1 00:00:00,240 --> 00:00:07,680 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,400 --> 00:00:13,319 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:13,400 --> 00:00:15,960 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:16,040 --> 00:00:18,560 Speaker 2: all around the world. Straight Ahead on the program, we'll 5 00:00:18,560 --> 00:00:21,640 Speaker 2: look to US non farm payrolls for November and earnings 6 00:00:21,640 --> 00:00:24,960 Speaker 2: from sneaker giant Nike. I'm Nathan Hager in Washington. 7 00:00:25,120 --> 00:00:27,760 Speaker 3: I'm Callie hepkea Hey in London, where we discussed at 8 00:00:27,760 --> 00:00:32,240 Speaker 3: Europe's business and political challenges in the face of US criticism. 9 00:00:32,440 --> 00:00:34,960 Speaker 4: I've Dot Krisner looking at the likelihood of a rate 10 00:00:35,040 --> 00:00:36,560 Speaker 4: increase from the Bank of Japan. 11 00:00:38,240 --> 00:00:42,280 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 12 00:00:42,320 --> 00:00:46,000 Speaker 1: eleven three year, New York, Bloomberg ninety nine to one, Washington, DC, 13 00:00:46,520 --> 00:00:51,520 Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syria 14 00:00:51,800 --> 00:00:55,320 Speaker 1: XM one twenty one, and around the world on Bloomberg Radio, 15 00:00:55,360 --> 00:00:57,560 Speaker 1: dot Com and the Bloomberg Business app. 16 00:01:02,760 --> 00:01:05,360 Speaker 2: Good day to you. I'm Nathan Hagar. We begin today's 17 00:01:05,400 --> 00:01:09,280 Speaker 2: program with US jobs numbers. Non farm payrolls for the 18 00:01:09,319 --> 00:01:12,720 Speaker 2: month of November are due out Tuesday at eight thirty am. 19 00:01:12,760 --> 00:01:15,119 Speaker 2: Wall Street Time For more and what to expect. We're 20 00:01:15,200 --> 00:01:19,080 Speaker 2: joined by Michael McKee, international economics and policy correspondent for 21 00:01:19,080 --> 00:01:23,399 Speaker 2: Bloomberg Radio and Television. First off, Mike, I don't really 22 00:01:23,440 --> 00:01:28,040 Speaker 2: remember having a job's Tuesday before the government shutdowns really 23 00:01:28,120 --> 00:01:29,400 Speaker 2: changed things, an't it? 24 00:01:29,400 --> 00:01:31,440 Speaker 5: It really has? Somebody said the other day, given the 25 00:01:31,520 --> 00:01:33,959 Speaker 5: schedule for the releasing all the data that we didn't 26 00:01:33,959 --> 00:01:37,480 Speaker 5: get before, that it's soon going to be twenty twenty six, 27 00:01:37,560 --> 00:01:40,640 Speaker 5: except at the Bureau of Labor Statistics, we'll still be 28 00:01:40,680 --> 00:01:42,600 Speaker 5: twenty twenty five for quite some time. 29 00:01:43,040 --> 00:01:47,080 Speaker 2: So what are we expecting with the numbers do out 30 00:01:47,520 --> 00:01:51,280 Speaker 2: this coming Tuesday on a delayed schedule then. 31 00:01:51,680 --> 00:01:53,320 Speaker 5: Well, to be totally honest, we're expecting a lot of 32 00:01:53,360 --> 00:01:57,560 Speaker 5: confusion because what they're doing is trying to put out 33 00:01:57,600 --> 00:02:01,960 Speaker 5: as much of the October report in terms of the 34 00:02:02,080 --> 00:02:05,760 Speaker 5: Establishment survey, where they count how many jobs as they can, 35 00:02:05,960 --> 00:02:09,280 Speaker 5: but they don't have complete data. And then they're going 36 00:02:09,360 --> 00:02:14,640 Speaker 5: to put out the November payrolls report with most of 37 00:02:14,680 --> 00:02:17,200 Speaker 5: the data that they need, but we're going to have 38 00:02:17,240 --> 00:02:21,120 Speaker 5: to parse two months there together, and some of it 39 00:02:21,160 --> 00:02:24,480 Speaker 5: won't even the data won't even be there, so we're 40 00:02:24,480 --> 00:02:25,720 Speaker 5: going to have to take it with a bit of 41 00:02:25,760 --> 00:02:29,360 Speaker 5: a grain of salt, but it will give us a 42 00:02:29,400 --> 00:02:32,200 Speaker 5: better view of sort of where we are right now. 43 00:02:32,200 --> 00:02:33,760 Speaker 5: The biggest issue is going to come on the other 44 00:02:33,840 --> 00:02:36,720 Speaker 5: side the household survey, which gives us the unemployment rate, 45 00:02:36,720 --> 00:02:39,320 Speaker 5: because there's no data for October, so they've got to 46 00:02:39,400 --> 00:02:42,720 Speaker 5: jump right into November, and they didn't get started questioning 47 00:02:42,760 --> 00:02:46,919 Speaker 5: people until the end of November, which creates some statistical 48 00:02:47,600 --> 00:02:53,919 Speaker 5: anomalies that are probably too nerdy to talk about. But 49 00:02:54,760 --> 00:02:58,520 Speaker 5: it's going to be a rough report to make a 50 00:02:58,520 --> 00:02:59,040 Speaker 5: lot out of. 51 00:02:59,280 --> 00:03:03,520 Speaker 2: Okay, So since we have those holes in the household survey, 52 00:03:04,000 --> 00:03:06,359 Speaker 2: even with the November numbers coming out, does that raise 53 00:03:06,400 --> 00:03:09,239 Speaker 2: some questions in the market about what the reliability even 54 00:03:09,280 --> 00:03:10,200 Speaker 2: of the November data. 55 00:03:11,080 --> 00:03:14,840 Speaker 5: It should and J. Powell in his news comforts this 56 00:03:14,919 --> 00:03:17,880 Speaker 5: past week said the very same thing, that the FED 57 00:03:18,000 --> 00:03:21,000 Speaker 5: is going to have to really analyze this and not 58 00:03:21,080 --> 00:03:24,200 Speaker 5: take it at face value because they understand the statistical 59 00:03:24,240 --> 00:03:25,560 Speaker 5: issues that are involved. 60 00:03:26,080 --> 00:03:26,240 Speaker 1: Now. 61 00:03:26,280 --> 00:03:29,040 Speaker 5: The good thing is for the FED they don't meet 62 00:03:29,080 --> 00:03:34,560 Speaker 5: again until January twenty eighth, and so therefore they will 63 00:03:34,560 --> 00:03:37,480 Speaker 5: have the December numbers, which will be a complete report 64 00:03:37,760 --> 00:03:40,480 Speaker 5: at least to go on before they have to make 65 00:03:40,520 --> 00:03:44,400 Speaker 5: another decision, but we will get more information than we 66 00:03:44,520 --> 00:03:48,120 Speaker 5: have had, and in certain categories of jobs, will get 67 00:03:48,400 --> 00:03:50,560 Speaker 5: good information because a lot of that stuff comes in 68 00:03:50,640 --> 00:03:54,480 Speaker 5: electronically wasn't affected by the government shutdown. But there will 69 00:03:54,520 --> 00:03:57,119 Speaker 5: be gaps in the numbers for October November. 70 00:03:57,400 --> 00:03:59,760 Speaker 2: So in terms of the gaps that are meant to 71 00:03:59,760 --> 00:04:03,240 Speaker 2: be filled here, what particularly are you looking for that 72 00:04:03,520 --> 00:04:06,400 Speaker 2: is going to be filled in and what's your expectation there. 73 00:04:07,000 --> 00:04:13,320 Speaker 5: Big companies, manufacturing companies, people like that, and large retailers. 74 00:04:13,760 --> 00:04:16,479 Speaker 5: They have computerized records that they send in to the 75 00:04:16,480 --> 00:04:20,720 Speaker 5: Bureau Labor Statistics, so those kinds of numbers will show up. 76 00:04:20,920 --> 00:04:23,520 Speaker 5: It's going to be harder for them to count things 77 00:04:23,600 --> 00:04:28,799 Speaker 5: that are at small businesses which are surveyed but don't 78 00:04:28,839 --> 00:04:35,320 Speaker 5: necessarily send in their stuff electronically, or construction workers because 79 00:04:35,360 --> 00:04:38,599 Speaker 5: they're sort of itinerant and can be from job to job. 80 00:04:39,040 --> 00:04:41,360 Speaker 5: And home healthcare workers, now that's going to be interesting 81 00:04:41,400 --> 00:04:45,320 Speaker 5: because home healthcare has been the biggest job creator in 82 00:04:45,320 --> 00:04:48,719 Speaker 5: the last few years, and so we might get a 83 00:04:48,760 --> 00:04:51,799 Speaker 5: distorted number there that would kind of throw off the total. 