably as had got itself to a neutral policy setting. 341 00:19:36,600 --> 00:19:39,040 Speaker 9: The Bank of England, I think the majority on the 342 00:19:39,080 --> 00:19:42,800 Speaker 9: committee would argue that policy was still somewhat restrictive. As 343 00:19:42,840 --> 00:19:45,280 Speaker 9: you say, things have changed dramatically and in a similar 344 00:19:45,320 --> 00:19:49,360 Speaker 9: way to the trade off facing the ECB. Inflation all 345 00:19:49,400 --> 00:19:51,760 Speaker 9: else equal, if we look at market pricing, inflation is 346 00:19:51,760 --> 00:19:53,640 Speaker 9: going to be quite a bit higher than the Bank 347 00:19:53,640 --> 00:19:55,840 Speaker 9: of England thought we had. The Bank of England thought 348 00:19:55,840 --> 00:19:58,720 Speaker 9: inflation would get to two percent in the spring and 349 00:19:58,800 --> 00:20:01,560 Speaker 9: stay there essentially for the whole of its forecast period. 350 00:20:01,760 --> 00:20:04,760 Speaker 9: If you take market pricing now, you're looking at around 351 00:20:04,760 --> 00:20:08,000 Speaker 9: a percentage point somewhere between half and a percentage point higher, 352 00:20:08,000 --> 00:20:11,080 Speaker 9: depending on when you take a snapshot of the market 353 00:20:11,119 --> 00:20:14,560 Speaker 9: prices for oil and importantly gas as well. So that's 354 00:20:14,560 --> 00:20:18,200 Speaker 9: a much different picture to the one we had in February. 355 00:20:18,680 --> 00:20:21,880 Speaker 9: We haven't really heard from any policy makers as around 356 00:20:22,040 --> 00:20:23,679 Speaker 9: you know what this may or may not mean for 357 00:20:23,720 --> 00:20:26,640 Speaker 9: the outlook, But I would just echo one thing that 358 00:20:26,960 --> 00:20:29,520 Speaker 9: Yanna said there is that the jobs market in the 359 00:20:29,600 --> 00:20:32,200 Speaker 9: UK is in a very different place, and that means 360 00:20:32,400 --> 00:20:34,640 Speaker 9: what the Bank of England is facing now is very 361 00:20:34,720 --> 00:20:37,159 Speaker 9: very different to what it faced a few years ago, 362 00:20:37,400 --> 00:20:39,760 Speaker 9: where you had I think it's not an exaggeration to 363 00:20:39,800 --> 00:20:42,960 Speaker 9: say a red hot jobs market and inflation going much 364 00:20:43,040 --> 00:20:45,439 Speaker 9: much higher. So the trade off is different, and so 365 00:20:45,600 --> 00:20:48,520 Speaker 9: the policy response is likely to be different as well. 366 00:20:48,560 --> 00:20:51,159 Speaker 9: I think, you know, given where the Bank's policy rate 367 00:20:51,240 --> 00:20:53,960 Speaker 9: is starting, you know, it's much easier to see the 368 00:20:53,960 --> 00:20:57,119 Speaker 9: bank staying on hold. I think the bar to hiking 369 00:20:57,200 --> 00:20:59,760 Speaker 9: rates is pretty high at the moment. 370 00:21:00,280 --> 00:21:02,600 Speaker 3: There's a great deal of uncertainty about how the war 371 00:21:02,680 --> 00:21:05,040 Speaker 3: plays out and what it means in terms of the 372 00:21:05,080 --> 00:21:09,199 Speaker 3: strait of hormus and energy supplies. But we know that 373 00:21:09,240 --> 00:21:13,680 Speaker 3: the UK is perhaps more exposed to an energy shock 374 00:21:13,800 --> 00:21:17,480 Speaker 3: than Europe it is, how would you kind of contextualize that? 375 00:21:17,600 --> 00:21:20,520 Speaker 3: I mean, we know this this war is an exogenous shock. 376 00:21:21,160 --> 00:21:24,240 Speaker 3: How much could it affect inflation through energy? 377 00:21:24,440 --> 00:21:26,520 Speaker 9: And it's really important to you know, you draw the 378 00:21:27,119 --> 00:21:30,160 Speaker 9: path of the natural gas price. The increase we've had 379 00:21:30,640 --> 00:21:33,480 Speaker 9: has been tiny compared to what happened in twenty twenty two. 380 00:21:33,520 --> 00:21:37,160 Speaker 9: We're not in the same Those comparisons are just not fair. Nonetheless, 381 00:21:38,160 --> 00:21:40,320 Speaker 9: you know, the central Bank's job, or a Bank of 382 00:21:40,320 --> 00:21:43,040 Speaker 9: England's job. Its mandate is two percent inflation. So if 383 00:21:43,080 --> 00:21:44,760 Speaker 9: inflation is going to end the year closer to three 384 00:21:44,800 --> 00:21:47,600 Speaker 9: percent rather than two percent, you know it requires it 385 00:21:48,119 --> 00:21:51,119 Speaker 9: to change course somewhat, so you know you're going to 386 00:21:51,600 --> 00:21:55,000 Speaker 9: The inflation impact is at least the first order inflation 387 00:21:55,119 --> 00:21:58,359 Speaker 9: impact is pretty easy to measure on the assumption that 388 00:21:58,400 --> 00:22:00,600 Speaker 9: you get the path of the orb and gas price correct. 