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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. We

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Speaker 2: begin with the story dominating much of the news cycle, tariffs. Today,

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Speaker 2: President Trump seemed to be sending mixed signals when it

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Speaker 2: comes to levies on European goods. He said there's still

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Speaker 2: room for trade talks with the EU, but Trump also

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Speaker 2: insisted the letters he recently sent outlining new tariff rates

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Speaker 2: are final. Well, markets seemed to look past the rhetoric.

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Speaker 2: US equities pushed higher, and in a moment we'll look

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Speaker 2: at the tariff story from the Asian perspective and part

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Speaker 2: of our conversation with the CEO of Misahu Masahiro Kihara.

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Speaker 2: But we begin here in the States. Joining me now

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Speaker 2: is Carol Schleife. She is the chief market strategist at

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Speaker 2: BEMO Private Wealth. Carol is on the line from Chicago.

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Speaker 2: Good of you to make time to chat with me.

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Speaker 2: Can we look ahead to the earnings that we're expecting

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Speaker 2: this week from the big banks. I'm curious as to

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Speaker 2: what you're expect.

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Speaker 3: Expecting good earnings because you actually saw it in the

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Speaker 3: first quarter already. You saw trading volumes doing very well.

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Speaker 3: You've seen M and A pickup. We'll be listening closely

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Speaker 3: to for the commentary around the health of the consumer,

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Speaker 3: and I think they'll be There's a lot of great

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Speaker 3: data coming out this week and having the banks kick

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Speaker 3: things off will be really interesting to watch that. But

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Speaker 3: you've also got loosened to capital requirements, so you've basically

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Speaker 3: got a lot of money burning holes in big bank

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Speaker 3: pockets and I'll want us listen to and see how

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Speaker 3: they're intending to use that.

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Speaker 2: What about the trading revenue side of the equation, given

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Speaker 2: a lot of the market volatility that we had in

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Speaker 2: Q two, I would imagine that some of these results

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Speaker 2: will be pretty robust.

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Speaker 3: Yeah, I would think that because we saw surprises already

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Speaker 3: in the first quarter, and that was before the April

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Speaker 3: second and all of the subsequent trading, and when you

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Speaker 3: think through if you remember back to that time, there

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Speaker 3: was one point in time where we went down five

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Speaker 3: percent to up five percent, all based on rumor and

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Speaker 3: take away the rumor, all in the same day, and

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Speaker 3: that trading revenue will all come into this quarter.

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Speaker 2: So I mentioned the tariff story a moment ago. Tomorrow

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Speaker 2: we get CPI here in the US, and the big

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Speaker 2: question is whether or not we're going to begin to

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Speaker 2: see evidence that companies are passing along those higher cost

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Speaker 2: of imported goods merchandise associated with the tariffs. Would that

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Speaker 2: be your expectation.

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Speaker 3: I would think we're going to see it more in

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Speaker 3: the PPI than the CPI at this point, and we

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Speaker 3: might be a quarter two or not necessarily a quarter two,

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Speaker 3: we might be a month or two away from seeing

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Speaker 3: it creep through into the CPI because you've got in

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Speaker 3: a big way because you've had a lot of companies.

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Speaker 3: Do they brought it over, they hoarded it, They've absorbed

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Speaker 3: it pretty well, but that's wearing pretty thin, and so

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Speaker 3: as opposed to looking to the aggregate numbers for it,

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Speaker 3: I think we'll be looking over the next couple of

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Speaker 3: weeks and listening really closely to what the company companies

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Speaker 3: are all saying, particularly the consumer goods companies, and how

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Speaker 3: they're able to either absorb it or pass it on.

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Speaker 2: There were some new research today coming out of twenty

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Speaker 2: two v research about what investor expectations are for the

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Speaker 2: average effective tariff rate when the dust settles. That number

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Speaker 2: is seventeen percent. That seems pretty high. Would that cause

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Speaker 2: you to kind of take a closer look at a

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Speaker 2: lot of the holdings that you have on the equity side.

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Speaker 3: Not necessarily a closer look, but we think it's pretty absorbable.

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Speaker 4: And markets may not be quite that high.

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Speaker 3: They might be more like twelve or thirteen percent, But

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Speaker 3: you know, it's just it's important that we don't lose

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Speaker 3: sight because I know the administration is very positive about

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Speaker 3: look at all the tariff revenues that are coming in,

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Speaker 3: and it's importantly not lose sight that those teriff revenues

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Speaker 3: are coming out of either consumer or business pockets in

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Speaker 3: the United States, and sooner or later that's going to

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Speaker 3: wear away at the margins. And if it's in slightly

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Speaker 3: slower growth or moderately slower growth, I think the issue

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Speaker 3: would be the market is not prepared for broader sectoral tariffs,

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Speaker 3: and we have a shot at getting some of those.