84 00:04:52,240 --> 00:04:54,640 Speaker 2: In terms of the data that we've gotten from the 85 00:04:54,640 --> 00:04:59,440 Speaker 2: private sector, so far, we've seen all sorts of ADP figures, 86 00:04:59,480 --> 00:05:03,640 Speaker 2: the Challenge Grain, Christmas layoff notices as well. What does 87 00:05:03,680 --> 00:05:06,800 Speaker 2: that tell us about what we could see from the 88 00:05:06,839 --> 00:05:08,760 Speaker 2: rest of the data that's coming from the BLS. 89 00:05:09,200 --> 00:05:11,159 Speaker 5: I think all that will tell you is that they 90 00:05:11,240 --> 00:05:14,760 Speaker 5: sort of confirm the idea that the hiring environment has 91 00:05:14,839 --> 00:05:18,720 Speaker 5: slowed a lot. Neither one of them is a particularly 92 00:05:18,800 --> 00:05:23,440 Speaker 5: good predictor of what the overall BLS numbers will be. 93 00:05:24,400 --> 00:05:28,680 Speaker 5: It's just kind of gives you some data. They give 94 00:05:28,720 --> 00:05:32,400 Speaker 5: you a direction, but not necessarily a magnitude. So I 95 00:05:32,440 --> 00:05:35,599 Speaker 5: don't think we go into it with a completely clear 96 00:05:36,040 --> 00:05:38,640 Speaker 5: expectation for what the numbers are going to be. The 97 00:05:38,839 --> 00:05:43,240 Speaker 5: consensus forecast at Bloomberg has absolutely economists is for forty 98 00:05:43,320 --> 00:05:47,120 Speaker 5: thousand jobs, but again, you know that's combining two months, 99 00:05:47,120 --> 00:05:49,120 Speaker 5: so there might be job losses in one month and 100 00:05:49,200 --> 00:05:52,120 Speaker 5: job gains in another month, and it's really hard to 101 00:05:52,480 --> 00:05:55,359 Speaker 5: know where we end up. You kind of just have 102 00:05:55,440 --> 00:05:56,520 Speaker 5: to take it as it comes. 103 00:05:56,920 --> 00:05:59,040 Speaker 2: And you mentioned that there's going to be kind of 104 00:05:59,080 --> 00:06:02,479 Speaker 2: a hole in the unemployment rate with the household survey 105 00:06:02,680 --> 00:06:05,280 Speaker 2: on hold due to the shutdown, But what's the trend 106 00:06:05,720 --> 00:06:08,080 Speaker 2: when it comes to the unemployment rate. Are we seeing 107 00:06:08,120 --> 00:06:10,520 Speaker 2: more people getting into the job market. 108 00:06:11,240 --> 00:06:14,720 Speaker 5: Well, we see the last data we have is from September, 109 00:06:14,760 --> 00:06:17,839 Speaker 5: and more people did go into the labor market, and 110 00:06:17,839 --> 00:06:19,960 Speaker 5: that's one reason that the unemployment rate went up a 111 00:06:19,960 --> 00:06:23,400 Speaker 5: bit in September. We don't know what has happened since. 112 00:06:23,440 --> 00:06:25,440 Speaker 5: And one of the issues is of course that the 113 00:06:25,680 --> 00:06:30,279 Speaker 5: administration is deporting as many people as they can, deport 114 00:06:30,360 --> 00:06:32,840 Speaker 5: as fast as they can, and that's cutting down on 115 00:06:32,880 --> 00:06:35,320 Speaker 5: the size of the labor force. But we don't have 116 00:06:35,520 --> 00:06:39,640 Speaker 5: exact figures, so that will also be an interesting aspect 117 00:06:39,839 --> 00:06:44,200 Speaker 5: of these reports to see whether or not we're losing 118 00:06:44,279 --> 00:06:48,240 Speaker 5: workers or losing potential workers because they have been kicked 119 00:06:48,240 --> 00:06:52,919 Speaker 5: out of the country. That would raise probably raise the 120 00:06:53,120 --> 00:06:57,280 Speaker 5: unemployment rate. So there are some other concerns. One thing 121 00:06:57,320 --> 00:07:00,840 Speaker 5: I didn't mention is that a lot of the people 122 00:07:00,880 --> 00:07:05,200 Speaker 5: who were fired by DOGE or took early retirement because 123 00:07:05,320 --> 00:07:07,560 Speaker 5: they thought they were going to get fired, They were 124 00:07:07,600 --> 00:07:09,720 Speaker 5: on the payrolls till the end of the fiscal year, 125 00:07:10,200 --> 00:07:14,400 Speaker 5: which was September thirtieth, so we could see a big 126 00:07:14,520 --> 00:07:18,840 Speaker 5: drop in government payrolls in the month of October, and 127 00:07:18,920 --> 00:07:22,480 Speaker 5: that would have the effect of depressing the whole thing, 128 00:07:23,080 --> 00:07:29,320 Speaker 5: and it might increase unemployment numbers some but it looks 129 00:07:29,360 --> 00:07:31,800 Speaker 5: like at this point not a whole lot. But it 130 00:07:31,840 --> 00:07:35,280 Speaker 5: does complicate even more the whole task of sorting all 131 00:07:35,280 --> 00:07:35,720 Speaker 5: this out. 132 00:07:36,080 --> 00:07:39,200 Speaker 2: Now lots to sort out. I had of jobs Tuesday. 133 00:07:39,480 --> 00:07:43,760 Speaker 2: Thanks Mike, appreciate this. That's Michael McKee, Bloomberg International Economics 134 00:07:43,800 --> 00:07:47,920 Speaker 2: and Policy correspondent. We moved next to corporate earnings from Nike, 135 00:07:48,200 --> 00:07:51,960 Speaker 2: the sneaker giant report's second quarter results on Thursday. For 136 00:07:52,080 --> 00:07:54,800 Speaker 2: more on what to expect, it's got to be Putam Goyle, 137 00:07:54,960 --> 00:07:58,400 Speaker 2: senior US e commerce and retail analysts at Bloomberg Intelligence, 138 00:07:58,680 --> 00:08:01,520 Speaker 2: put them thanks for being here. The Swish has kind 139 00:08:01,520 --> 00:08:04,440 Speaker 2: of been crushed lightly by the competition, hasn't it. So 140 00:08:04,960 --> 00:08:06,800 Speaker 2: what are we expecting this time around from Nike? 141 00:08:07,320 --> 00:08:07,520 Speaker 6: Yeah? 142 00:08:07,560 --> 00:08:10,080 Speaker 7: I think right now we're just holding tight, kind of 143 00:08:10,080 --> 00:08:12,960 Speaker 7: waiting for the turnaround to take shape. We think Nike 144 00:08:13,400 --> 00:08:17,120 Speaker 7: is making all the right moves to get itself back 145 00:08:17,160 --> 00:08:20,720 Speaker 7: on track. That said, earnings will be a little light, 146 00:08:21,040 --> 00:08:24,200 Speaker 7: and that's as expected. We do expect sales to fall 147 00:08:24,400 --> 00:08:27,440 Speaker 7: turn negative again in fiscal two Q slipping by low 148 00:08:27,480 --> 00:08:30,400 Speaker 7: single digits and that's after it posted a slight gain 149 00:08:30,640 --> 00:08:33,719 Speaker 7: in the last quarter. I'm not so worried about that. 150 00:08:33,840 --> 00:08:38,560 Speaker 7: My main concern is, is Nike moving forward on clearing inventories. 151 00:08:39,120 --> 00:08:42,200 Speaker 7: Is Nike innovating to draw full price sales of the 152 00:08:42,240 --> 00:08:44,520 Speaker 7: new stuff that it's introducing and it is. 153 00:08:45,080 --> 00:08:47,680 Speaker 2: So you say that Nike is doing the right things 154 00:08:47,760 --> 00:08:50,760 Speaker 2: to do that turnaround, talk a little bit more about 155 00:08:50,840 --> 00:08:54,200 Speaker 2: what you're seeing. Why you think Nike might be getting 156 00:08:54,280 --> 00:08:57,800 Speaker 2: back on the front foot to keep using puns. 157 00:08:58,240 --> 00:09:01,400 Speaker 7: Yeah, I guess you know. The big II guest move 158 00:09:01,480 --> 00:09:04,720 Speaker 7: for me that they are making to right size the 159 00:09:04,760 --> 00:09:10,079 Speaker 7: brand is right sizing inventories. Inventories have been very elevated 160 00:09:10,120 --> 00:09:13,280 Speaker 7: for Nike for a few years now, and just bringing 161 00:09:13,320 --> 00:09:16,280 Speaker 7: them down and really getting them to realign with sales 162 00:09:16,480 --> 00:09:19,600 Speaker 7: is the number one factor that I'm looking for, to 163 00:09:19,760 --> 00:09:22,200 Speaker 7: have them kind of pick out everything that's old, that 164 00:09:22,280 --> 00:09:25,120 Speaker 7: they made too much of and that wasn't working, to 165 00:09:25,200 --> 00:09:28,480 Speaker 7: really bring in the new stuff more mainstream. The other 166 00:09:28,600 --> 00:09:31,360 Speaker 7: thing is innovation. So when you think about what Nike 167 00:09:31,559 --> 00:09:34,360 Speaker 7: was doing just you know, three to five years ago, 168 00:09:34,760 --> 00:09:37,800 Speaker 7: it was just introducing the same thing with a different 169 00:09:37,840 --> 00:09:40,320 Speaker 7: color wave. That's simply I mean they were doing a 170 00:09:40,320 --> 00:09:42,880 Speaker 7: lot of other things, but there just wasn't as much 171 00:09:42,920 --> 00:09:47,160 Speaker 7: innovation as the customer demanded. I think that's changing. I 172 00:09:47,200 --> 00:09:50,679 Speaker 7: think they are adding more performance, more innovation to their 173 00:09:50,720 --> 00:09:53,880 Speaker 7: product lineup. I also think that they're going back on 174 00:09:53,920 --> 00:09:56,880 Speaker 7: the playing field. So you know, one question that I 175 00:09:56,880 --> 00:10:01,480 Speaker 7: get asked often is how did Life let Hoka and 176 00:10:01,559 --> 00:10:05,559 Speaker 7: the ads take share from it? And the best answer 177 00:10:05,600 --> 00:10:08,080 Speaker 7: I could give is it's because they weren't on the field. 