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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. Markets

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Speaker 2: in Japan are reacting to the election over the weekend

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Speaker 2: of Sinai taka Ichi as the leader of the Liberal

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Speaker 2: Democratic Party. Take Ichi will soon become Japan's first female

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Speaker 2: prime minister, and she's likely to be supportive of more

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Speaker 2: fiscal stimulus. She's already expressed an aversion to further rate

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Speaker 2: hikes from the Bank of Japan. In a moment, we'll

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Speaker 2: get the views of Christopher Lafleur. He is the chairman

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Speaker 2: of am CHAM Japan. But we begin in Singapore with

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Speaker 2: Bloomberg's Paul Dobson. Paul is executive editor for Asia Markets. Paul,

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Speaker 2: thank you so much for being with us. Obviously, the

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Speaker 2: equity market is rallying. We've got a much weaker yeen.

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Speaker 2: It seems as though markets were a little surprised by

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Speaker 2: this outcome.

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Speaker 3: I think that you know, although Takaichi had the pulp votes,

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Speaker 3: the way that the the LDP uses its leader is

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Speaker 3: a little bit complicated and also requires lawmakers to give

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Speaker 3: their nod, and they had been seen as being more

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Speaker 3: minded to go with more of a centrist choice and hence,

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Speaker 3: you know, I think the market was caught out a

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Speaker 3: little bit by the fat attack AHG. And the end

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Speaker 3: secured the victory. And you know, what we're seeing is,

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Speaker 3: like you said, a pretty violent reaction, the end weakening

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Speaker 3: more than one percent from the open, and the flip

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Speaker 3: side of that being a rally in equities markets. And

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Speaker 3: I think that it's two things. One, she's seen as

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Speaker 3: being likely to, as you said, push for more fiscal stimulus,

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Speaker 3: which should be supportive for the economy and supported supported

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Speaker 3: for equity markets. But at the same time, if she

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Speaker 3: is discouraging in some way the Bank of Japan from

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Speaker 3: pushing those interest rates higher than that may cause the

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Speaker 3: end to weaken as we've been seeing, and that also

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Speaker 3: may help exporters in Japan when they're selling they go abroad.

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Speaker 3: The key, though, the key thing to watch is the

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Speaker 3: reaction in the bond market, which is at the moment

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Speaker 3: a little bit uncommitted. That will really tell us whether

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Speaker 3: you know, she can get away with her policies, because

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Speaker 3: if there's enough fiscal space to do it, or if

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Speaker 3: investors are going to keep on demanding higher yields, If

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Speaker 3: the Japanese government wants to increase borrowing in order to

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Speaker 3: fuel that fiscal stimulus.

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Speaker 2: Yeah, no doubt about that. But I'm curious to get

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Speaker 2: your view on the probability of the BOJ remaining on

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Speaker 2: the sidelines now in the face of inflation that's well

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Speaker 2: above target. I mean, I understand that there is concern

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Speaker 2: about trying to keep the cost of credit as low

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Speaker 2: as possible, but Japan really really doesn't have much to

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Speaker 2: worry about on a relative basis. I mean, interest rates

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Speaker 2: are still very, very low. The bigger problem is inflation.

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Speaker 3: It's true, and inflation is unpopular in Japan, and part

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Speaker 3: of what takeis she wants to do is to help

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Speaker 3: people to manage those inflation risks. So it's an interesting

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Speaker 3: one from that perspective. The Bank of Japan and has

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Speaker 3: been pretty clear and pletly adamant that as long as

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Speaker 3: the economy turns out the way that it's expecting, then

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Speaker 3: it will continue to push interest rates higher. And it

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Speaker 3: feels like it wants to raise interest rates again sooner

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Speaker 3: rather than later. You know, is going on a pretty

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Speaker 3: slow course as it adjusts to this new environment where

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Speaker 3: it's able to have higher interest rates. It's still being

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Speaker 3: very cautious in the way that it moves, and yet

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Speaker 3: you know, kind of we've heard from several policymakers that

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Speaker 3: have been hinting at the idea that it's time to

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Speaker 3: get going again. So whether the politics leaves them wanting

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Speaker 3: to wait a little bit longer and just see what

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Speaker 3: comes out before they act or not, could you know,

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Speaker 3: kind of give us some sort of way to trade

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Speaker 3: around it. And I think that people will be very

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Speaker 3: attumed to what the BOJ policymakers are saying in terms

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Speaker 3: of how they trade government bonds and currencies. Going forwards

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Speaker 3: from here.