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Speaker 4: I think maybe there's partial.

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Speaker 3: Expectation too, that the longer we push out these full

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Speaker 3: country tariffs, the likelier we are to see some sort

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Speaker 3: of legal overturning. Because the testimony in those in that

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Speaker 3: case starts in I think it's July thirty.

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Speaker 2: First, so I'm wondering whether the uncertainty around tariffs and

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Speaker 2: the impact in terms of the inflationary impact or the

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Speaker 2: inflationary pressure that these tariffs may create, really keeps the

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Speaker 2: FED on the sidelines for perhaps longer than the period

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Speaker 2: that would take us through September.

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Speaker 3: Our expectation is still in September, and you may see

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Speaker 3: enough continued wear and tear on the economy by then

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Speaker 3: that the FED feels compelled to go ahead, and because

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Speaker 3: they're not necessarily going to wait for hard data to

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Speaker 3: come through, and by the time we get to September,

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Speaker 3: you will have you'll have a couple more CPI prints,

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Speaker 3: a couple more PPI prints, You'll have some data for

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Speaker 3: the FED to start looking at. And we do think

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Speaker 3: you'll see a continued deceleration if you will. We're not

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Speaker 3: looking We don't think it's recessionary, but we do think

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Speaker 3: that you're impacting the strong growth We came into January

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Speaker 3: with I.

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Speaker 2: Want to focus a little bit if we can, on

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Speaker 2: one industry, in particular, artificial intelligence. Today, Mark Zuckerberg said

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Speaker 2: that Meta is going to be building massive data centers

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Speaker 2: to power AI. Elon Musk saying that Tesla shareholders will

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Speaker 2: be voting soon on whether to invest in Musk's startup Xai,

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Speaker 2: and tomorrow in Pennsylvania, President Trump will be announcing a

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Speaker 2: seventy billion dollar investment package that will focus not only

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Speaker 2: on AI but energy generation as well. Are you still

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Speaker 2: playing this and if so, how is that unfolding in

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Speaker 2: your portfolio?

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Speaker 3: I think it's hard not to play it if you will,

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Speaker 3: in terms of I mean just owning a plan ol

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Speaker 3: INDICX fund in any of the technology names, and you're

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Speaker 3: at least market weighted, if not overweighted, in that play.

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Speaker 3: And we do think the combination of that and some

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Speaker 3: of the more pro growth, pro business friendly aspects of

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Speaker 3: the one big beautiful bill that was passed last week

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Speaker 3: or the week before, those things do put some nice

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Speaker 3: support underneath. So that's one of the reasons why we're

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Speaker 3: not out there with a massive recessionary call. And that

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Speaker 3: could help surprise relative to employment too, because you've got

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Speaker 3: tighter labor markets in there.

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Speaker 4: And if you get some support.

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Speaker 3: Where companies are hiring again because they need to hire

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Speaker 3: for construction workers, they're going to need to pay those

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Speaker 3: workers a little more than they historically have.

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Speaker 4: If you will, we're going to put up.

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Speaker 3: Those data centers leverage AI across a variety of industries,

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Speaker 3: and we don't think it's close to the final innings.

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Speaker 3: It's definitely in the early and still in terms of

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Speaker 3: the build out there in much the same way as

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Speaker 3: you're probably in the mid nineties, not the late nineties,

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Speaker 3: when we were building out the infrastructure for the Internet

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Speaker 3: to begin with.

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Speaker 2: The other thing that's happened under the Trump administration is

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Speaker 2: this embracing of cryptocurrencies. House Republicans have declared this week

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Speaker 2: as Crypto Week. We've got three bills on the agenda

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Speaker 2: on the House side. Maybe a regulatory framework begins to emerge,

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Speaker 2: and maybe some institutional investor appetite begins to occur around crypto.

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Speaker 2: And as I'm speaking to you, Carol, bitcoin is above

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Speaker 2: one hundred and twenty thousand, which is hard to believe

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Speaker 2: because when President Trump was elected to his second term,

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Speaker 2: I think bitcoin was under seventy thousand. So this has

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Speaker 2: been a pretty phenomenal run. And I'm curious as to

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Speaker 2: how you're feeling about it.

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Speaker 4: It's interesting, it's something we've watched.

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Speaker 3: It still feels like it's in the speculative zone pieces

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Speaker 3: of it, but build again, building out the infrastructure of it,

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Speaker 3: watching it, by having a regulatory.

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Speaker 4: Framework of it will help.