178 00:10:08,360 --> 00:10:10,760 Speaker 7: They weren't where the runners were. They kind of took 179 00:10:10,760 --> 00:10:13,760 Speaker 7: a back seat in the sport and they focused on 180 00:10:13,800 --> 00:10:17,560 Speaker 7: digital too aggressively. That's all changed. They're back on the field, 181 00:10:17,679 --> 00:10:21,640 Speaker 7: they're at the runs, they have shoes that the runners 182 00:10:21,679 --> 00:10:24,760 Speaker 7: are wearing, they're showing off and quite honestly, they are 183 00:10:24,920 --> 00:10:27,920 Speaker 7: competitive and they are just as good, if not better 184 00:10:27,960 --> 00:10:29,960 Speaker 7: than some of what's out there in the competition. 185 00:10:30,160 --> 00:10:32,439 Speaker 2: Well, that's been the thing, right because there has been 186 00:10:32,480 --> 00:10:36,160 Speaker 2: so much attention on these upstart sneaker makers. You mentioned 187 00:10:36,160 --> 00:10:38,720 Speaker 2: Hoka and On coming out with these more I guess 188 00:10:38,760 --> 00:10:42,079 Speaker 2: innovative products compared to what Nike's product line has been 189 00:10:42,120 --> 00:10:44,840 Speaker 2: over the last few years. What is it that Nike's doing, 190 00:10:44,880 --> 00:10:48,520 Speaker 2: What kind of changes. Is it making to sort of 191 00:10:48,600 --> 00:10:49,920 Speaker 2: meet up with that competition. 192 00:10:50,559 --> 00:10:53,880 Speaker 7: It's being where the runners are. It's very simple. It's 193 00:10:53,920 --> 00:10:55,640 Speaker 7: back to one on one. It's we need to be 194 00:10:55,920 --> 00:10:59,079 Speaker 7: on the running grounds. We need to be at the races. 195 00:10:59,400 --> 00:11:01,800 Speaker 7: We need to have the runners wear our shoes and 196 00:11:02,600 --> 00:11:05,520 Speaker 7: believe that they are the best shoes or that's for 197 00:11:06,080 --> 00:11:08,280 Speaker 7: They're doing all of that now. It's just a matter 198 00:11:08,320 --> 00:11:10,000 Speaker 7: of time. I think we'll start to see it in 199 00:11:10,040 --> 00:11:11,960 Speaker 7: the results. The other thing I would say is, you know, 200 00:11:12,000 --> 00:11:15,120 Speaker 7: we talk about these emerging brands or I guess these 201 00:11:15,520 --> 00:11:18,440 Speaker 7: newer brands taking share, but when you think of the 202 00:11:18,480 --> 00:11:22,320 Speaker 7: market share that Nike holds given its size, it's still 203 00:11:22,400 --> 00:11:25,760 Speaker 7: the number one footwear brand in the world. And we 204 00:11:25,840 --> 00:11:30,160 Speaker 7: ran a survey at BI just last month asking consumers, 205 00:11:30,880 --> 00:11:34,760 Speaker 7: when you shop for sneakers, especially athletic sneakers, who do 206 00:11:34,800 --> 00:11:38,800 Speaker 7: you wear? Nike was still number one, And yes, Toka 207 00:11:38,840 --> 00:11:42,920 Speaker 7: and On are definitely gaining traction, but Nike leads still 208 00:11:42,920 --> 00:11:43,960 Speaker 7: by a wide margin. 209 00:11:44,920 --> 00:11:47,680 Speaker 2: Is Nike putting out the kind of product that sneaker 210 00:11:47,720 --> 00:11:50,600 Speaker 2: heads are still willing to pay top dollar for. I 211 00:11:50,640 --> 00:11:55,360 Speaker 2: know some of these models can really drive into pretty 212 00:11:55,440 --> 00:11:58,440 Speaker 2: high price points. Is that something that Nike is able 213 00:11:58,480 --> 00:11:58,800 Speaker 2: to meet. 214 00:11:59,200 --> 00:12:00,719 Speaker 7: Yeah, I think so. And if you think about the 215 00:12:00,760 --> 00:12:04,480 Speaker 7: price points that Nike is launching these new products, that 216 00:12:04,760 --> 00:12:08,040 Speaker 7: they're pretty competitive with what's out there in the competition. 217 00:12:08,520 --> 00:12:11,040 Speaker 7: So they The nice thing about Nike is that they 218 00:12:11,160 --> 00:12:13,760 Speaker 7: have a range of price points, right, So if you 219 00:12:13,800 --> 00:12:16,680 Speaker 7: want to buy sneakers starting at seventy eighty dollars, you 220 00:12:16,760 --> 00:12:18,679 Speaker 7: can at that one hundred dollars price point, but you 221 00:12:18,720 --> 00:12:20,880 Speaker 7: can go as high as up to two forty two 222 00:12:20,920 --> 00:12:24,520 Speaker 7: fifty two for like the most premium sneaker that they offer. 223 00:12:24,840 --> 00:12:27,440 Speaker 7: And when you think about the competition, I think they 224 00:12:27,480 --> 00:12:29,959 Speaker 7: do too. Offer sneakers, you know, in the one hundred 225 00:12:30,000 --> 00:12:31,920 Speaker 7: and forty hundred and sixty a north of two hundred 226 00:12:31,960 --> 00:12:34,400 Speaker 7: dollars range and depending on the style that you're looking at. 227 00:12:34,720 --> 00:12:37,240 Speaker 2: Really appreciate this, Punum, thanks again for being with us. 228 00:12:37,360 --> 00:12:40,720 Speaker 2: That's Punam Goyle, senior US e Commerce and retail analyst 229 00:12:40,840 --> 00:12:44,280 Speaker 2: at Bloomberg Intelligence. And coming up on Bloomberg Day Break weekend, 230 00:12:44,360 --> 00:12:47,320 Speaker 2: we'll look at Europe's business and political challenges in the 231 00:12:47,360 --> 00:12:51,920 Speaker 2: face of US criticism. I'm Nathan Hager, and this is Bloomberg. 232 00:13:03,840 --> 00:13:06,800 Speaker 2: This is Bloomberg Daybreak weekend our global look ahead at 233 00:13:06,840 --> 00:13:09,360 Speaker 2: the top stories for investors in the coming week. I'm 234 00:13:09,440 --> 00:13:12,280 Speaker 2: Nathan Hager in Washington. Up later in the program, we'll 235 00:13:12,280 --> 00:13:15,360 Speaker 2: look at whether the Bank of Japan will raise interest rates. 236 00:13:15,600 --> 00:13:19,000 Speaker 2: But first, in the coming days, global leaders convene in 237 00:13:19,040 --> 00:13:21,800 Speaker 2: France at the Conference of Paris. It is an annual 238 00:13:21,840 --> 00:13:24,920 Speaker 2: gathering in the City of Light which encourages knowledge sharing 239 00:13:24,960 --> 00:13:28,200 Speaker 2: on economic, social and environmental issues in the hope of 240 00:13:28,200 --> 00:13:32,199 Speaker 2: collaboration to overcome the world's challenges. I Meanwhile, political leaders 241 00:13:32,240 --> 00:13:35,200 Speaker 2: are gearing up for the European Council meetings, where priorities 242 00:13:35,240 --> 00:13:38,280 Speaker 2: will be on Ukraine and its security. For more, Let's 243 00:13:38,320 --> 00:13:41,960 Speaker 2: go to London and bring in Bloomberg Daybreak europe Anker Caroline. 244 00:13:41,520 --> 00:13:46,679 Speaker 3: Hepger Nathan Europe is facing complicated times a week economy, 245 00:13:46,800 --> 00:13:49,760 Speaker 3: the war in Ukraine, and a strained relationship with the 246 00:13:49,800 --> 00:13:55,320 Speaker 3: Trump White House, three persistent and intertwined challenges the continent 247 00:13:55,360 --> 00:13:59,160 Speaker 3: has grappled with throughout twenty twenty five. The region's leaders 248 00:13:59,200 --> 00:14:02,480 Speaker 3: are deeply concerned by US efforts to end the nearly 249 00:14:02,559 --> 00:14:05,960 Speaker 3: four years long conflict in Ukraine by cutting a deal 250 00:14:06,000 --> 00:14:10,720 Speaker 3: with the aggressor Russia. But what action can European leaders take? 251 00:14:11,440 --> 00:14:14,960 Speaker 3: From JD Vance's speech at the Munich Security Conference in 252 00:14:15,000 --> 00:14:19,440 Speaker 3: February through to the thirty three page national Security strategy 253 00:14:19,880 --> 00:14:25,440 Speaker 3: signed by President Trump that claims Europe risks civilizational erasure, 254 00:14:25,960 --> 00:14:29,880 Speaker 3: the issue for Europe, according to JP Morgan CEO Jamie Darmon, 255 00:14:30,480 --> 00:14:36,040 Speaker 3: is anti business, bureaucracy, internal fragmentation, and a lack of innovation. 256 00:14:36,560 --> 00:14:39,640 Speaker 3: He told Bloomberg's Caroline Hyde that Europe needs to make 257 00:14:39,840 --> 00:14:41,560 Speaker 3: serious changes to survive. 258 00:14:42,360 --> 00:14:44,560 Speaker 8: I think Europe has a real problem. You know, it's 259 00:14:44,640 --> 00:14:46,280 Speaker 8: very hard to look at the world and you know, 260 00:14:46,480 --> 00:14:49,520 Speaker 8: have we have movie tectonic plays you've seen, you've heard 261 00:14:49,680 --> 00:14:53,440 Speaker 8: spoken about AI, the enemies in the satellite up above 262 00:14:53,640 --> 00:14:56,320 Speaker 8: and in your computer systems right now, you know, and 263 00:14:57,360 --> 00:14:59,960 Speaker 8: the world change, the other tectonic plays, a rise of China, 264 00:15:00,640 --> 00:15:05,280 Speaker 8: huge global deficits, social network programs that probably can't be 265 00:15:05,360 --> 00:15:08,880 Speaker 8: maintained over a long period of time. So Europe has 266 00:15:08,920 --> 00:15:11,800 Speaker 8: a problem. I think they accomplished an unbelievable thing with 267 00:15:11,960 --> 00:15:15,280 Speaker 8: when they put the euro got together the EC and 268 00:15:15,320 --> 00:15:17,440 Speaker 8: they said, you know, let's live in peace and not war. 269 00:15:17,520 --> 00:15:19,040 Speaker 8: You know, they had World War One and World War two, 270 00:15:19,080 --> 00:15:22,040 Speaker 8: but they had them. They frankop Preussian Wars, the Napoleonic Wars, 271 00:15:22,040 --> 00:15:23,920 Speaker 8: the One Hundred Years of War, the War the Roses, 272 00:15:24,320 --> 00:15:26,080 Speaker 8: you know, and so living in piece is a good thing, 273 00:15:26,320 --> 00:15:29,600 Speaker 8: but it got bogged down. They never finished the Common Market. 274 00:15:30,320 --> 00:15:33,520 Speaker 8: It takes twenty seven nations, you know, to make a decision. 275 00:15:34,520 --> 00:15:39,440 Speaker 8: They let their military drop dramatically. It's very bureaucratically wide. 276 00:15:39,520 --> 00:15:41,480 Speaker 8: Part of the reason that, you know, they lost Britain 277 00:15:41,560 --> 00:15:43,600 Speaker 8: to the EU, which I think makes it bad for 278 00:15:43,640 --> 00:15:45,560 Speaker 8: both of them, by the way, And so you got 279 00:15:45,600 --> 00:15:48,120 Speaker 8: to be honest about this. So in those tectonic plays 280 00:15:48,280 --> 00:15:51,920 Speaker 8: may move over twenty years, but if we ever write 281 00:15:51,960 --> 00:15:54,640 Speaker 8: a book about how the West was lost, it will 282 00:15:54,680 --> 00:15:57,200 Speaker 8: be because of the following. It will because of we 283 00:15:57,240 --> 00:15:59,200 Speaker 8: didn't get her act together here, and we go through 284 00:15:59,200 --> 00:16:01,920 Speaker 8: all the policies here, that we didn't have the strongest 285 00:16:01,960 --> 00:16:04,240 Speaker 8: military in the world, and that we allowed Europe to 286 00:16:04,280 --> 00:16:05,200 Speaker 8: fall apart. 287 00:16:05,360 --> 00:16:08,000 Speaker 3: That was JP Morgan CEO Jamie Dimond speaking there to 288 00:16:08,000 --> 00:16:13,400 Speaker 3: Bloomberg's Caroline Hyde. At the Reagan National Defense Forum, questions 289 00:16:13,440 --> 00:16:17,840 Speaker 3: of European security and collaboration with the US will be 290 00:16:18,040 --> 00:16:21,920 Speaker 3: major points of discussion at the Conference of Paris in 291 00:16:21,960 --> 00:16:25,360 Speaker 3: the next few days. Speakers include Bruno Lemaire, the former 292 00:16:25,400 --> 00:16:29,160 Speaker 3: French Economy and Finance Minister, and Ken Griffin, CEO and 293 00:16:29,200 --> 00:16:32,160 Speaker 3: founder of Citadel. It's also an issue that will be 294 00:16:32,200 --> 00:16:35,080 Speaker 3: on the minds of leaders at the upcoming EU Leader's 295 00:16:35,160 --> 00:16:38,680 Speaker 3: Summit in Brussels. Well, joining me now for more is 296 00:16:38,720 --> 00:16:43,640 Speaker 3: Ben Sils, Bloomberg's managing editor for European Government and Economy. Ben, 297 00:16:43,720 --> 00:16:46,240 Speaker 3: good to speak to you. Firstly, I'd just like your 298 00:16:46,280 --> 00:16:50,520 Speaker 3: reaction to what Jamie Diamond had to say. Really, his 299 00:16:50,640 --> 00:16:54,560 Speaker 3: comments have dominated news in Europe over the past few days, 300 00:16:54,600 --> 00:16:57,160 Speaker 3: saying that Europe has a big problem. What do you 301 00:16:57,200 --> 00:17:00,960 Speaker 3: think the response and the thinking is in Brussels and 302 00:17:01,000 --> 00:17:02,200 Speaker 3: across Europe. 303 00:17:02,600 --> 00:17:06,240 Speaker 6: Well, I think he's right. For starters, I think most people, 304 00:17:06,720 --> 00:17:10,720 Speaker 6: most European officials will recognize that he's right. He's not 305 00:17:10,760 --> 00:17:14,040 Speaker 6: the first person to say this, but when somebody as 306 00:17:15,040 --> 00:17:18,880 Speaker 6: influential as Jamie Dammon makes that sort of comment so publicly, 307 00:17:18,920 --> 00:17:25,160 Speaker 6: it has to sting. I think that will it will 308 00:17:25,160 --> 00:17:29,159 Speaker 6: it lead to a bit more soul searching. I'm not 309 00:17:29,200 --> 00:17:31,320 Speaker 6: really sure. To be honest, I think that the Draggy 310 00:17:31,400 --> 00:17:37,840 Speaker 6: report last year was arguably a more substantial and more 311 00:17:37,920 --> 00:17:43,359 Speaker 6: kind of conspicuous call to arms for European officials, and 312 00:17:43,400 --> 00:17:46,119 Speaker 6: the progress on the back of that has been limited, 313 00:17:46,680 --> 00:17:51,399 Speaker 6: and the progress on so many of the critical files 314 00:17:51,400 --> 00:17:57,120 Speaker 6: for the European Union has has continued to be kind 315 00:17:57,119 --> 00:18:01,920 Speaker 6: of plagued by the same old problems of the need 316 00:18:02,000 --> 00:18:06,960 Speaker 6: for consensus, like the divisions over the sort of kind 317 00:18:06,960 --> 00:18:09,480 Speaker 6: of vision of the sort of European economy that people 318 00:18:09,520 --> 00:18:12,440 Speaker 6: want to build and that just kind of constantly holds 319 00:18:12,560 --> 00:18:14,560 Speaker 6: the European Union back. 320 00:18:14,800 --> 00:18:18,080 Speaker 3: Do you think that it is something that European leaders 321 00:18:18,080 --> 00:18:22,240 Speaker 3: are going to think about at this EU Council meeting 322 00:18:22,600 --> 00:18:24,600 Speaker 3: or at the conference of Paris, where we're going to 323 00:18:24,640 --> 00:18:30,840 Speaker 3: see again a number of leading US CEOs speaking to Bloomberg, 324 00:18:31,080 --> 00:18:34,800 Speaker 3: speaking to the investor community. We know that the drug 325 00:18:34,960 --> 00:18:40,680 Speaker 3: report has has not perhaps had the galvanizing impact that maybe, 326 00:18:40,800 --> 00:18:43,800 Speaker 3: you know, the former ECV president might have wanted to see. 327 00:18:44,040 --> 00:18:47,000 Speaker 6: I would imagine it's likely to be a topic for 328 00:18:47,040 --> 00:18:51,680 Speaker 6: discussion on the sidelines. I would imagine that Emmanuel Macran, 329 00:18:52,000 --> 00:18:56,120 Speaker 6: who is always one for articulating his grand vision, might 330 00:18:56,240 --> 00:18:58,440 Speaker 6: be talking about those sorts of issues. But what we've 331 00:18:58,480 --> 00:19:03,159 Speaker 6: seen some after some is that Macran's rhetoric is not 332 00:19:04,080 --> 00:19:10,119 Speaker 6: successful in persuading the rest of the European leadership to 333 00:19:10,560 --> 00:19:13,600 Speaker 6: kind of come along and to take decisions. And we've 334 00:19:13,600 --> 00:19:16,959 Speaker 6: got we've got the very kind of concrete, tangible decision 335 00:19:16,960 --> 00:19:18,959 Speaker 6: on the table of what they're going to do about Ukraine, 336 00:19:19,040 --> 00:19:22,400 Speaker 6: what are they going to do about the frozen Russian assets. 337 00:19:22,720 --> 00:19:25,280 Speaker 6: And that's the real test if the if the Europeans 338 00:19:25,359 --> 00:19:28,480 Speaker 6: want to prove at this moment, when the White House 339 00:19:28,560 --> 00:19:31,000 Speaker 6: is really stepping up its push for a settlement of 340 00:19:31,040 --> 00:19:34,680 Speaker 6: the of the war in Ukraine, the single most important 341 00:19:34,680 --> 00:19:37,439 Speaker 6: thing that Europeans can do is find a way to 342 00:19:38,080 --> 00:19:43,600 Speaker 6: supply for substantial amounts of additional financing to Kiev with 343 00:19:43,760 --> 00:19:46,520 Speaker 6: this mechanism based on the frozen Russian assets. And they've 344 00:19:46,560 --> 00:19:49,840 Speaker 6: been going around around in circles on that for months, 345 00:19:51,040 --> 00:19:53,520 Speaker 6: so now it's really time for them to deliver on 346 00:19:53,560 --> 00:19:54,040 Speaker 6: that one. 347 00:19:54,320 --> 00:19:57,000 Speaker 3: And that again is the issue that President Trump rays 348 00:19:57,200 --> 00:20:01,320 Speaker 3: also just in the past few days, sizing the talk 349 00:20:01,520 --> 00:20:06,119 Speaker 3: the lack of action as he sees it, also again 350 00:20:06,280 --> 00:20:11,320 Speaker 3: using this very strong, very critical language about Europe. It 351 00:20:11,359 --> 00:20:14,639 Speaker 3: really does seem that the Trump White House has the 352 00:20:14,680 --> 00:20:18,159 Speaker 3: EU in its sights and he's talking about European nations, 353 00:20:18,840 --> 00:20:25,280 Speaker 3: decaying this also must have an impact on leaders in 354 00:20:25,320 --> 00:20:27,720 Speaker 3: Europe too. I mean, I just note that the former 355 00:20:27,760 --> 00:20:32,520 Speaker 3: EU diplomaut Joseph Burrell saying European leaders must stop pretending 356 00:20:32,880 --> 00:20:36,919 Speaker 3: that Trump is not our adversary. Are we at that 357 00:20:37,080 --> 00:20:37,720 Speaker 3: point yet? 358 00:20:38,359 --> 00:20:43,960 Speaker 6: The Trump administration, I mean, their rhetoric flips back and 359 00:20:44,000 --> 00:20:47,840 Speaker 6: forth a little bit, but we heard. I was at 360 00:20:48,000 --> 00:20:50,960 Speaker 6: the Munich Security Conference in February where j. D Rans 361 00:20:51,000 --> 00:20:58,120 Speaker 6: delivered that really shocking speech attacking the European Union, attacking 362 00:20:58,400 --> 00:21:03,440 Speaker 6: the kind of the democratic norms on which European societies 363 00:21:04,600 --> 00:21:12,560 Speaker 6: are based. And it was pretty clear then that any support, 364 00:21:13,119 --> 00:21:17,480 Speaker 6: any kind of legacy support that the Europeans were going 365 00:21:17,520 --> 00:21:20,359 Speaker 6: to be getting from the US was going to be 366 00:21:20,520 --> 00:21:23,879 Speaker 6: kind of limited, qualified and certainly not something that you 367 00:21:23,920 --> 00:21:26,679 Speaker 6: could count on. And we've seen that come back with 368 00:21:26,680 --> 00:21:32,240 Speaker 6: a vengeance with the US National Security Strategy, which came 369 00:21:32,280 --> 00:21:37,159 Speaker 6: out last week with that really quite shocking language about 370 00:21:37,280 --> 00:21:43,960 Speaker 6: civilizational Erasia, and you know, following up with those with 371 00:21:44,240 --> 00:21:47,360 Speaker 6: Trump's comments in his interview this week about the weakness 372 00:21:47,200 --> 00:21:50,600 Speaker 6: of European leaders. I have to say I've lived in 373 00:21:50,640 --> 00:21:54,560 Speaker 6: Europe for more than twenty years, and I don't see 374 00:21:54,720 --> 00:21:59,000 Speaker 6: much sign of civilizational Erasia. But I do think he's 375 00:21:59,080 --> 00:22:00,880 Speaker 6: right when he says that the European leaders a week 376 00:22:00,880 --> 00:22:02,760 Speaker 6: and I think that they've been demonstrating that with their 377 00:22:02,800 --> 00:22:06,520 Speaker 6: failure to must have proper support for Ukraine despite all 378 00:22:06,560 --> 00:22:07,040 Speaker 6: of their talk. 379 00:22:07,920 --> 00:22:12,280 Speaker 3: H Yes, I suppose you know to that that raises 380 00:22:12,359 --> 00:22:17,560 Speaker 3: issues around migration anti immigration within Europe. But also, as 381 00:22:17,600 --> 00:22:22,560 Speaker 3: you say, the litmus test is Ukraine in the next 382 00:22:22,560 --> 00:22:25,680 Speaker 3: few days, what do you think is going to change 383 00:22:25,720 --> 00:22:29,800 Speaker 3: who is maybe best to engage with President Trump on 384 00:22:29,840 --> 00:22:32,479 Speaker 3: the European side. The European has been trying to get 385 00:22:32,520 --> 00:22:37,840 Speaker 3: into that negotiation, that process of the US wanting to 386 00:22:37,880 --> 00:22:41,760 Speaker 3: get to a deal with Moscow, but it's about speed 387 00:22:41,840 --> 00:22:42,800 Speaker 3: and who engages. 388 00:22:43,960 --> 00:22:47,840 Speaker 6: Yeah, I think that it's pretty clear by this stage 389 00:22:47,840 --> 00:22:51,879 Speaker 6: in the process that if the Europeans want to have 390 00:22:51,920 --> 00:22:55,199 Speaker 6: a seat at the table, they need to earn that 391 00:22:55,560 --> 00:23:04,000 Speaker 6: by putting down some either some serious support, whether that's money, 392 00:23:04,400 --> 00:23:08,760 Speaker 6: whether that's weapons, whether that's political commitment, whether that's boots 393 00:23:08,760 --> 00:23:11,760 Speaker 6: on the ground in Ukraine. They need to be making 394 00:23:12,200 --> 00:23:15,920 Speaker 6: a real kind of concrete commitment to Ukraine, which will 395 00:23:15,960 --> 00:23:21,360 Speaker 6: demonstrate to the US to Russia, to the Ukrainians that 396 00:23:21,400 --> 00:23:28,880 Speaker 6: the Europeans are serious and serious about taking unilateral measures 397 00:23:29,080 --> 00:23:34,000 Speaker 6: outside of the kind of US umbrella to defend and 398 00:23:34,119 --> 00:23:38,960 Speaker 6: promote their own interests. And so far we haven't seen that. 399 00:23:39,640 --> 00:23:42,080 Speaker 3: I think. I don't know for sure, but I think 400 00:23:42,119 --> 00:23:44,679 Speaker 3: it would have flown a little bit more under the radar. 401 00:23:44,840 --> 00:23:49,040 Speaker 3: Again in recent days the address that the Chance of Germany, 402 00:23:49,280 --> 00:23:55,159 Speaker 3: Friedrich Mertz, made on TV to German voters in the 403 00:23:55,200 --> 00:23:59,560 Speaker 3: last few days, where actually he was, you know, kind 404 00:23:59,560 --> 00:24:02,679 Speaker 3: of count entering what was happening in the US and 405 00:24:02,760 --> 00:24:07,280 Speaker 3: was a little bit critical, i'd say, even fairly critical 406 00:24:07,520 --> 00:24:10,840 Speaker 3: of the United States. And I think again, there are 407 00:24:11,000 --> 00:24:13,840 Speaker 3: moves in Europe to spend a lot more on defense, 408 00:24:15,080 --> 00:24:17,880 Speaker 3: and just in the last few few days that has 409 00:24:17,960 --> 00:24:23,480 Speaker 3: been commitment by Germany to build out its conventional armed forces. 410 00:24:24,880 --> 00:24:27,360 Speaker 3: So there is a response that is happening, isn't there 411 00:24:27,400 --> 00:24:28,000 Speaker 3: in Europe? 412 00:24:29,359 --> 00:24:32,680 Speaker 6: Yeah, that's right actually, and I think German defense spending. 413 00:24:32,720 --> 00:24:36,479 Speaker 6: If you're looking for arguments to support the idea that 414 00:24:36,520 --> 00:24:39,399 Speaker 6: the Europeans are getting serious, then German defense spending is 415 00:24:39,440 --> 00:24:44,239 Speaker 6: that should be top of the list. The increase in 416 00:24:44,400 --> 00:24:49,040 Speaker 6: German defense spending is significant, it's real, it's happening, and 417 00:24:49,119 --> 00:24:55,560 Speaker 6: it's going to have a meaningful impact on European security 418 00:24:56,119 --> 00:25:00,600 Speaker 6: in the next decade. And that's, you know, without doubt, 419 00:25:01,320 --> 00:25:09,240 Speaker 6: Matt's biggest achievement. I would say, be in a difficult 420 00:25:09,280 --> 00:25:10,199 Speaker 6: first year in office. 421 00:25:11,640 --> 00:25:13,800 Speaker 3: Ben, thank you so much for being with us. There'll 422 00:25:13,800 --> 00:25:18,480 Speaker 3: be plenty then for both Europe's political and business and 423 00:25:18,560 --> 00:25:21,320 Speaker 3: finance leaders to think about in the next few days, 424 00:25:21,359 --> 00:25:24,199 Speaker 3: with a couple of big events in Europe. Ben Sils 425 00:25:24,200 --> 00:25:28,760 Speaker 3: is Bloomberg's Managing editor for European Politics and Economy. Thank you. 426 00:25:29,840 --> 00:25:32,240 Speaker 3: We will have full coverage in the next few days 427 00:25:32,280 --> 00:25:35,040 Speaker 3: of the Conference of Paris with our own franc In 428 00:25:35,160 --> 00:25:39,160 Speaker 3: Laqua and Danny Berger and the EU Leader's summit right 429 00:25:39,200 --> 00:25:42,399 Speaker 3: here on Bloomberg Radio. I'm Caroline Hepget in London. You 430 00:25:42,400 --> 00:25:45,560 Speaker 3: can catch us every weekday morning for Bloomberg Daybreak Europe, 431 00:25:45,680 --> 00:25:48,040 Speaker 3: beginning at six am in London. That's one am on 432 00:25:48,119 --> 00:25:48,600 Speaker 3: Wall Street. 433 00:25:48,840 --> 00:25:52,679 Speaker 2: Nathan, Thanks Caroline, and coming up on Bloomberg Daybreak weekend, 434 00:25:52,720 --> 00:25:55,159 Speaker 2: we look ahead to a monetary policy decision from the 435 00:25:55,200 --> 00:25:59,320 Speaker 2: Bank of Japan. I'm Nathan Hagger and this is Bloomberg. 436 00:26:10,520 --> 00:26:13,560 Speaker 2: This is Bloomberg day Break weekend, our global look ahead 437 00:26:13,560 --> 00:26:15,880 Speaker 2: at the top stories for investors in the coming week. 438 00:26:16,040 --> 00:26:18,800 Speaker 2: I'm Nathan Hagger in Washington. In the coming days, the 439 00:26:18,800 --> 00:26:22,320 Speaker 2: Bank of Japan is expected to raise its policy interest rate. 440 00:26:22,560 --> 00:26:24,480 Speaker 2: For a closer look, let's bring in the host of 441 00:26:24,520 --> 00:26:27,719 Speaker 2: the Daybreak Asia podcast, Doug Krisner, Nathan. 442 00:26:27,760 --> 00:26:30,800 Speaker 4: Over the last month, we have seen more bets placed 443 00:26:30,880 --> 00:26:34,040 Speaker 4: on a BOJ rate hike in the coming week. Right now, 444 00:26:34,080 --> 00:26:38,080 Speaker 4: the swaps market has assigned a ninety one percent probability 445 00:26:38,080 --> 00:26:40,720 Speaker 4: of a twenty five basis point increase. Now, if that 446 00:26:40,840 --> 00:26:44,200 Speaker 4: comes to pass, it would take the boj's policy rate 447 00:26:44,240 --> 00:26:47,359 Speaker 4: to seventy five basis points, and that would be a 448 00:26:47,520 --> 00:26:50,840 Speaker 4: thirty year high. Just a month ago, the probability of 449 00:26:50,840 --> 00:26:53,680 Speaker 4: a rate hike was less than fifty percent. Let's take 450 00:26:53,720 --> 00:26:57,080 Speaker 4: a closer look now at the dynamics surrounding the boj's 451 00:26:57,119 --> 00:27:00,960 Speaker 4: decision with Bloomberg's Paul Jackson. Paul cover the economies of 452 00:27:01,040 --> 00:27:03,680 Speaker 4: Japan and South Korea, and he joins us from our 453 00:27:03,720 --> 00:27:06,240 Speaker 4: studios in Tokyo. Thank you for making time. Can you 454 00:27:06,280 --> 00:27:09,159 Speaker 4: help me understand how we got to a ninety one 455 00:27:09,240 --> 00:27:12,919 Speaker 4: percent probability when a short while ago, the probability was 456 00:27:13,000 --> 00:27:14,119 Speaker 4: less than fifty percent. 457 00:27:14,640 --> 00:27:17,679 Speaker 9: Well, it all relates really to a speech at the 458 00:27:17,680 --> 00:27:22,199 Speaker 9: beginning of December by a Bank of Japan governor Kazuo Uida, 459 00:27:23,000 --> 00:27:26,560 Speaker 9: in which he said the central Bank would consider the 460 00:27:26,560 --> 00:27:30,119 Speaker 9: pros and cons of raising interest rates at its next meeting. 461 00:27:30,480 --> 00:27:36,560 Speaker 9: Now that is seen as key language hinting at a 462 00:27:36,960 --> 00:27:42,160 Speaker 9: rate hike. Subsequently, Bloomberg reported that key government officials would 463 00:27:42,160 --> 00:27:46,440 Speaker 9: not try to block a rate hike, and also separately 464 00:27:46,960 --> 00:27:50,040 Speaker 9: we reported that officials at the bank were ready to 465 00:27:50,560 --> 00:27:53,840 Speaker 9: raise the rate, and so that has had a dramatic 466 00:27:53,880 --> 00:27:59,320 Speaker 9: effect on expectations for a rate hike at the upcoming meeting. 467 00:27:59,560 --> 00:28:03,120 Speaker 4: Is there any conversation around the possibility that the BOJ 468 00:28:03,359 --> 00:28:05,080 Speaker 4: may have fallen a bit behind the curve. 469 00:28:05,520 --> 00:28:13,199 Speaker 9: Absolutely, Obviously, We've seen comments from American officials, including Scott Pssant, 470 00:28:13,240 --> 00:28:17,000 Speaker 9: about the risk of falling behind and whether the BOJ 471 00:28:17,240 --> 00:28:22,280 Speaker 9: is acting fast enough. We have inflation at three percent. 472 00:28:22,680 --> 00:28:24,439 Speaker 9: I don't know about you, Doug, but to me that 473 00:28:24,600 --> 00:28:27,879 Speaker 9: seems to be higher than the Bank of Japan's two 474 00:28:27,920 --> 00:28:31,040 Speaker 9: percent target. And you know what, he's been there for 475 00:28:31,119 --> 00:28:34,000 Speaker 9: more than three and a half years, so in terms 476 00:28:34,040 --> 00:28:39,000 Speaker 9: of conventional policy making, you would want to raise rates 477 00:28:39,040 --> 00:28:45,040 Speaker 9: to cool inflation. And you know, just another perspective on 478 00:28:45,080 --> 00:28:49,840 Speaker 9: this is that with inflation at three percent, if your inflation, 479 00:28:50,040 --> 00:28:53,120 Speaker 9: if you're a central bank rate, even if you raise 480 00:28:53,200 --> 00:28:57,000 Speaker 9: it to zero point seventy five percent, you're still way 481 00:28:57,200 --> 00:29:00,920 Speaker 9: below the inflation rate. That means real interest rates are 482 00:29:01,600 --> 00:29:06,520 Speaker 9: deeply zero. And to extend that model a bit further, 483 00:29:07,000 --> 00:29:10,720 Speaker 9: if you think in terms of where inflation was in 484 00:29:10,800 --> 00:29:14,880 Speaker 9: April twenty twenty one, it was actually falling. Prices were 485 00:29:14,880 --> 00:29:18,080 Speaker 9: falling by zero point nine percent, So at that time 486 00:29:18,360 --> 00:29:20,640 Speaker 9: a negative interest rate at the Bank of Japan of 487 00:29:21,000 --> 00:29:25,120 Speaker 9: minus zero point one was actually positive zero point eight 488 00:29:25,160 --> 00:29:30,080 Speaker 9: percent positive at that time, whereas now we're deeply, deeply negative. So, 489 00:29:30,440 --> 00:29:32,960 Speaker 9: I mean, to all intents and purposes, it seems crazy 490 00:29:33,080 --> 00:29:35,200 Speaker 9: that we're still solow. 491 00:29:35,000 --> 00:29:38,080 Speaker 4: So Paul, when we consider the rates environment in Japan 492 00:29:38,320 --> 00:29:41,480 Speaker 4: and we look at the Japanese bond market, what becomes apparent. 493 00:29:41,880 --> 00:29:45,080 Speaker 9: Well, I think in the bond market among investors, there 494 00:29:45,080 --> 00:29:49,960 Speaker 9: are concerns on the one hand about how much spending 495 00:29:50,240 --> 00:29:54,960 Speaker 9: Sanattakichi's government is going to conduct. We've seen this hefty 496 00:29:55,200 --> 00:29:59,720 Speaker 9: economic package unveiled last month, and you know there could 497 00:29:59,760 --> 00:30:02,720 Speaker 9: be more spending down the line, So that raises some 498 00:30:02,800 --> 00:30:07,200 Speaker 9: concerns about what's going to happen with bondishents and so on. Also, 499 00:30:07,400 --> 00:30:09,920 Speaker 9: I mean, if interest rates at the shorter end are 500 00:30:09,920 --> 00:30:12,600 Speaker 9: going to be going up, then that's going to affect 501 00:30:12,600 --> 00:30:15,880 Speaker 9: things across the curve when you think about it. I mean, 502 00:30:16,520 --> 00:30:18,720 Speaker 9: just getting back to the earlier point. You know, if 503 00:30:18,720 --> 00:30:23,280 Speaker 9: inflation is at a much higher level, then interest rates 504 00:30:23,320 --> 00:30:26,960 Speaker 9: also naturally would be expected to go up. 505 00:30:27,400 --> 00:30:29,840 Speaker 4: What do we know about the path of radio increases 506 00:30:29,880 --> 00:30:32,560 Speaker 4: in the new year? Might we see any I'm wondering 507 00:30:32,720 --> 00:30:35,600 Speaker 4: if Governor Uwada has dropped any hints. What do we know? 508 00:30:36,120 --> 00:30:39,040 Speaker 9: Well, I think this is going to be the key 509 00:30:39,520 --> 00:30:42,280 Speaker 9: point of interest that this meeting, given that the raid 510 00:30:42,400 --> 00:30:47,760 Speaker 9: increases is largely expected by everyone. So what is mister 511 00:30:47,760 --> 00:30:51,240 Speaker 9: Awada going to say about the future course? I mean, 512 00:30:51,320 --> 00:30:55,400 Speaker 9: I think he's going to stick to some formulaic language 513 00:30:55,560 --> 00:30:59,080 Speaker 9: on if our outlook is realized, we will continue to 514 00:30:59,200 --> 00:31:02,680 Speaker 9: raise interest rates. But the key point is how fast 515 00:31:02,680 --> 00:31:05,200 Speaker 9: are they going to do that and how far will 516 00:31:05,240 --> 00:31:09,000 Speaker 9: they go? And I think before we had Donald Trump's tariffs, 517 00:31:09,200 --> 00:31:13,480 Speaker 9: before Takaichi took over as prime minister. The understanding was 518 00:31:13,480 --> 00:31:16,280 Speaker 9: that the Bank of Japan wanted to raise interest rates 519 00:31:16,520 --> 00:31:19,680 Speaker 9: at a pace of about every six months, once every 520 00:31:19,720 --> 00:31:22,800 Speaker 9: six months, and then with those tariffs and the arrival 521 00:31:22,800 --> 00:31:27,400 Speaker 9: of Takichi's Prime minister, that understanding kind of changed to, oh, well, 522 00:31:27,440 --> 00:31:31,880 Speaker 9: maybe it's more like once every year, once a year. Now. 523 00:31:32,000 --> 00:31:34,760 Speaker 9: I think that's what investors are going to be looking 524 00:31:34,760 --> 00:31:37,640 Speaker 9: at at this meeting. You know which one is it? 525 00:31:37,680 --> 00:31:40,440 Speaker 9: Is it once every six months or once every year. 526 00:31:40,560 --> 00:31:43,800 Speaker 4: We know the Japanese economy has struggled a bit in 527 00:31:43,840 --> 00:31:47,000 Speaker 4: the face of those US tariffs. Is there the sense 528 00:31:47,080 --> 00:31:50,200 Speaker 4: now that Japan by and large has been able to 529 00:31:50,280 --> 00:31:53,280 Speaker 4: absorb the initial shock without too much difficulty. 530 00:31:53,560 --> 00:31:57,800 Speaker 9: Well, the Ladies' GDP figures showed a contraction of two 531 00:31:57,920 --> 00:32:01,960 Speaker 9: point three percent in the quarter, so that's not a 532 00:32:02,000 --> 00:32:05,600 Speaker 9: great number. Part of that was a tariff effect, but 533 00:32:06,280 --> 00:32:09,360 Speaker 9: that was kind of a reflected a pulling back of 534 00:32:09,400 --> 00:32:13,360 Speaker 9: exports over the summer after some front loading ahead of 535 00:32:13,600 --> 00:32:17,680 Speaker 9: what people were fearing would come from the tariff barrage 536 00:32:17,680 --> 00:32:21,400 Speaker 9: from Donald Trump. So I think the takeaway is okay, 537 00:32:21,600 --> 00:32:25,120 Speaker 9: bad GDP figures for the summer, but we're probably going 538 00:32:25,160 --> 00:32:27,840 Speaker 9: to return to growth now, and the hit from the 539 00:32:27,920 --> 00:32:34,120 Speaker 9: tariffs is, you know, surprisingly mild compared from what expectations 540 00:32:34,160 --> 00:32:36,760 Speaker 9: were in the darkest moments earlier this year. 541 00:32:36,840 --> 00:32:39,160 Speaker 4: So when you say growth, is that based on the 542 00:32:39,200 --> 00:32:42,280 Speaker 4: notion that Prime Minister at taki Ichi is going to 543 00:32:42,440 --> 00:32:45,800 Speaker 4: deliver the sort of stimulus to reinvigorate the economy in 544 00:32:45,840 --> 00:32:46,760 Speaker 4: a meaningful way. 545 00:32:47,120 --> 00:32:50,320 Speaker 9: Yeah, I think we're going to have rebound from the summer. 546 00:32:50,360 --> 00:32:53,080 Speaker 9: There were some technical factors in the housing market that 547 00:32:53,240 --> 00:32:56,840 Speaker 9: also contributed to the contraction. So I think we're going 548 00:32:56,880 --> 00:32:59,960 Speaker 9: to return to growth now. We're not talking gangbus the growth. 549 00:33:00,320 --> 00:33:03,600 Speaker 9: We're talking like, you know, moderate growth. But in the 550 00:33:03,680 --> 00:33:06,760 Speaker 9: environment of tariffs, is that can take place. That is 551 00:33:06,800 --> 00:33:10,719 Speaker 9: a positive. And in terms of whether the Japanese consumer 552 00:33:11,240 --> 00:33:14,800 Speaker 9: is adjusting to the reality, the new reality for many 553 00:33:14,880 --> 00:33:18,600 Speaker 9: Japanese of inflation of prices going up, we are seeing 554 00:33:18,680 --> 00:33:23,880 Speaker 9: consumption very very slowly on an upward path. It's not 555 00:33:24,760 --> 00:33:28,640 Speaker 9: a hugely strong, but it is pointing in the right direction. 556 00:33:28,880 --> 00:33:31,800 Speaker 4: I'd like to get your sense of this skirmish, if 557 00:33:31,800 --> 00:33:35,480 Speaker 4: I can use that term between Tokyo and Beijing. Maybe 558 00:33:35,520 --> 00:33:38,400 Speaker 4: it's a little more than that. After Prime Minister taki 559 00:33:38,400 --> 00:33:41,200 Speaker 4: ICHI's comments on Taiwan. I'm trying to get a sense 560 00:33:41,200 --> 00:33:44,560 Speaker 4: of the risk of stress in the trade relationship between 561 00:33:44,640 --> 00:33:47,600 Speaker 4: China and Japan, and if China were to create some 562 00:33:47,680 --> 00:33:51,760 Speaker 4: difficulty here, how that might impact the overall Japanese economy. 563 00:33:52,120 --> 00:33:57,560 Speaker 9: I think the spat between China and Japan can have 564 00:33:57,840 --> 00:34:02,640 Speaker 9: an observable effect on Japan's economy. Coming up this week, 565 00:34:02,720 --> 00:34:06,360 Speaker 9: we will be seeing the latest tourist information data and 566 00:34:06,440 --> 00:34:09,799 Speaker 9: we expect to see a drop in the number of 567 00:34:10,040 --> 00:34:14,000 Speaker 9: Chinese tourists to Japan in the month of November. Now, 568 00:34:14,280 --> 00:34:17,560 Speaker 9: the Chinese tourists are the biggest spenders in among foreign 569 00:34:17,680 --> 00:34:21,440 Speaker 9: visitors to Japan, so that will have an effect. But 570 00:34:21,719 --> 00:34:24,719 Speaker 9: this kind of impact on GDP is that enough to 571 00:34:24,840 --> 00:34:29,040 Speaker 9: move the needle and change the Japanese government's thoughts on 572 00:34:29,120 --> 00:34:31,920 Speaker 9: how it should respond to China. I don't think so. 573 00:34:32,120 --> 00:34:35,399 Speaker 9: I think it's going to be an observable impact, but 574 00:34:35,480 --> 00:34:38,960 Speaker 9: not big enough to really move the needle. However, China 575 00:34:39,040 --> 00:34:45,040 Speaker 9: does have some other possibilities, and of those the scariest 576 00:34:45,040 --> 00:34:48,120 Speaker 9: probably would be cutting off rare earth supplies. Now, that 577 00:34:49,160 --> 00:34:52,000 Speaker 9: might give policymakers in Tokyo food for. 578 00:34:52,000 --> 00:34:54,759 Speaker 4: Thought so, Paul, we know in the last week the 579 00:34:54,800 --> 00:34:57,879 Speaker 4: FED cut its policy rate by twenty five basis points. Now, 580 00:34:57,920 --> 00:35:01,479 Speaker 4: that move was widely expected, and at the same time, 581 00:35:01,520 --> 00:35:04,279 Speaker 4: officials maintained the outlook for just one rate cut in 582 00:35:04,320 --> 00:35:07,240 Speaker 4: the new year, and if you look at the FED statement, 583 00:35:07,360 --> 00:35:10,560 Speaker 4: it was rewarded in a very subtle way to suggest 584 00:35:11,120 --> 00:35:16,399 Speaker 4: greater uncertainty now about when the FED might cut again. Nonetheless, 585 00:35:17,000 --> 00:35:19,319 Speaker 4: we did see some dollar weakness, and of course the 586 00:35:19,320 --> 00:35:22,439 Speaker 4: flip side of that was a stronger Japanese currency. When 587 00:35:22,480 --> 00:35:25,040 Speaker 4: you look at what's happening with the Fed vis a 588 00:35:25,080 --> 00:35:28,520 Speaker 4: VI the Bank of Japan. Does FED policy right now 589 00:35:28,600 --> 00:35:32,800 Speaker 4: take much pressure off the Bank of Japan, particularly going 590 00:35:32,840 --> 00:35:35,200 Speaker 4: back to this notion of a stronger currency, what it 591 00:35:35,280 --> 00:35:38,240 Speaker 4: would do in fighting inflationary pressure. 592 00:35:38,680 --> 00:35:42,719 Speaker 9: Well, the currency dynamics are very interesting. I mean, a 593 00:35:42,840 --> 00:35:48,439 Speaker 9: large factor in yen weakness is the difference in real 594 00:35:48,520 --> 00:35:53,520 Speaker 9: interest rates between Japan and the US. Now, I think 595 00:35:53,560 --> 00:35:57,680 Speaker 9: what we've seen since the whole tariff war started was 596 00:35:57,920 --> 00:36:02,880 Speaker 9: that differential element. That aspect has had less of a 597 00:36:03,480 --> 00:36:07,240 Speaker 9: you know, the correlation between the difference in interest rates 598 00:36:07,239 --> 00:36:10,239 Speaker 9: and where the Japanese yen is against the dollar is 599 00:36:11,239 --> 00:36:14,319 Speaker 9: kind of out of sync quite a bit from where 600 00:36:14,360 --> 00:36:16,600 Speaker 9: you'd expect it to be. In other words, what I'm 601 00:36:16,640 --> 00:36:19,319 Speaker 9: saying is the yen would actually be quite a bit 602 00:36:19,400 --> 00:36:23,080 Speaker 9: stronger than where it is at the moment. So that 603 00:36:23,320 --> 00:36:26,759 Speaker 9: kind of speaks to the uncertainty factor out there. 604 00:36:27,000 --> 00:36:30,480 Speaker 4: We know inflation in Japan has been persistently above the 605 00:36:30,480 --> 00:36:33,879 Speaker 4: boj's two percent target for quite a number of months. Now, 606 00:36:33,920 --> 00:36:36,720 Speaker 4: I think that may be an understatement. I'm curious about 607 00:36:36,719 --> 00:36:39,720 Speaker 4: the inputs that have been the primary drivers. 608 00:36:40,120 --> 00:36:40,440 Speaker 6: Well. 609 00:36:40,480 --> 00:36:43,680 Speaker 9: I think in terms of the inflation at the moment, 610 00:36:44,080 --> 00:36:49,160 Speaker 9: the main culprit is food food inflation, and I think 611 00:36:49,840 --> 00:36:53,239 Speaker 9: it's the movements there that will be one of the 612 00:36:53,320 --> 00:36:56,600 Speaker 9: key drivers to the inflation trend over the coming months. 613 00:36:56,840 --> 00:37:00,239 Speaker 9: Another factor that we need to be a cognizant of 614 00:37:00,520 --> 00:37:04,680 Speaker 9: is that in Prime Minister Tack HG's package for the economy, 615 00:37:04,960 --> 00:37:08,959 Speaker 9: there are some more subsidy measures for households to deal 616 00:37:09,000 --> 00:37:13,359 Speaker 9: with electricity bills and gas bills, and some of these 617 00:37:13,400 --> 00:37:17,759 Speaker 9: measures are already forecast by the government to shave off 618 00:37:17,800 --> 00:37:21,759 Speaker 9: about zero point seven percentage point off inflation. So I 619 00:37:21,760 --> 00:37:24,400 Speaker 9: think we are going to see much lower figures coming 620 00:37:24,440 --> 00:37:27,200 Speaker 9: in over the coming months. And you know, you could 621 00:37:27,360 --> 00:37:31,359 Speaker 9: argue that that's why the BOJ also wants to get 622 00:37:31,360 --> 00:37:34,480 Speaker 9: a rate hike out of the way, because you want 623 00:37:34,520 --> 00:37:36,160 Speaker 9: to go wile the figures still looking hot. 624 00:37:36,320 --> 00:37:38,560 Speaker 4: What about the story on wages that was such a 625 00:37:38,600 --> 00:37:41,440 Speaker 4: focal point for such a long time, waiting for wages 626 00:37:41,480 --> 00:37:45,000 Speaker 4: to have a meaningful uptick. Has wage inflation improved? 627 00:37:45,200 --> 00:37:48,560 Speaker 9: We're seeing a pretty solid trend. If you look at 628 00:37:48,600 --> 00:37:54,160 Speaker 9: the figure for wages for full time employees in regular jobs, 629 00:37:54,320 --> 00:37:58,080 Speaker 9: it's around the two point two percent mark for a 630 00:37:58,120 --> 00:38:01,239 Speaker 9: stable sample. There's lots of out there, but I think 631 00:38:01,280 --> 00:38:03,600 Speaker 9: that's one of the ones to really focus on. It 632 00:38:03,640 --> 00:38:06,920 Speaker 9: gives a much more stable view of the trend now 633 00:38:07,000 --> 00:38:10,360 Speaker 9: compared with previous years, that's a very very solid figure. 634 00:38:10,680 --> 00:38:14,239 Speaker 9: But compared with three percent inflation, that is not a 635 00:38:14,239 --> 00:38:18,120 Speaker 9: great number because that means your purchasing power is getting 636 00:38:18,120 --> 00:38:21,000 Speaker 9: weaker in real terms all the time. And I think 637 00:38:21,360 --> 00:38:24,719 Speaker 9: that's the big thing that needs to change, is we 638 00:38:24,840 --> 00:38:29,440 Speaker 9: need to get the wage increases ahead of where the 639 00:38:29,480 --> 00:38:33,759 Speaker 9: inflation rate is to really turn around the consumption figures 640 00:38:33,760 --> 00:38:35,520 Speaker 9: in the economy and drive growth. 641 00:38:35,600 --> 00:38:37,640 Speaker 4: Paul, it's always a pleasure. Thank you so much for 642 00:38:37,680 --> 00:38:41,560 Speaker 4: helping US preview this week's boj decision. Paul Jackson there 643 00:38:41,960 --> 00:38:45,120 Speaker 4: from Bloomberg News. He covers the economies of Japan and 644 00:38:45,440 --> 00:38:48,440 Speaker 4: South Korea. I'm Doug Krisner. You can catch us weekdays 645 00:38:48,440 --> 00:38:51,399 Speaker 4: for the Daybreak Asia podcast. It's available wherever you get 646 00:38:51,440 --> 00:38:52,160 Speaker 4: your podcast. 647 00:38:52,440 --> 00:38:55,439 Speaker 2: Nathan, Thanks Doug, and that does it for this edition 648 00:38:55,480 --> 00:38:58,799 Speaker 2: of Bloomberg Daybreak Weekend. Join us again Monday morning at 649 00:38:58,840 --> 00:39:01,400 Speaker 2: five am Wall Street Time for the latest don markets, 650 00:39:01,400 --> 00:39:03,960 Speaker 2: overseas and the news you need to start your day. 651 00:39:04,360 --> 00:39:07,320 Speaker 2: I'm Nathan Hager. Stay with us. Top stories and global 652 00:39:07,360 --> 00:39:10,440 Speaker 2: business headlines are coming up right now.