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Speaker 2: I want to change gears talk a little bit about

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Speaker 2: the crypto space because over the weekend early Sunday in

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Speaker 2: the States, we had bitcoin setting an all time high

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Speaker 2: and the positivity seems to be continuing now in Asian trading.

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Speaker 2: What are people saying about bitcoin?

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Speaker 3: Yes, so I don't think that the two are completely unconnected, Doug.

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Speaker 3: I think, you know, one of the sort of hot

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Speaker 3: topics at the moment in not just the crypto space,

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Speaker 3: but in financial markets in general, is this idea of

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Speaker 3: a debasement trade that people don't want to own fiat

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Speaker 3: currencies and so they're looking for alternative assets to that.

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Speaker 3: Not very keen on owning the dollar because of the

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Speaker 3: pressures from the US government shut down, the disagreements there

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Speaker 3: and the fact that the Fed is going to be

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Speaker 3: cutting interest rates. Not really keen on only the yeen

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Speaker 3: And of course for all of the reasons that we

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Speaker 3: discussed about tak Aechiese government and the boj not keen

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Speaker 3: on owning the euro either. That's got its own fiscal

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Speaker 3: problems at the moment, particularly if you look at France

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Speaker 3: where the government seems to be in this complete sort

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Speaker 3: of standoff at the moment and a bit of a gridlock,

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Speaker 3: not able to get things done. British pounds, you know,

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Speaker 3: has its own problems as well that we've been talking

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Speaker 3: about for a long time. There's a budget coming up

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Speaker 3: in November that the market is anxious about. People thinking,

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Speaker 3: you know, we don't really want to own any of those.

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Speaker 3: We would much rather own gold, which continues to skyrocket higher,

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Speaker 3: pushing towards four thousand dollars. Announce we want to own

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Speaker 3: bitcoin because you know, that gets us out of the

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Speaker 3: other currency system, and so we're seeing recordis in the

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Speaker 3: crypto space as well. I think beyond that, you know,

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Speaker 3: if you look at silver and other precious metals, they're

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Speaker 3: also having a good right. So I think that you know,

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Speaker 3: that's one of the narratives, and it's standing the market

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Speaker 3: in good stead for people that are looking at alternatives

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Speaker 3: outside of the currency space.

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Speaker 2: At the moment, Well, you mentioned the government shut down

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Speaker 2: here in the US. I think it's fair to say

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Speaker 2: it's created somewhat foggy conditions given the lack of official

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Speaker 2: government data. I mean, the employment report from last Friday

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Speaker 2: has already been delayed. If this shutdown were to persist,

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Speaker 2: maybe the consumer Price Index report is in doubt that's

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Speaker 2: due on October fifteenth. The question is whether markets have

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Speaker 2: become a little complacent in the face of all of this.

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Speaker 3: So well, I suppose, you know, if you're thinking about

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Speaker 3: equity space where stocks continue to go higher, then you

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Speaker 3: could certainly detect a little bit of complacency there. Although

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Speaker 3: I think that the stocks narrative is really about this

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Speaker 3: AI enthusiasm. Every day we seem to be seeing more deals,

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Speaker 3: more agreements, more tie ups between the various players involved,

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Speaker 3: and every single one of those seems to give the

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Speaker 3: market a new catalyst for pushing towards higher highs. I think,

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Speaker 3: you know, the other thing that you have to keep

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Speaker 3: in your mind and factor into those calculations and considerations

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Speaker 3: is if the Federal Reserve policymakers don't get any more

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Speaker 3: new information from those sort of public data points and

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Speaker 3: only from the private sector surveys and so on, does

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Speaker 3: that make them less likely or more likely to continue

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Speaker 3: with the path of cutting interest rates. Feels like, you know,

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Speaker 3: if you looked at the dot plot at the end

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Speaker 3: of the last FED meeting, there were more people minded

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Speaker 3: to pursue another two cuts over the course of the year.

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Speaker 3: On the other hand, we don't know how many of

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Speaker 3: those were voting members, and some of the policymakers we've

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Speaker 3: heard from still been quite adamant about their caution over

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Speaker 3: inflation risks. So I feel like it would be a

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Speaker 3: very difficult FED decision at the end of the month

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Speaker 3: without a little bit more data. On the other hand,

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Speaker 3: if we do get that inflation data and it does

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Speaker 3: show the inflation is starting to moderate or at least

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Speaker 3: holding in check, then probably the market will believe that

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Speaker 3: the FED is going to keep on cutting interest rates,

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Speaker 3: in which case you could say that we're not complacent,

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Speaker 3: We're just reasonably priced for that.

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Speaker 2: Well, we'll see about that because at the end of

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Speaker 2: the week we'll get the Consumer Centerate survey from the

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Speaker 2: University of Michigan, So maybe a view on job opportunities

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Speaker 2: as well as inflation expectations. I have to ask you

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Speaker 2: about the higher oil price that we're seeing right now.

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Speaker 2: We had an OPEC plus meeting over the weekend. Not

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Speaker 2: really surprising that the cartel agreed to a modest increase

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Speaker 2: in production beginning in November. What are people saying about

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Speaker 2: the price action of the oil market today?

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Speaker 3: Yeah, modest, I think is the keyword to focus on

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Speaker 3: their doug because although people were expecting them to continue

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Speaker 3: to increase production that after we had the big drop

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Speaker 3: in prices over recent days, they responded by deciding, you know,

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Speaker 3: not to go full tilt on continuing to push that

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Speaker 3: output higher. And so maybe that suggests that there's a

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Speaker 3: little bit of a price floor objective some of that

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Speaker 3: sort of to play in mind at the back of

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Speaker 3: the OPEK officials minds. And therefore, you know, although we're

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Speaker 3: going to continue to see more oil seeping into the market,

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Speaker 3: you know, perhaps it will be at that slightly st

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Speaker 3: more slow, slow pace. I think it's interesting on the

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Speaker 3: supply side as well. We're continuing to see China gobble

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Speaker 3: up large amounts of the oil that's coming into the market,

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Speaker 3: and so that actually, you know, it seems like putting

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Speaker 3: it into storage most likely, although we don't have very

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Speaker 3: clear data on that, and so that seems to be

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Speaker 3: counterbalancing a little bit, or at least at helping to

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Speaker 3: provide that flaw for prices.

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Speaker 2: We'll leave it there, Paul, It's always a pleasure. Thanks

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Speaker 2: very much, Paul Dobson there. Paul is executive editor for

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Speaker 2: Asia Markets, joining from Singapore. Here on the Daybreak Asia podcast.

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

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Speaker 2: We continue now with reaction to the victory of Senai

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Speaker 2: Takichi as leader of the Liberal Democratic Party in Japan.

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Speaker 2: She's on track to become the country's first female prime minister.

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Speaker 2: For more on the election, we heard from Christopher Lafleur.

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Speaker 2: He is the chairman at the American Chamber of Commerce

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Speaker 2: in Japan. He spoke with Bloomberg TV host Cherry On

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Speaker 2: in April Hong on the Asia trade.

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Speaker 1: Give us your reaction for Satakaichi's win here because you've

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Speaker 1: had a few conversations with her over the past couple

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Speaker 1: of years already.

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Speaker 4: Certainly well over the years, and particularly when she served

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Speaker 4: as the Minister for Economic Security I in the Japanese government,

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Speaker 4: we've maintained a very good dialogue with her on the issues.

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Speaker 4: I recall personally attending a meeting it which she delivered

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Speaker 4: an excellent speech in fluent English add to our group

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Speaker 4: to reassure us the Japanese government was fully cognizant of

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Speaker 4: our concerns with regard to recently enacted Japanese economic security legislation. So,

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Speaker 4: as I say, we have a good dialogue with her

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Speaker 4: over the years, and we certainly congratulate her on becoming

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Speaker 4: the Liberal Democratic Party's first female leader. And as you've vindicated,

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Speaker 4: we'll see what the Diet decides later this month, but

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Speaker 4: of course there is high expectation that she will eventually

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Speaker 4: become the next Prime Minister of Japan.

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Speaker 1: Her fluent English, as you mentioned, could also come in

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Speaker 1: handy if she does in fact get to meet President

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Speaker 1: Trump later in the month. She has talked about potentially

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Speaker 1: renegotiating the trade deal if needed. What do you make

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Speaker 1: of that?

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Speaker 4: Well, I think that was a reference to a comment

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Speaker 4: she made in one of the debates that was held

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Speaker 4: for the LDP presidential candidates. But I think she was

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Speaker 4: carefully coveyating that, and I expect that she and her

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Speaker 4: government will continue to try to implement faithfully the agreement

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Speaker 4: between the two governments, because I'm quite confident that she

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Speaker 4: wants to maintain the best possible relationship with the United States.

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Speaker 4: You'll recall that she was a very strong supporter and

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Speaker 4: indeed served in the cabinet of former Prime Minister Abbe,

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Speaker 4: who is also well known for having a strong relationship

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Speaker 4: with President Trump. So I expect that she will start

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Speaker 4: off by having just as strong a relationship going forward.

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Speaker 5: What about the relationship with other regional trading partners, we

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Speaker 5: know what has stannced towards China.

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Speaker 3: Might look like.

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Speaker 5: Are you expecting any developments towards South Korea or even

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Speaker 5: to China against this backdrop.

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Speaker 4: My sense was that she took great care during the

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Speaker 4: party presidential campaign to avoid creating an additional tension in

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Speaker 4: Japan's relations with its East Asian neighbors, and I would

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Speaker 4: anticipate that as Prime Minister, particularly given her other priorities,

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Speaker 4: that that will continue to be her posture.

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Speaker 5: What are you hearing among businesses about the potential for

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Speaker 5: addressing some of the challenges that they're already facing, including

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Speaker 5: cost pressures or labor issues. We know what she said

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Speaker 5: previously about immigration as well.

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Speaker 4: Right, The expectation, of course, is that she's going to

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Speaker 4: pursue a more expansionary fiscal policy, and I think for

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Speaker 4: businesses in general in Japan that's going to be a positive.

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Speaker 4: You've already seen in the Tong Kan a few days

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Speaker 4: ago that Japanese business confidence is picking up now that

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Speaker 4: the US Japan tariff steel has been concluded, and I

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Speaker 4: think her ascension to the leadership will further encourage business

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Speaker 4: to invest, even as she considers ways that the government

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Speaker 4: can be more supportive.

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Speaker 1: What are some of the supportive government measures that your

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Speaker 1: business members would like to see from this new administration.

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Speaker 4: Well, we're very must focus on general business conditions in Japan,

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Speaker 4: of course, and naturally we would like to see our

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Speaker 4: markets here expand further as they do that. We also

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Speaker 4: want to continue encouraging the Japanese government to continue its

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Speaker 4: structural reform efforts. And in this area also, I think

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Speaker 4: it's important to recall that the new LDP president was

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Speaker 4: very much a supporter of former Prime Minister Abbe's Albinomics program,

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Speaker 4: which included very importantly encouraging further structural reforms in Japan.

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Speaker 4: Along those lines, we'd certainly want to encourage the Japanese

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Speaker 4: government to ensure that it's becoming economic security measures continue

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Speaker 4: to take the importance of foreign company participation and eleven

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Speaker 4: level playing field as a key element. We certainly would

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Speaker 4: like to see improved policies encouraging innovation and stable supply

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Speaker 4: in the pharmaceuticals area, and we certainly also hope that

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Speaker 4: as the Japanese economy further picks, held an even greater

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Speaker 4: market for aerospace products from US manufacturers.

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Speaker 5: Christopher, thank you so much for your insight. It's great

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Speaker 5: to hear from you on what her policies might entail

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Speaker 5: in what the business community wants to see. Christopher Laflow

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Speaker 5: is Cham d a AmCham Japan.

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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 Prisoner and this is Bloomberg