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Speaker 3: And I think we need to pick a handful of

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Speaker 3: industries that we want to make sure we stay at

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Speaker 3: the forefront of and you know, trying to bring some

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Speaker 3: battery technology back, whether it's restarting some of the nuclear energy,

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Speaker 3: because it's one thing. All of this stuff is going

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Speaker 3: to take energy on the grid and we're not going

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Speaker 3: to get there just by.

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Speaker 4: Pumping oil and drilling coal.

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Speaker 2: Okay, Carol, We'll leave it there. Thank you so very much.

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Speaker 2: Carol Schleife. She is the chief market strategist at BEMO

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Speaker 2: Private Wealth. Joining us here on the Daybreak Asia podcast.

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Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Doug Krisner,

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Speaker 2: the CEO of Japan's third largest bank, says the US

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Speaker 2: will continue to be an important trading partner for Japan

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Speaker 2: even with tariff uncertain still. Misuvo CEO Masahiro Kihara says

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Speaker 2: Japan will need to diversify away from its second biggest

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Speaker 2: trading partner. Kihara spoke with Bloomberg's friends in Laquaw in London. Here.

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Speaker 1: As part of their conversation, mister Kihara Thank you so

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Speaker 1: much for speaking to us here at Bloomberg. Now, how

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Speaker 1: confident are you about reaching the one trillion en profit

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Speaker 1: within a few years given all the global uncertainty and

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Speaker 1: given what we heard on tariffs and trade.

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Speaker 5: Thank you very much for having me. In fact, I

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Speaker 5: think from a current earning profile, I think we have

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Speaker 5: almost reached one trillion. Again, actually we had eight hundred

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Speaker 5: last year. We had eight hundred eighty billion. We took

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Speaker 5: one time losses around somewhere around one hundred and twenty

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Speaker 5: billion actually, so I think in reality we reached one trillion.

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Speaker 5: Thanks for all the you know, circumstances.

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Speaker 1: But what does the uncertainty do? The uncertainty surrounding some

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Speaker 1: of the Trump policy and trading.

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Speaker 5: Yes, yes, so before April second, we were aiming on

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Speaker 5: somewhere around one point one trillion for this year. Actually, however,

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Speaker 5: because of all the uncertaintyes, we sort of shrink it

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Speaker 5: down from as a conservative base to nine hundred and

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Speaker 5: fifty trillion. I'm sorry, nine hundred and fifty billion yen.

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Speaker 5: But I think you know, when things get certain, the

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Speaker 5: corporate action will come back, which means that we can

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Speaker 5: wratchet up a little bit. Yeah, our guide.

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Speaker 1: So where are you seeing that uncertainty play into right now?

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Speaker 1: Is it loans? Is it cheap executives not spending, not

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Speaker 1: deploying cash?

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Speaker 5: Yes, right now, the CEOs are very very on the sidelines. Actually,

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Speaker 5: But for example, if it is a domestic deal, even

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Speaker 5: in each region, if it is a domestic deal, things

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Speaker 5: are happening, which means that we don't see a lot

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Speaker 5: of crossworder happening right now. All of them are. We

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Speaker 5: have a big chunk of pipeline, but they're not executed.

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Speaker 5: But from a domestically perspective, people are moving a little bit,

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Speaker 5: so I think, you know, there is a good chance

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Speaker 5: that people will get confident at some point.

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Speaker 1: You've also built up a US investment bank basically franchise.

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Speaker 1: How's that going?

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Speaker 5: So we're started from building the capital markets by ourself.

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Speaker 5: We went to equity capital markets, M and A was

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Speaker 5: missing for us, but we purchased Greenhill, and I think

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Speaker 5: at this moment we have the necessary pieces on the

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Speaker 5: ground actually, so I'm very very looking forward to see

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Speaker 5: the synergies between our former missile platform and the Green

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Speaker 5: Hill platform to materialize.

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Speaker 1: Actually, do you plan to take the model of the

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Speaker 1: successful investment bank that you build and actually apply it elsewhere,

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Speaker 1: including an Asia.

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Speaker 5: Yes, so we would like to uh sort of use

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Speaker 5: our US capabilities transplanted to Europe Asia and so that

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Speaker 5: the also even in Japan, so that there will be

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Speaker 5: cross regional collaboration between our regions and so that and

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Speaker 5: I think that will bring our next growth.

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Speaker 1: Actually, how much of your growth will be organic and

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Speaker 1: how much will be through mergers and acquisitions.

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Speaker 5: From now on on. I think we did the Green

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Speaker 5: Hill deal. It's very important that we make sure that

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Speaker 5: the synergies will be built out and for us, the

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Speaker 5: next growth will basically be organic.

