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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters

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Speaker 1: on Katherine, Calgary. Wall Street is extending its recent advance

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Speaker 1: that benchmarks are approaching their records as traders push back

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Speaker 1: bets on higher interest rates. Chemical and mining companies are

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Speaker 1: leading away, and energy companies are climbing along with the

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Speaker 1: price of oil. After new home prices rose by the

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Speaker 1: fastest pace in eight years in June, a new survey

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Speaker 1: showed US homebuilders are feeling more optimistic about the market.

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Speaker 1: We check the markets every fifteen minutes throughout the trading

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Speaker 1: day on Bloomberg Radio. The DAW Industrial Average is up

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Speaker 1: seventy five points four tons of a percent, trading at

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Speaker 1: eighteen thousand, six hundred fifty one. SMP five founded up

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Speaker 1: eight points a third of a percent. The NAZDAC is

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Speaker 1: up thirty two points two thirds of a percent, trading

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Speaker 1: at fifty two sixty five. West typsis Centermedia. Crude oil

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Speaker 1: up at dollar nineteen and barrel two point seven percent

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Speaker 1: to forty five sixty eight. It's back World is up

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Speaker 1: two dollars sixty and the tenure Treasury down ten thirty

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Speaker 1: seconds with the yeld of one. And that's a Bloomberg

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Speaker 1: business flash. This is taking stock with Pim Box and

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Speaker 1: Kathleen Hayes on Bloomberg Radio. The Japanese economy it is sputtering.

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Speaker 1: Is it's spluttering to a halt? Or will government stimulus

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Speaker 1: fix the economy? Here to tell us more as Tobias Harris.

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Speaker 1: He is japan analyst and vice president for ten Ao

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Speaker 1: Intelligence based in Washington, d C. Home to Bloomberg and

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Speaker 1: one oh five point seven h D two and he

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Speaker 1: can be followed on Twitter at Observing Japan. Tobias, thanks

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Speaker 1: for being with us, you know, and trying to understand

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Speaker 1: exactly what went on in the Japanese economy in the

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Speaker 1: second quarter. I ended up reading a lot about a

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Speaker 1: leap year, low income households, and statistical problems. What is

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Speaker 1: up with the GDP report from Japan. So we look

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Speaker 1: at the numbers and it looks like pretty much everything

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Speaker 1: was flat or slightly negative except the housing number. And

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Speaker 1: when you think about it, the housing number actually makes

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Speaker 1: sense because that would be the first time where we

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Speaker 1: start really seeing the effect of the negative negative interest

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Speaker 1: rate cut that took effect in mid February, and so

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Speaker 1: as those interest rates came down, a lot of people

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Speaker 1: decided to refinance, and as corporate as corporates rolled over

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Speaker 1: the loans, they took advantage of those lower rates, and

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Speaker 1: so you started to see I mean, this is something

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Speaker 1: that Krota has talked about that eventually we'd start seeing

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Speaker 1: the effects of negative interest rates in certain parts of

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Speaker 1: the economy. So that showed up in this form. But

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Speaker 1: does that get Japan any closer towards positive inflation? It

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Speaker 1: didn't look like it. Well. In fact, our bloom Big

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Speaker 1: intelligence team I give them hats off in Tokyo because

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Speaker 1: they put together a number of interesting slides. And when

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Speaker 1: you look at real wages, when you look at the

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Speaker 1: GDP to flatter versus GDP, everything is either moving in

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Speaker 1: the wrong direction or just not moving up enough. Yeah

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Speaker 1: is yeah, absolutely, And I think you know what we're

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Speaker 1: really seeing too, is just how much the experiment has

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Speaker 1: depended on the fact that they got the end down

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Speaker 1: as far as they did in the first couple of years.

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Speaker 1: And as it's come back up, you're seeing corporate profits

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Speaker 1: going down, and that means you're not going to see

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Speaker 1: wages going up. I mean, it's just this virtuous cycle

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Speaker 1: that Ab talked about over and over again. I mean

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Speaker 1: they needed, uh the end to say the levels that

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Speaker 1: it reached last year when it got below it's not

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Speaker 1: it's not going back that direction, and they're extremely constrained

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Speaker 1: in the tools that they have to get back to

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Speaker 1: those levels. And so as long as that's going to

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Speaker 1: be the case, you're gonna look at the situation where

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Speaker 1: they're gonna they're gonna be spinning their wheels and it

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Speaker 1: doesn't really look like fiscal stimulus that they've put out

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Speaker 1: is the answer to the to the problem. So why

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Speaker 1: go ahead and spend two hundred and seventy six billion dollars.

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Speaker 1: I mean, that's the amount that Prime Minister Shinzo AB's

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Speaker 1: cabinet approved in early August as the stimulus package. Well,

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Speaker 1: so that should be caveatic because they're not actually going

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Speaker 1: to spend that much. Three quarters of that amount of

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Speaker 1: money is actually coming uh in the forms of loans

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Speaker 1: from public financial institutions in the timeline for getting those

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Speaker 1: loans out, and you know they're gonna be prepaid. I mean,

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Speaker 1: there's it's a that I mean, you have to you

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Speaker 1: have to ring fence that because that actually is not

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Speaker 1: straight up stimulus. In fact, there's a lot of hocus

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Speaker 1: pocus going on when it comes to what number we

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Speaker 1: should actually be talking about. The number we should be

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Speaker 1: talking about is probably more like seven trillion in in

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Speaker 1: which is gonna be divided between a supplemental budget that

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Speaker 1: will be passed during the diet session that starts next month,

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Speaker 1: and then some left over for the general budget next year.

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Speaker 1: So we're talking about a very different number than what

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Speaker 1: the headline figure was. Well, you know, um terrific story

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Speaker 1: widely read on the Bloomberg terminal today the Tokyo Whales

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Speaker 1: Unstoppable rise to shareholder number one in Japan, and it's

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Speaker 1: Tokyo Whale as its Bank of Japan. The story poets

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Speaker 1: points out that the b o J, through its purchases

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Speaker 1: of ets, this is part of its plan to stimulate

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Speaker 1: the economy by you know, increasing UH risk appetite, boosting

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Speaker 1: stocks top five O of eighty one companies in Japan's

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Speaker 1: nick average. Many experts in this right question if this

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Speaker 1: is a proper role for a central bank. Yeah, and

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Speaker 1: you can. And that article I think was really great

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Speaker 1: in pointing out some of the downside risk that on

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Speaker 1: the one hand, you know, is this going to be

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Speaker 1: government intrusion in management to the private sector. On the

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Speaker 1: other hand, if having the b o J sit on

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Speaker 1: all these stocks, does that decrease pressure on managers to

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Speaker 1: improve returns and to actually make their companies better? I mean,

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Speaker 1: does it undercut the corporate government push that we've been

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Speaker 1: getting from the Abbe government. And so, I mean it

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Speaker 1: does seem like a incredibly problematic shift. And and and

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Speaker 1: also it just doesn't seem like it's gonna be it's

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Speaker 1: going to do the job when it comes to getting

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Speaker 1: inflation up. I mean, I think the portfolio rebalanced channel

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Speaker 1: that we've seen with Quanta City Easing hasn't quite done

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Speaker 1: the job over the last few years, and it seemed

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Speaker 1: like this was more of a placehold to policy. I mean,

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Speaker 1: the expectations were so high going into the meeting last month.

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Speaker 1: I think the b o J had to do something.

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Speaker 1: But obviously now the question is we're going to see

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Speaker 1: this review had at the September meeting, And that's the

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Speaker 1: real question. I mean, is there anything more in Corolla's

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Speaker 1: bag of tricks that that to get inflation expectations going

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Speaker 1: in the right direction. I'm skeptical, but you know, I

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Speaker 1: don't think July is the end of the discussion went

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Speaker 1: as far as monetary policy goes Tobias, if one of

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Speaker 1: your clients called you and asked for the same information

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Speaker 1: on a regular basis, and they took that information and

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Speaker 1: the results were terrible, wouldn't they change what they were doing,

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Speaker 1: or wouldn't they listen to someone else? Why are all

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Speaker 1: these central banks continuing to just do more of the

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Speaker 1: same when the results have been terrible? You know, I

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Speaker 1: think if there's a certain amount of path dependency, I mean,

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Speaker 1: I think in terms of the Abbe Crooda partnership, I mean,

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Speaker 1: at this point, I mean, if there was an abandonment

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Speaker 1: of this course of action, or if Abby decided that

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Speaker 1: he'd had enough of Kuroota and he was going to

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Speaker 1: replace him, I mean that that blows up in Abbey's face.

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Speaker 1: I mean this, you know, at this point, for better

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Speaker 1: or worse, Abbey is committed to abbeomics, He's committed to

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Speaker 1: leaving Japan better and he found it. I mean, whether

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Speaker 1: that's going to happen or not, you know, at this point,

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Speaker 1: he has no choice but going forward, lets he faced

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Speaker 1: opposition within his ruling party. Lets the opposition go after

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Speaker 1: his government in the diet. I mean, unfortunately his hands

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Speaker 1: are tied when it comes to a real course correction.

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Speaker 1: It is an exciting if you're excited that I do

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Speaker 1: about montery policy and economies. It's a very exciting situation

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Speaker 1: in Japan. So many cross currents and Tobias Harris today

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Speaker 1: helping us UH see where Japan is in terms of

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Speaker 1: the economy and growth in montery policy and where it

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Speaker 1: may be heading. He's japan analyst at to Neo Intelligence.

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Speaker 1: I'm Kathleen Hayes along with Pim Fox. This is taking

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Speaker 1: Stock on Bloomberg Radio. Keep it right here. This is

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Speaker 1: We're gonna be speaking with the chief financial officer of

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