389 00:22:00,640 --> 00:22:03,240 Speaker 9: Of course, that's quite a bit of uncertainty around that. 390 00:22:03,520 --> 00:22:05,919 Speaker 9: The thing that the bank will be really worried about 391 00:22:06,160 --> 00:22:09,679 Speaker 9: is whether this spills into wage settlements, because that's what 392 00:22:09,800 --> 00:22:12,120 Speaker 9: drove and has been driving, I should say, the inflation 393 00:22:12,240 --> 00:22:14,840 Speaker 9: process in the UK and why it's been so persistent. 394 00:22:15,200 --> 00:22:17,040 Speaker 9: I'm going back to what I said in the first question, 395 00:22:17,560 --> 00:22:21,040 Speaker 9: why might we think that's different now to twenty twenty two. 396 00:22:21,640 --> 00:22:24,880 Speaker 9: The jobs market is a lot looser, so yes, there 397 00:22:24,960 --> 00:22:26,520 Speaker 9: is going to be this. I think there's going to 398 00:22:26,520 --> 00:22:29,439 Speaker 9: be this reaction on the NPC where they worry that 399 00:22:29,960 --> 00:22:32,560 Speaker 9: they're going to make a mistake, a similar mistake to 400 00:22:32,560 --> 00:22:34,040 Speaker 9: the one they made in twenty twenty two, where they 401 00:22:34,080 --> 00:22:36,800 Speaker 9: didn't recognize what was going to happen and didn't react 402 00:22:36,880 --> 00:22:39,199 Speaker 9: quickly enough. The thing with all central banks, though, is 403 00:22:39,200 --> 00:22:41,480 Speaker 9: that they always run the risk of fighting the last war, 404 00:22:41,760 --> 00:22:44,119 Speaker 9: and every shock is different, and this one, I think 405 00:22:44,240 --> 00:22:46,600 Speaker 9: there are reasons to argue that, yes, it's an inflation 406 00:22:46,720 --> 00:22:50,199 Speaker 9: shock again, but the risks to it spiraling like it 407 00:22:50,240 --> 00:22:52,679 Speaker 9: did before are somewhat lower, and I think that's an 408 00:22:52,720 --> 00:22:53,520 Speaker 9: important distinction. 409 00:22:54,000 --> 00:22:56,239 Speaker 3: Just briefly, then, in the next few days at the 410 00:22:56,320 --> 00:22:59,359 Speaker 3: March Bank of Rate decision of what are you expecting? 411 00:23:00,040 --> 00:23:03,639 Speaker 9: Ignored in February that a cut was coming either in 412 00:23:03,680 --> 00:23:07,080 Speaker 9: March or in April. We thought prior to the start 413 00:23:07,119 --> 00:23:09,280 Speaker 9: of the war that they would move in March, that 414 00:23:09,480 --> 00:23:11,359 Speaker 9: the labor market data has been a bit weaker than 415 00:23:11,400 --> 00:23:16,080 Speaker 9: they'd expected. Now, I think the level of uncertainty speaks 416 00:23:16,080 --> 00:23:18,680 Speaker 9: to them staying on hold. I mean, the given how 417 00:23:18,680 --> 00:23:21,919 Speaker 9: close they are to neutral, they've got time on their side. 418 00:23:21,960 --> 00:23:24,200 Speaker 9: They can assess the situation. So I think a hold 419 00:23:24,520 --> 00:23:27,040 Speaker 9: and just sending the message that they're going to keep 420 00:23:27,040 --> 00:23:30,440 Speaker 9: an eye on things and rates. I still think rates 421 00:23:30,440 --> 00:23:33,000 Speaker 9: will fall. It's just as you said, what matters is 422 00:23:33,040 --> 00:23:35,920 Speaker 9: how long the war lasts, and then they can sort 423 00:23:35,960 --> 00:23:38,080 Speaker 9: of get the all clear in terms of the inflation 424 00:23:38,160 --> 00:23:39,840 Speaker 9: picture and think about their next move. 425 00:23:41,359 --> 00:23:43,119 Speaker 3: Janna, I want to bring you back in then with 426 00:23:43,400 --> 00:23:46,280 Speaker 3: a final thought really on the European Central Bank. You know, 427 00:23:46,280 --> 00:23:49,680 Speaker 3: we're thinking about leadership. Just before the war broke out, 428 00:23:49,680 --> 00:23:53,200 Speaker 3: there was a lot of discussion and questions to ECB 429 00:23:53,320 --> 00:23:56,639 Speaker 3: President Christine Lagarde about how long she would stay on 430 00:23:57,240 --> 00:24:00,639 Speaker 3: in that role, and she was insistent that she, you know, 431 00:24:00,720 --> 00:24:04,760 Speaker 3: complete her mandate. But I suppose that is still in 432 00:24:04,760 --> 00:24:05,439 Speaker 3: the background. 433 00:24:06,440 --> 00:24:09,240 Speaker 8: It is, And in fact, it's interesting that you said 434 00:24:09,280 --> 00:24:12,720 Speaker 8: she was insistent because I wasn't so convinced. She used 435 00:24:12,720 --> 00:24:16,120 Speaker 8: the phrase, you know, it's her baseline to stay, and 436 00:24:16,520 --> 00:24:20,320 Speaker 8: being among economists, we all know that baseline is just 437 00:24:20,600 --> 00:24:24,000 Speaker 8: the baseline, is just one scenario. So those rumors are 438 00:24:24,080 --> 00:24:28,240 Speaker 8: still holding on. I wouldn't say they're dominant anymore, but 439 00:24:28,520 --> 00:24:31,960 Speaker 8: they're still there. She's probably still going to face questions 440 00:24:31,960 --> 00:24:35,280 Speaker 8: on whether she will stay or whether she will leave early. 441 00:24:36,000 --> 00:24:39,680 Speaker 8: But I also judge her as a person that recognizes 442 00:24:40,320 --> 00:24:43,760 Speaker 8: that now leadership is in demand, and leaving in the 443 00:24:43,800 --> 00:24:46,320 Speaker 8: middle of a crisis that would be extremely bad form. 444 00:24:46,400 --> 00:24:48,760 Speaker 8: I don't take her as a person that would do 445 00:24:48,840 --> 00:24:51,199 Speaker 8: such a thing. So for now, as long as the 446 00:24:51,240 --> 00:24:54,879 Speaker 8: crisis lasts, as the challenges last, and the situation is 447 00:24:54,920 --> 00:24:57,880 Speaker 8: what it is, I would expect her to be there 448 00:24:58,000 --> 00:25:01,920 Speaker 8: to lead. For me. The question i've her departing before 449 00:25:01,960 --> 00:25:05,240 Speaker 8: October next year, that continues to linger in the background, 450 00:25:05,359 --> 00:25:07,680 Speaker 8: and it might well pop up again. I mean, this 451 00:25:07,840 --> 00:25:10,600 Speaker 8: also wasn't the first time that we had those. It'll 452 00:25:11,040 --> 00:25:13,040 Speaker 8: remain interesting, yeah, indeed. 453 00:25:13,480 --> 00:25:16,119 Speaker 3: And it is always about you know, passing what people 454 00:25:16,160 --> 00:25:18,880 Speaker 3: say very carefully, you know, the subtle as well as 455 00:25:18,920 --> 00:25:21,879 Speaker 3: these sort of over things that they happen to say, Yana, 456 00:25:21,960 --> 00:25:23,600 Speaker 3: I trust you to do that. Thank you so much 457 00:25:23,640 --> 00:25:26,879 Speaker 3: for being with me, Yana Randa, who runs our coverage 458 00:25:27,000 --> 00:25:30,040 Speaker 3: of the Western europe economy, talking us through what to 459 00:25:30,119 --> 00:25:32,879 Speaker 3: expect from the European Central Bank. And my thanks also 460 00:25:33,280 --> 00:25:36,080 Speaker 3: to our chief UK economist, Dan Hanson on the Bank 461 00:25:36,119 --> 00:25:38,960 Speaker 3: of England. I'm Caline Hepga and you can catch us 462 00:25:39,000 --> 00:25:42,240 Speaker 3: every weekday morning here for Bloomberg Daybreak Europe, beginning at 463 00:25:42,280 --> 00:25:45,919 Speaker 3: six am in London. That's two am on Wall Street. 464 00:25:46,119 --> 00:25:49,879 Speaker 2: Nathan, Thanks Caroline, and coming up on Bloomberg day Break Weekend, 465 00:25:49,880 --> 00:25:52,439 Speaker 2: we'll look at what to expect when US and Japanese 466 00:25:52,480 --> 00:25:56,960 Speaker 2: leaders meet in Washington. I'm Nathan Hager, and this is Bloomberg. 467 00:26:08,200 --> 00:26:11,040 Speaker 2: This is Bloomberg Daybreak Weekend, our global look ahead of 468 00:26:11,080 --> 00:26:13,680 Speaker 2: the top stories for investors in the coming week. I'm 469 00:26:13,720 --> 00:26:16,520 Speaker 2: Nathan Hager in Washington. One of the top stories this 470 00:26:16,560 --> 00:26:20,080 Speaker 2: week will be Japanese Prime Minister sana E Takaichi's meeting 471 00:26:20,119 --> 00:26:23,640 Speaker 2: with President Donald Trump in Washington. For a closer look, 472 00:26:23,720 --> 00:26:26,320 Speaker 2: let's get to Bloomberg's Doug Krisner, host of the Daybreak 473 00:26:26,320 --> 00:26:27,240 Speaker 2: Asia podcast. 474 00:26:27,760 --> 00:26:30,680 Speaker 4: Thanks Nathan. Japan is now in a tough position given 475 00:26:30,720 --> 00:26:33,680 Speaker 4: the strikes on Iran from both the US and Israel, 476 00:26:34,080 --> 00:26:37,760 Speaker 4: and Prime Minister Takeichi will attempt to balance Tokyo's strong 477 00:26:37,800 --> 00:26:40,879 Speaker 4: support for the rules based global order on one hand, 478 00:26:41,440 --> 00:26:44,680 Speaker 4: with its need to maintain a robust alliance with Washington 479 00:26:44,800 --> 00:26:47,120 Speaker 4: on the other. And to help me preview this meeting, 480 00:26:47,200 --> 00:26:51,080 Speaker 4: I'm joined by Bloomberg's Alistair. Gail Alistair is the Ekogov 481 00:26:51,119 --> 00:26:55,000 Speaker 4: reporter for Japan. He also covers security in Asia. Alistair, 482 00:26:55,040 --> 00:26:56,919 Speaker 4: thank you so much for being here. I'd like to 483 00:26:57,000 --> 00:27:00,240 Speaker 4: begin by having you give me a sense of what 484 00:27:00,280 --> 00:27:03,080 Speaker 4: the reaction has been like in Japan to what's unfolding 485 00:27:03,080 --> 00:27:03,840 Speaker 4: in the Middle East. 486 00:27:04,320 --> 00:27:08,119 Speaker 10: Well, the reaction has been obviously surprised at the scale 487 00:27:08,160 --> 00:27:11,200 Speaker 10: of what's been happening in the Middle East and concerned 488 00:27:11,200 --> 00:27:15,119 Speaker 10: that this may drag on. Japan's priority in all of 489 00:27:15,119 --> 00:27:19,280 Speaker 10: this is really energy supplies, because it imports almost all 490 00:27:19,320 --> 00:27:21,879 Speaker 10: of its oil and gas, and much of its oil 491 00:27:22,000 --> 00:27:23,879 Speaker 10: comes from the Middle East and goes through the Strait 492 00:27:23,880 --> 00:27:27,640 Speaker 10: of Hormuz. So that's an issue that has been top 493 00:27:27,680 --> 00:27:30,760 Speaker 10: of mind, and we've seen Prime Minister Takeichi already come 494 00:27:30,760 --> 00:27:34,360 Speaker 10: out ahead of the international community and say Japan's going 495 00:27:34,359 --> 00:27:38,480 Speaker 10: to release its own oil reserves to deal with potential 496 00:27:38,600 --> 00:27:42,000 Speaker 10: spikes in oil prices. So that's really the priority here. 497 00:27:42,359 --> 00:27:45,200 Speaker 4: And to that point, crude oil prices have jumped since 498 00:27:45,240 --> 00:27:48,920 Speaker 4: the war to about the highest level in forty two months. Obviously, 499 00:27:48,960 --> 00:27:53,320 Speaker 4: this has inflationary implications. Even before the war though, Japan 500 00:27:53,440 --> 00:27:56,800 Speaker 4: was facing very high inflation, and I'm curious, alister, as 501 00:27:56,840 --> 00:28:00,240 Speaker 4: to how Prime Minister taki Ichi will address this situation. 502 00:28:00,480 --> 00:28:01,960 Speaker 10: So, I mean, this is really the top of the 503 00:28:02,000 --> 00:28:05,520 Speaker 10: agenda in terms of economic policy. Now, inflation is kind 504 00:28:05,560 --> 00:28:09,000 Speaker 10: of rare for Japan. There's been a few decades of 505 00:28:09,440 --> 00:28:12,760 Speaker 10: falling prices and over the last few years that's changed 506 00:28:12,800 --> 00:28:16,439 Speaker 10: to inflation, which has been the thing that voters have 507 00:28:16,480 --> 00:28:19,200 Speaker 10: been most concerned about. So as you would expect, the 508 00:28:19,240 --> 00:28:22,119 Speaker 10: Prime Minister has focused on that. You know, she's already 509 00:28:22,160 --> 00:28:24,600 Speaker 10: talked about other steps that she's going to take to 510 00:28:24,760 --> 00:28:28,359 Speaker 10: rain in high prices, you know, helping consumers perhaps with 511 00:28:29,119 --> 00:28:32,440 Speaker 10: cash houndouts and things. But you know, this potential oil 512 00:28:32,480 --> 00:28:35,239 Speaker 10: shock and an increase to oil prices is something that 513 00:28:35,280 --> 00:28:37,720 Speaker 10: they really didn't want. Is in a way, it's kind 514 00:28:37,720 --> 00:28:40,080 Speaker 10: of the worst timing as she's trying to show that 515 00:28:40,120 --> 00:28:42,760 Speaker 10: she's able to keep control of inflation, so I think 516 00:28:42,800 --> 00:28:44,560 Speaker 10: that's why she's moved quickly on this. 517 00:28:44,880 --> 00:28:47,080 Speaker 4: And speaking of timing, it was just in the last 518 00:28:47,160 --> 00:28:50,160 Speaker 4: week that we had a solid upward revision in Japan's 519 00:28:50,200 --> 00:28:54,320 Speaker 4: fourth quarter GDP figure. So it seems as though Japan 520 00:28:54,440 --> 00:28:58,200 Speaker 4: is growing above its potential rate, despite the fact that 521 00:28:58,400 --> 00:29:01,000 Speaker 4: the country has had to deal with those US tariffs 522 00:29:01,320 --> 00:29:03,640 Speaker 4: and we've had a few rate hikes from the Bank 523 00:29:03,680 --> 00:29:06,720 Speaker 4: of Japan. Is there still a fair amount of optimism 524 00:29:06,840 --> 00:29:10,080 Speaker 4: or is the potential oil shock really kind of put 525 00:29:10,400 --> 00:29:12,400 Speaker 4: most everyone on the back foot so to speak. 526 00:29:13,080 --> 00:29:15,680 Speaker 10: Well, people have long memories here of the oil shock 527 00:29:15,720 --> 00:29:18,560 Speaker 10: in the nineteen seventies, which was really devastating for Japan. 528 00:29:18,640 --> 00:29:21,280 Speaker 10: We saw, you know, a big blow to the economy there. 529 00:29:21,320 --> 00:29:24,800 Speaker 10: We saw people hoarding even things like toilet paper because 530 00:29:24,800 --> 00:29:29,560 Speaker 10: they were concerned about supplies of basic goods because of 531 00:29:28,840 --> 00:29:32,200 Speaker 10: the problems with the oil supply. So there's this kind 532 00:29:32,240 --> 00:29:35,400 Speaker 10: of fear that we're going to see a reprisal of that, 533 00:29:35,720 --> 00:29:39,120 Speaker 10: and I think that's why she's moved quickly, and that's why, 534 00:29:39,680 --> 00:29:41,520 Speaker 10: you know, this is the thing that is leading all 535 00:29:41,520 --> 00:29:44,480 Speaker 10: the newspapers. It's what she's talking about in Parliament every day, 536 00:29:45,280 --> 00:29:47,480 Speaker 10: and it's really top of mind for you know, average 537 00:29:47,560 --> 00:29:48,320 Speaker 10: Japanese people. 538 00:29:48,480 --> 00:29:51,240 Speaker 4: So when it comes to the Prime minister's conversation with 539 00:29:51,360 --> 00:29:55,240 Speaker 4: President Trump, give me a sense of how taka Ichi 540 00:29:55,320 --> 00:29:57,360 Speaker 4: is going to have to thread the needle here. 541 00:29:58,360 --> 00:30:00,520 Speaker 10: This will be her first trip to the w House 542 00:30:00,600 --> 00:30:04,200 Speaker 10: as Prime minister. Trump was here in November last year. 543 00:30:04,240 --> 00:30:07,080 Speaker 10: They got off on a very strong footing. You know, 544 00:30:07,120 --> 00:30:10,160 Speaker 10: they seem to have personal chemistry. It's important for her 545 00:30:10,160 --> 00:30:12,640 Speaker 10: to go to the White House. Most Japanese Prime ministers 546 00:30:12,720 --> 00:30:17,040 Speaker 10: go early in their terms. She's just won this big mandate. 547 00:30:17,080 --> 00:30:19,120 Speaker 10: We had an election here in February, which we won 548 00:30:19,360 --> 00:30:22,720 Speaker 10: by a landslide, so she's well placed politically to go there, 549 00:30:23,160 --> 00:30:26,560 Speaker 10: you know, with confidence. But for her, it's important really 550 00:30:26,640 --> 00:30:29,320 Speaker 10: to make sure that the alliance that Japan has with 551 00:30:29,360 --> 00:30:32,440 Speaker 10: the US stays strong. As you mentioned, you know, the 552 00:30:32,520 --> 00:30:35,320 Speaker 10: trade issue is a is a thorny one for Japan 553 00:30:35,400 --> 00:30:38,200 Speaker 10: because it's been hit by taris like everyone else. It's 554 00:30:38,200 --> 00:30:41,120 Speaker 10: trying to find a way through that with this commitment 555 00:30:41,200 --> 00:30:44,400 Speaker 10: to invest five hundred and fifty billion US dollars in 556 00:30:44,480 --> 00:30:47,880 Speaker 10: the in the US. We've seen three initial projects which 557 00:30:47,920 --> 00:30:50,600 Speaker 10: have been announced by Japan on that front. So I'm 558 00:30:50,640 --> 00:30:53,320 Speaker 10: sure that when she's talking to the President, you know, 559 00:30:53,360 --> 00:30:56,360 Speaker 10: they'll be going over this and you know, she may 560 00:30:56,400 --> 00:30:59,720 Speaker 10: have some new things that she wants to provide that 561 00:31:00,120 --> 00:31:03,280 Speaker 10: that Japan is still committed to investing in the US 562 00:31:03,760 --> 00:31:06,360 Speaker 10: because the relationship is really important. You know, the US 563 00:31:06,440 --> 00:31:10,200 Speaker 10: is Japan's only security ally. You know, there's large military 564 00:31:10,240 --> 00:31:13,360 Speaker 10: bases US bases here in Japan, and of course the 565 00:31:13,440 --> 00:31:16,280 Speaker 10: US is a major training partner for Japan. So it's 566 00:31:16,280 --> 00:31:19,880 Speaker 10: important really to make sure that she has continues that good, 567 00:31:19,920 --> 00:31:22,680 Speaker 10: strong start to the relationship and tries to find a 568 00:31:22,680 --> 00:31:26,479 Speaker 10: way to navigate through this trade issue. And also Iran, 569 00:31:26,600 --> 00:31:30,360 Speaker 10: because you know, Japan has not come out and said 570 00:31:30,360 --> 00:31:33,400 Speaker 10: it supports what the US is doing. It's tried to 571 00:31:33,480 --> 00:31:36,120 Speaker 10: kind of avoid giving a clear position on this. So 572 00:31:36,160 --> 00:31:38,760 Speaker 10: that's something that you know is going to be hanging 573 00:31:38,760 --> 00:31:40,520 Speaker 10: over the meeting with President Trump as well. 574 00:31:40,760 --> 00:31:43,959 Speaker 4: So if in Iran has really put the spotlight on 575 00:31:44,040 --> 00:31:46,680 Speaker 4: geopolitical risk and not just in the Mid East but 576 00:31:46,840 --> 00:31:50,200 Speaker 4: on other areas of the globe. I'm recalling that Prime 577 00:31:50,200 --> 00:31:54,240 Speaker 4: Minister Takichi wanted to increase defense spending. Give me your 578 00:31:54,400 --> 00:31:57,960 Speaker 4: sense of what's going on right now and the geopolitical 579 00:31:58,040 --> 00:32:01,280 Speaker 4: risk side of the equation across the apecific and how 580 00:32:01,360 --> 00:32:02,600 Speaker 4: Japan is dealing with it. 581 00:32:03,680 --> 00:32:07,920 Speaker 10: So she has a background in national security. She has 582 00:32:07,960 --> 00:32:12,120 Speaker 10: strong views on building up Japan's military, ensuring that Japan 583 00:32:12,200 --> 00:32:16,160 Speaker 10: has stronger economic security, which of course is related to 584 00:32:16,720 --> 00:32:21,440 Speaker 10: energy supplies. So she's basically now said that Japan is 585 00:32:21,440 --> 00:32:24,240 Speaker 10: going to move faster on defense spending. There is a 586 00:32:24,280 --> 00:32:27,920 Speaker 10: target of reaching two percent of GDP on defense spending, 587 00:32:27,960 --> 00:32:31,280 Speaker 10: which she's moved up by two years, and the government 588 00:32:31,360 --> 00:32:34,920 Speaker 10: is now committed to spending that about this fiscal year. 589 00:32:35,640 --> 00:32:39,000 Speaker 10: She's talked about a new plan that's now under discussion. 590 00:32:39,320 --> 00:32:41,720 Speaker 10: I think we can expect that, you know, spending is 591 00:32:41,720 --> 00:32:44,760 Speaker 10: going to go up. So she wants Japan to have 592 00:32:44,800 --> 00:32:47,960 Speaker 10: a more robust military. She wants it to be equipped 593 00:32:47,960 --> 00:32:50,440 Speaker 10: with all, you know, the modern equipment. She wants it 594 00:32:50,480 --> 00:32:54,600 Speaker 10: to be a contributor to regional security. Obviously, the big 595 00:32:54,640 --> 00:32:57,440 Speaker 10: concern here in Japan is what might happen over Taiwan. 596 00:32:58,600 --> 00:33:02,120 Speaker 10: She sees Japan as being part of the deterrence to 597 00:33:02,640 --> 00:33:06,600 Speaker 10: you know, deter China from making moves such as you 598 00:33:06,640 --> 00:33:11,040 Speaker 10: know on Taiwan. And so you know, that's really something 599 00:33:11,080 --> 00:33:14,840 Speaker 10: that she takes a deep personal interest on. She also 600 00:33:14,960 --> 00:33:17,560 Speaker 10: wants to have, you know, the the US military presence 601 00:33:18,280 --> 00:33:21,680 Speaker 10: to remain strong here we've seen in the US National 602 00:33:21,720 --> 00:33:25,440 Speaker 10: Security strategy there has been a commitment to having a 603 00:33:25,480 --> 00:33:28,640 Speaker 10: strong focus on East Asia as well, of of course, 604 00:33:28,760 --> 00:33:32,640 Speaker 10: you know, as the Western Hemisphere. So I guess you know, 605 00:33:32,720 --> 00:33:34,320 Speaker 10: in some sense, you know, what's happening in the Middle 606 00:33:34,320 --> 00:33:37,360 Speaker 10: East maybe something of a concern because we're seeing the 607 00:33:37,360 --> 00:33:40,040 Speaker 10: focus of obviously US military power now is very much 608 00:33:40,440 --> 00:33:43,600 Speaker 10: around Iran. So she I think she'll be seeking some 609 00:33:43,640 --> 00:33:47,760 Speaker 10: reassurances that the US is still strongly committed to East Asia. 610 00:33:47,840 --> 00:33:50,479 Speaker 10: But that's something that you know, she enjoys talking about, 611 00:33:51,360 --> 00:33:53,600 Speaker 10: and you know, she is really putting her money where 612 00:33:53,600 --> 00:33:55,960 Speaker 10: her mouth is in terms of what Japan is doing. 613 00:33:56,200 --> 00:34:00,280 Speaker 4: So to what extent with that increase in military spending 614 00:34:00,560 --> 00:34:04,880 Speaker 4: benefit the US defense contractors or are there enough players 615 00:34:05,360 --> 00:34:09,120 Speaker 4: in the Japanese market for defense that she could be 616 00:34:09,200 --> 00:34:11,759 Speaker 4: a little bit more reliant on domestic companies or is 617 00:34:11,800 --> 00:34:14,440 Speaker 4: it necessarily the case that you have to be partnered 618 00:34:14,480 --> 00:34:17,600 Speaker 4: with the US if you're looking to build up more hardware. 619 00:34:18,520 --> 00:34:21,840 Speaker 10: That's a really interesting question because Japan does spend a 620 00:34:21,840 --> 00:34:24,160 Speaker 10: lot of money on US defense equipment, and I think 621 00:34:24,160 --> 00:34:27,640 Speaker 10: we'll continue to do so. But one of her goals 622 00:34:27,719 --> 00:34:32,480 Speaker 10: is to increase the scale of the defense industrial sector 623 00:34:32,520 --> 00:34:35,360 Speaker 10: here in Japan, which is relatively small, which is a 624 00:34:35,440 --> 00:34:38,120 Speaker 10: legacy of World War Two where Japan has not really 625 00:34:38,560 --> 00:34:44,040 Speaker 10: focused on investment in defense business businesses. There are some 626 00:34:44,080 --> 00:34:47,960 Speaker 10: companies here which obviously make equipment for the Japanese military, 627 00:34:48,280 --> 00:34:51,279 Speaker 10: but it tends to be a peripheral part of their 628 00:34:51,680 --> 00:34:55,560 Speaker 10: business portfolio. They mainly focused on other things. So what 629 00:34:55,680 --> 00:34:58,799 Speaker 10: she wants to do. She's talked about government investment in 630 00:34:58,840 --> 00:35:03,200 Speaker 10: the defense sector, providing government money to encourage companies to 631 00:35:03,960 --> 00:35:06,400 Speaker 10: build up their capacity and do more R and D 632 00:35:06,600 --> 00:35:09,120 Speaker 10: and sort of you know, get into things like AI 633 00:35:09,200 --> 00:35:11,719 Speaker 10: and all the you know, all the modern developments in 634 00:35:12,160 --> 00:35:15,120 Speaker 10: terms of military technology. But Japan is starting from a 635 00:35:15,239 --> 00:35:19,680 Speaker 10: relatively low base, so she will, you know, no doubt 636 00:35:19,760 --> 00:35:21,719 Speaker 10: Japan will continue to spend a lot of money on 637 00:35:21,760 --> 00:35:24,720 Speaker 10: American equipment, but the long term goal is for japan 638 00:35:24,840 --> 00:35:27,640 Speaker 10: companies to be having a bigger slice of that pie. 639 00:35:28,000 --> 00:35:31,400 Speaker 4: I'm wondering as I'm listening to where the BOJ fits 640 00:35:31,400 --> 00:35:34,000 Speaker 4: into all of this. I mean, we started the conversation 641 00:35:34,080 --> 00:35:37,799 Speaker 4: by addressing higher oil prices and the inflationary impact of that. 642 00:35:38,000 --> 00:35:41,560 Speaker 4: Now Japan has been well above the boj's inflation target 643 00:35:41,640 --> 00:35:44,920 Speaker 4: for it feels like many years now. Do you have 644 00:35:44,960 --> 00:35:48,279 Speaker 4: a sense of giving everything that we're describing where the 645 00:35:48,320 --> 00:35:49,640 Speaker 4: BOJ may go from here? 646 00:35:50,760 --> 00:35:51,000 Speaker 7: Right? 647 00:35:51,120 --> 00:35:54,719 Speaker 10: So, the BOJ has a meeting on March nineteenth. They 648 00:35:54,719 --> 00:35:59,600 Speaker 10: are of course on a policy normalization course, which you 649 00:35:59,600 --> 00:36:02,040 Speaker 10: know is an the way of saying raising interest rates 650 00:36:02,080 --> 00:36:04,200 Speaker 10: because they have been very low for a long time 651 00:36:04,920 --> 00:36:08,720 Speaker 10: and it is looking for an opportunity to raise rates again. 652 00:36:08,840 --> 00:36:12,319 Speaker 10: But there's essentially a consensus that it will hold off 653 00:36:12,480 --> 00:36:15,600 Speaker 10: in March. You know, the obviously the developments in the 654 00:36:15,600 --> 00:36:18,480 Speaker 10: Middle East and the impact on oil prices and what 655 00:36:18,520 --> 00:36:21,879 Speaker 10: that might mean for inflation. You know, you would think 656 00:36:21,920 --> 00:36:24,759 Speaker 10: it would be an incentive to raise interest rates, you know, 657 00:36:24,800 --> 00:36:29,640 Speaker 10: to deal with rises in prices, but the BOJ has 658 00:36:29,719 --> 00:36:32,960 Speaker 10: made mistakes in the past where it's raised interest rates 659 00:36:33,000 --> 00:36:36,800 Speaker 10: too quickly and the economy has contracted as a result. 660 00:36:36,920 --> 00:36:39,799 Speaker 10: So it's being it's signaling that it's you know, it's 661 00:36:39,840 --> 00:36:43,600 Speaker 10: going to pay close attention to the situation. You know, 662 00:36:44,120 --> 00:36:47,480 Speaker 10: around prices and in the Middle East. But the expectations 663 00:36:47,520 --> 00:36:50,440 Speaker 10: amongst economists is for the next meeting in March nineteenth 664 00:36:50,480 --> 00:36:52,799 Speaker 10: it will hold off, and people are really looking to 665 00:36:53,160 --> 00:36:56,799 Speaker 10: perhaps the following meeting in April, when we'll have a 666 00:36:56,840 --> 00:36:59,440 Speaker 10: better sense of what the you know, the feedthrough of 667 00:37:00,280 --> 00:37:02,680 Speaker 10: the you know, the all price is going to be 668 00:37:02,760 --> 00:37:05,680 Speaker 10: and the overall inflation in picture. The BOJ will have 669 00:37:05,880 --> 00:37:07,719 Speaker 10: obviously have a lot more data on you know, the 670 00:37:07,760 --> 00:37:11,240 Speaker 10: overall economy. So we're looking at you know, the months 671 00:37:11,280 --> 00:37:13,640 Speaker 10: ahead really for the next moves to the BOJ. 672 00:37:14,080 --> 00:37:16,520 Speaker 4: And we know that takei Ichi had great success in 673 00:37:16,560 --> 00:37:19,960 Speaker 4: the recent snap election. I'm wondering about the level of 674 00:37:20,120 --> 00:37:23,360 Speaker 4: public support that she enjoys right now. Are her approval 675 00:37:23,440 --> 00:37:24,479 Speaker 4: ratings at a high level. 676 00:37:24,880 --> 00:37:27,239 Speaker 10: They are, They've come down from the you know, the 677 00:37:27,239 --> 00:37:31,600 Speaker 10: peaks around election time that was now over a month ago, 678 00:37:31,760 --> 00:37:35,840 Speaker 10: so some of the excitement around her during the election 679 00:37:36,000 --> 00:37:38,600 Speaker 10: campaign has worn off, I think, but she still has, yeah, 680 00:37:38,640 --> 00:37:42,040 Speaker 10: a very strong hand in terms of public support, you know, 681 00:37:42,280 --> 00:37:46,239 Speaker 10: and I think you know, with this huge majority that 682 00:37:46,320 --> 00:37:48,759 Speaker 10: she has in Parliament, you know, that gives her a 683 00:37:48,800 --> 00:37:52,680 Speaker 10: lot of bandwidth to push through her policy objectives. She's 684 00:37:52,680 --> 00:37:55,400 Speaker 10: talked about lots of you know, spending that's been some 685 00:37:55,480 --> 00:37:58,440 Speaker 10: of something of a concern, particularly to the bond market. 686 00:37:58,840 --> 00:38:01,319 Speaker 10: But she now has a very strong hand to do 687 00:38:01,400 --> 00:38:03,600 Speaker 10: what she wants to do, and I think going back 688 00:38:03,640 --> 00:38:06,880 Speaker 10: to her meeting with President Trump, the expectations may be 689 00:38:07,040 --> 00:38:09,799 Speaker 10: higher on the US side for her to do more, 690 00:38:09,880 --> 00:38:13,359 Speaker 10: certainly in terms of defense spending and being ambitious about 691 00:38:13,440 --> 00:38:17,200 Speaker 10: Japana having a larger regional role, because of course, you know, 692 00:38:17,280 --> 00:38:20,120 Speaker 10: that's a message that President Trump has given to its 693 00:38:20,120 --> 00:38:22,120 Speaker 10: allies that you know, we want you to do more 694 00:38:22,120 --> 00:38:24,759 Speaker 10: of the heavy lifting around the world. So I think, 695 00:38:25,200 --> 00:38:29,000 Speaker 10: you know, he will have high expectations of her doing 696 00:38:29,040 --> 00:38:31,520 Speaker 10: things along those lines, but she does have the mandate 697 00:38:31,560 --> 00:38:32,160 Speaker 10: to do that now. 698 00:38:32,320 --> 00:38:34,520 Speaker 4: Alistair will leave it there. Thank you for helping us 699 00:38:34,520 --> 00:38:37,560 Speaker 4: look ahead to the meeting between President Trump and Prime 700 00:38:37,560 --> 00:38:42,240 Speaker 4: Minister take Ichi. That's Bloomberg's Alistair Gail ikogv reporter for Japan. 701 00:38:42,280 --> 00:38:45,680 Speaker 4: He also covers security in Asia. I'm Doug Prisner. You 702 00:38:45,680 --> 00:38:48,719 Speaker 4: can catch us weekdays for the Daybreak Asia podcast. It's 703 00:38:48,760 --> 00:38:51,280 Speaker 4: available wherever you get your podcast. Nathan. 704 00:38:51,760 --> 00:38:54,080 Speaker 2: Thanks Doug Man. That does it for this edition of 705 00:38:54,120 --> 00:38:57,560 Speaker 2: Bloomberg Daybreak weekend. Join us again Monday morning at five 706 00:38:57,600 --> 00:39:00,520 Speaker 2: am Wall Street Time for the latest don market, overseas, 707 00:39:00,719 --> 00:39:03,080 Speaker 2: and the news you need to start your day. I'm 708 00:39:03,160 --> 00:39:06,120 Speaker 2: Nathan Hager. Stay with US. Top stories and global business 709 00:39:06,120 --> 00:39:07,879 Speaker 2: headlines are coming up right now.