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Speaker 1: Okay, because you said in the past that you weren't

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Speaker 1: used to or you didn't want to, for example, interested

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Speaker 1: in buying some traditional commercial banks with a physical branch network.

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Speaker 1: So that's still that's still the case. That's that's still

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Speaker 1: the case. But how do you seem it's so changing

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Speaker 1: actually in the next four to five years.

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Speaker 5: Yeah, So, I mean there are a couple of areas

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Speaker 5: that should be interesting for us, just as I said, UH,

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Speaker 5: investment banking, regional collaboration that will bring a lot of

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Speaker 5: synergies inside our institution. Also, as you may know, as

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Speaker 5: a management. Wealth management is growing in Japan and this

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Speaker 5: will be another area and also one of one more

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Speaker 5: area that will be very interesting will be Japanese midcaps actually,

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Speaker 5: so the medcaps are keen to grow or if they

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Speaker 5: can outgrow, they might deal list. And there are a

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Speaker 5: couple many corporate actions happening in that space. So I

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Speaker 5: think this will be another interesting area for US.

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Speaker 1: Is competition very fierce in wealth management?

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Speaker 5: Yes, it is very high competitive, but I think the

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Speaker 5: thing is that the overall market is growing and that

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Speaker 5: is beneficial for all of the banks.

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Speaker 4: I think yeah.

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Speaker 1: And on the medcap is there something so if it,

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Speaker 1: will it be basically lending that they need or all services?

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Speaker 5: As they grow there will be advisory and also lending,

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Speaker 5: so both how.

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Speaker 1: Do you see them? You know, Japanese landscape for businesses changing,

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Speaker 1: how much will they look? I mean Japan has been

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Speaker 1: a great experiment right in terms of financials for a

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Speaker 1: lot of time. Yes, is it companies that will then

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Speaker 1: grow also abroad as economy stabilizes.

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Speaker 5: I would say that if right now there's many uncertainties,

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Speaker 5: but things get clearer, the corporate action will come back.

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Speaker 5: These couple of years, we have seen many corporate actions

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Speaker 5: happening investing outside Japan, you know, changing their business s, portfolio,

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Speaker 5: misk selling parts of the business that they are not

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Speaker 5: doing well, so concentrating the areas that has strengths. So

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Speaker 5: I would say that once things get clearer, corporate action

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Speaker 5: will come back and many you know, Japanese corporates will

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Speaker 5: try to invest in outside of Japan too.

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Speaker 1: Are you confident in the Japanese economy overall? Over?

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Speaker 5: I think we still have strengths in the economy sectors

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Speaker 5: that we have, so I think over we are very

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Speaker 5: I am very confident in that. The thing is that

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Speaker 5: we have to concentrate our resources in the area that

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Speaker 5: we have strengths. We have high quality manufacturing, high quality

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Speaker 5: you know products, So I think we need to figure

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Speaker 5: out where the strengths are and try to sell it

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Speaker 5: to the world.

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Speaker 1: Do you worry or are there dangers actually to Japan

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Speaker 1: given the spike and long term interest rates.

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Speaker 5: Yes, so twenty years so for the long end es

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Speaker 5: for the twenty years thirty years, there has been spike

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Speaker 5: and there has been volatility, but I think the government

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Speaker 5: said that they will try to shift the issuance to

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Speaker 5: a ten years below. I think that BOJ is a

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Speaker 5: little bit shrinking, is qt. I think that will help.

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Speaker 1: Is there a point where it actually starts shirting your

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Speaker 1: business and starts shirting the real economy?

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Speaker 5: Well, I think BOJ is saying that the neutral rate

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Speaker 5: is somewhere around one point one percent to one point

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Speaker 5: five percent, and on top of that, ten years will

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Speaker 5: be somewhere around two to two point two five percent.

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Speaker 5: Then I think that that's the level that is okay.

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Speaker 5: But if it goes beyond to three percent or so,

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Speaker 5: they will then hurt the budget.

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Speaker 1: I think, are you expecting more turmoil in you know,

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Speaker 1: in the end, but also not in the bond.

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Speaker 5: Market, not at this moment. Actually, I think the current

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Speaker 5: level of one point four one point five for ten

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Speaker 5: years is very It's okay, I think, you know, and

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Speaker 5: we have I haven't seen any turmol in the ten

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Speaker 5: years old. So as long as the ten year is fine,

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Speaker 5: I think it's fine.

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Speaker 2: That is masahiro Kihara, the CEO of Misoho, speaking with

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Speaker 2: Bloomberg's friend Sine Laqua here on the Daybreak Asia podcast.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg