Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 2: top stories in the coming week from our Daybreak anchors
Speaker 2: all around the world. Straight Ahead on the program, we'll
Speaker 2: look to US non farm payrolls for November and earnings
Speaker 2: from sneaker giant Nike. I'm Nathan Hager in Washington.
Speaker 3: I'm Callie hepkea Hey in London, where we discussed at
Speaker 3: Europe's business and political challenges in the face of US criticism.
Speaker 4: I've Dot Krisner looking at the likelihood of a rate
Speaker 4: increase from the Bank of Japan.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
Speaker 1: eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syria
Speaker 1: XM one twenty one, and around the world on Bloomberg Radio,
Speaker 1: dot Com and the Bloomberg Business app.
Speaker 2: Good day to you. I'm Nathan Hagar. We begin today's
Speaker 2: program with US jobs numbers. Non farm payrolls for the
Speaker 2: month of November are due out Tuesday at eight thirty am.
Speaker 2: Wall Street Time For more and what to expect. We're
Speaker 2: joined by Michael McKee, international economics and policy correspondent for
Speaker 2: Bloomberg Radio and Television. First off, Mike, I don't really
Speaker 2: remember having a job's Tuesday before the government shutdowns really
Speaker 2: changed things, an't it?
Speaker 5: It really has? Somebody said the other day, given the
Speaker 5: schedule for the releasing all the data that we didn't
Speaker 5: get before, that it's soon going to be twenty twenty six,
Speaker 5: except at the Bureau of Labor Statistics, we'll still be
Speaker 5: twenty twenty five for quite some time.
Speaker 2: So what are we expecting with the numbers do out
Speaker 2: this coming Tuesday on a delayed schedule then.
Speaker 5: Well, to be totally honest, we're expecting a lot of
Speaker 5: confusion because what they're doing is trying to put out
Speaker 5: as much of the October report in terms of the
Speaker 5: Establishment survey, where they count how many jobs as they can,
Speaker 5: but they don't have complete data. And then they're going
Speaker 5: to put out the November payrolls report with most of
Speaker 5: the data that they need, but we're going to have
Speaker 5: to parse two months there together, and some of it
Speaker 5: won't even the data won't even be there, so we're
Speaker 5: going to have to take it with a bit of
Speaker 5: a grain of salt, but it will give us a
Speaker 5: better view of sort of where we are right now.
Speaker 5: The biggest issue is going to come on the other
Speaker 5: side the household survey, which gives us the unemployment rate,
Speaker 5: because there's no data for October, so they've got to
Speaker 5: jump right into November, and they didn't get started questioning
Speaker 5: people until the end of November, which creates some statistical
Speaker 5: anomalies that are probably too nerdy to talk about. But
Speaker 5: it's going to be a rough report to make a
Speaker 5: lot out of.
Speaker 2: Okay, So since we have those holes in the household survey,
Speaker 2: even with the November numbers coming out, does that raise
Speaker 2: some questions in the market about what the reliability even
Speaker 2: of the November data.
Speaker 5: It should and J. Powell in his news comforts this
Speaker 5: past week said the very same thing, that the FED
Speaker 5: is going to have to really analyze this and not
Speaker 5: take it at face value because they understand the statistical
Speaker 5: issues that are involved.
Speaker 1: Now.
Speaker 5: The good thing is for the FED they don't meet
Speaker 5: again until January twenty eighth, and so therefore they will
Speaker 5: have the December numbers, which will be a complete report
Speaker 5: at least to go on before they have to make
Speaker 5: another decision, but we will get more information than we
Speaker 5: have had, and in certain categories of jobs, will get
Speaker 5: good information because a lot of that stuff comes in
Speaker 5: electronically wasn't affected by the government shutdown. But there will
Speaker 5: be gaps in the numbers for October November.
Speaker 2: So in terms of the gaps that are meant to
Speaker 2: be filled here, what particularly are you looking for that
Speaker 2: is going to be filled in and what's your expectation there.
Speaker 5: Big companies, manufacturing companies, people like that, and large retailers.
Speaker 5: They have computerized records that they send in to the
Speaker 5: Bureau Labor Statistics, so those kinds of numbers will show up.
Speaker 5: It's going to be harder for them to count things
Speaker 5: that are at small businesses which are surveyed but don't
Speaker 5: necessarily send in their stuff electronically, or construction workers because
Speaker 5: they're sort of itinerant and can be from job to job.
Speaker 5: And home healthcare workers, now that's going to be interesting
Speaker 5: because home healthcare has been the biggest job creator in
Speaker 5: the last few years, and so we might get a
Speaker 5: distorted number there that would kind of throw off the total.
Speaker 2: In terms of the data that we've gotten from the
Speaker 2: private sector, so far, we've seen all sorts of ADP figures,
Speaker 2: the Challenge Grain, Christmas layoff notices as well. What does
Speaker 2: that tell us about what we could see from the
Speaker 2: rest of the data that's coming from the BLS.
Speaker 5: I think all that will tell you is that they
Speaker 5: sort of confirm the idea that the hiring environment has
Speaker 5: slowed a lot. Neither one of them is a particularly
Speaker 5: good predictor of what the overall BLS numbers will be.
Speaker 5: It's just kind of gives you some data. They give
Speaker 5: you a direction, but not necessarily a magnitude. So I
Speaker 5: don't think we go into it with a completely clear
Speaker 5: expectation for what the numbers are going to be. The
Speaker 5: consensus forecast at Bloomberg has absolutely economists is for forty
Speaker 5: thousand jobs, but again, you know that's combining two months,
Speaker 5: so there might be job losses in one month and
Speaker 5: job gains in another month, and it's really hard to
Speaker 5: know where we end up. You kind of just have
Speaker 5: to take it as it comes.
Speaker 2: And you mentioned that there's going to be kind of
Speaker 2: a hole in the unemployment rate with the household survey
Speaker 2: on hold due to the shutdown, But what's the trend
Speaker 2: when it comes to the unemployment rate. Are we seeing
Speaker 2: more people getting into the job market.
Speaker 5: Well, we see the last data we have is from September,
Speaker 5: and more people did go into the labor market, and
Speaker 5: that's one reason that the unemployment rate went up a
Speaker 5: bit in September. We don't know what has happened since.
Speaker 5: And one of the issues is of course that the
Speaker 5: administration is deporting as many people as they can, deport
Speaker 5: as fast as they can, and that's cutting down on
Speaker 5: the size of the labor force. But we don't have
Speaker 5: exact figures, so that will also be an interesting aspect
Speaker 5: of these reports to see whether or not we're losing
Speaker 5: workers or losing potential workers because they have been kicked
Speaker 5: out of the country. That would raise probably raise the
Speaker 5: unemployment rate. So there are some other concerns. One thing
Speaker 5: I didn't mention is that a lot of the people
Speaker 5: who were fired by DOGE or took early retirement because
Speaker 5: they thought they were going to get fired, They were
Speaker 5: on the payrolls till the end of the fiscal year,
Speaker 5: which was September thirtieth, so we could see a big
Speaker 5: drop in government payrolls in the month of October, and
Speaker 5: that would have the effect of depressing the whole thing,
Speaker 5: and it might increase unemployment numbers some but it looks
Speaker 5: like at this point not a whole lot. But it
Speaker 5: does complicate even more the whole task of sorting all
Speaker 5: this out.
Speaker 2: Now lots to sort out. I had of jobs Tuesday.
Speaker 2: Thanks Mike, appreciate this. That's Michael McKee, Bloomberg International Economics
Speaker 2: and Policy correspondent. We moved next to corporate earnings from Nike,
Speaker 2: the sneaker giant report's second quarter results on Thursday. For
Speaker 2: more on what to expect, it's got to be Putam Goyle,
Speaker 2: senior US e commerce and retail analysts at Bloomberg Intelligence,
Speaker 2: put them thanks for being here. The Swish has kind
Speaker 2: of been crushed lightly by the competition, hasn't it. So
Speaker 2: what are we expecting this time around from Nike?
Speaker 6: Yeah?
Speaker 7: I think right now we're just holding tight, kind of
Speaker 7: waiting for the turnaround to take shape. We think Nike
Speaker 7: is making all the right moves to get itself back
Speaker 7: on track. That said, earnings will be a little light,
Speaker 7: and that's as expected. We do expect sales to fall
Speaker 7: turn negative again in fiscal two Q slipping by low
Speaker 7: single digits and that's after it posted a slight gain
Speaker 7: in the last quarter. I'm not so worried about that.
Speaker 7: My main concern is, is Nike moving forward on clearing inventories.
Speaker 7: Is Nike innovating to draw full price sales of the
Speaker 7: new stuff that it's introducing and it is.
Speaker 2: So you say that Nike is doing the right things
Speaker 2: to do that turnaround, talk a little bit more about
Speaker 2: what you're seeing. Why you think Nike might be getting
Speaker 2: back on the front foot to keep using puns.
Speaker 7: Yeah, I guess you know. The big II guest move
Speaker 7: for me that they are making to right size the
Speaker 7: brand is right sizing inventories. Inventories have been very elevated
Speaker 7: for Nike for a few years now, and just bringing
Speaker 7: them down and really getting them to realign with sales
Speaker 7: is the number one factor that I'm looking for, to
Speaker 7: have them kind of pick out everything that's old, that
Speaker 7: they made too much of and that wasn't working, to
Speaker 7: really bring in the new stuff more mainstream. The other
Speaker 7: thing is innovation. So when you think about what Nike
Speaker 7: was doing just you know, three to five years ago,
Speaker 7: it was just introducing the same thing with a different
Speaker 7: color wave. That's simply I mean they were doing a
Speaker 7: lot of other things, but there just wasn't as much
Speaker 7: innovation as the customer demanded. I think that's changing. I
Speaker 7: think they are adding more performance, more innovation to their
Speaker 7: product lineup. I also think that they're going back on
Speaker 7: the playing field. So you know, one question that I
Speaker 7: get asked often is how did Life let Hoka and
Speaker 7: the ads take share from it? And the best answer
Speaker 7: I could give is it's because they weren't on the field.
Speaker 7: They weren't where the runners were. They kind of took
Speaker 7: a back seat in the sport and they focused on
Speaker 7: digital too aggressively. That's all changed. They're back on the field,
Speaker 7: they're at the runs, they have shoes that the runners
Speaker 7: are wearing, they're showing off and quite honestly, they are
Speaker 7: competitive and they are just as good, if not better
Speaker 7: than some of what's out there in the competition.
Speaker 2: Well, that's been the thing, right because there has been
Speaker 2: so much attention on these upstart sneaker makers. You mentioned
Speaker 2: Hoka and On coming out with these more I guess
Speaker 2: innovative products compared to what Nike's product line has been
Speaker 2: over the last few years. What is it that Nike's doing,
Speaker 2: What kind of changes. Is it making to sort of
Speaker 2: meet up with that competition.
Speaker 7: It's being where the runners are. It's very simple. It's
Speaker 7: back to one on one. It's we need to be
Speaker 7: on the running grounds. We need to be at the races.
Speaker 7: We need to have the runners wear our shoes and
Speaker 7: believe that they are the best shoes or that's for
Speaker 7: They're doing all of that now. It's just a matter
Speaker 7: of time. I think we'll start to see it in
Speaker 7: the results. The other thing I would say is, you know,
Speaker 7: we talk about these emerging brands or I guess these
Speaker 7: newer brands taking share, but when you think of the
Speaker 7: market share that Nike holds given its size, it's still
Speaker 7: the number one footwear brand in the world. And we
Speaker 7: ran a survey at BI just last month asking consumers,
Speaker 7: when you shop for sneakers, especially athletic sneakers, who do
Speaker 7: you wear? Nike was still number one, And yes, Toka
Speaker 7: and On are definitely gaining traction, but Nike leads still
Speaker 7: by a wide margin.
Speaker 2: Is Nike putting out the kind of product that sneaker
Speaker 2: heads are still willing to pay top dollar for. I
Speaker 2: know some of these models can really drive into pretty
Speaker 2: high price points. Is that something that Nike is able
Speaker 2: to meet.
Speaker 7: Yeah, I think so. And if you think about the
Speaker 7: price points that Nike is launching these new products, that
Speaker 7: they're pretty competitive with what's out there in the competition.
Speaker 7: So they The nice thing about Nike is that they
Speaker 7: have a range of price points, right, So if you
Speaker 7: want to buy sneakers starting at seventy eighty dollars, you
Speaker 7: can at that one hundred dollars price point, but you
Speaker 7: can go as high as up to two forty two
Speaker 7: fifty two for like the most premium sneaker that they offer.
Speaker 7: And when you think about the competition, I think they
Speaker 7: do too. Offer sneakers, you know, in the one hundred
Speaker 7: and forty hundred and sixty a north of two hundred
Speaker 7: dollars range and depending on the style that you're looking at.
Speaker 2: Really appreciate this, Punum, thanks again for being with us.
Speaker 2: That's Punam Goyle, senior US e Commerce and retail analyst
Speaker 2: at Bloomberg Intelligence. And coming up on Bloomberg Day Break weekend,
Speaker 2: we'll look at Europe's business and political challenges in the
Speaker 2: face of US criticism. I'm Nathan Hager, and this is Bloomberg.
Speaker 2: This is Bloomberg Daybreak weekend our global look ahead at
Speaker 2: the top stories for investors in the coming week. I'm
Speaker 2: Nathan Hager in Washington. Up later in the program, we'll
Speaker 2: look at whether the Bank of Japan will raise interest rates.
Speaker 2: But first, in the coming days, global leaders convene in
Speaker 2: France at the Conference of Paris. It is an annual
Speaker 2: gathering in the City of Light which encourages knowledge sharing
Speaker 2: on economic, social and environmental issues in the hope of
Speaker 2: collaboration to overcome the world's challenges. I Meanwhile, political leaders
Speaker 2: are gearing up for the European Council meetings, where priorities
Speaker 2: will be on Ukraine and its security. For more, Let's
Speaker 2: go to London and bring in Bloomberg Daybreak europe Anker Caroline.
Speaker 3: Hepger Nathan Europe is facing complicated times a week economy,
Speaker 3: the war in Ukraine, and a strained relationship with the
Speaker 3: Trump White House, three persistent and intertwined challenges the continent
Speaker 3: has grappled with throughout twenty twenty five. The region's leaders
Speaker 3: are deeply concerned by US efforts to end the nearly
Speaker 3: four years long conflict in Ukraine by cutting a deal
Speaker 3: with the aggressor Russia. But what action can European leaders take?
Speaker 3: From JD Vance's speech at the Munich Security Conference in
Speaker 3: February through to the thirty three page national Security strategy
Speaker 3: signed by President Trump that claims Europe risks civilizational erasure,
Speaker 3: the issue for Europe, according to JP Morgan CEO Jamie Darmon,
Speaker 3: is anti business, bureaucracy, internal fragmentation, and a lack of innovation.
Speaker 3: He told Bloomberg's Caroline Hyde that Europe needs to make
Speaker 3: serious changes to survive.
Speaker 8: I think Europe has a real problem. You know, it's
Speaker 8: very hard to look at the world and you know,
Speaker 8: have we have movie tectonic plays you've seen, you've heard
Speaker 8: spoken about AI, the enemies in the satellite up above
Speaker 8: and in your computer systems right now, you know, and
Speaker 8: the world change, the other tectonic plays, a rise of China,
Speaker 8: huge global deficits, social network programs that probably can't be
Speaker 8: maintained over a long period of time. So Europe has
Speaker 8: a problem. I think they accomplished an unbelievable thing with
Speaker 8: when they put the euro got together the EC and
Speaker 8: they said, you know, let's live in peace and not war.
Speaker 8: You know, they had World War One and World War two,
Speaker 8: but they had them. They frankop Preussian Wars, the Napoleonic Wars,
Speaker 8: the One Hundred Years of War, the War the Roses,
Speaker 8: you know, and so living in piece is a good thing,
Speaker 8: but it got bogged down. They never finished the Common Market.
Speaker 8: It takes twenty seven nations, you know, to make a decision.
Speaker 8: They let their military drop dramatically. It's very bureaucratically wide.
Speaker 8: Part of the reason that, you know, they lost Britain
Speaker 8: to the EU, which I think makes it bad for
Speaker 8: both of them, by the way, And so you got
Speaker 8: to be honest about this. So in those tectonic plays
Speaker 8: may move over twenty years, but if we ever write
Speaker 8: a book about how the West was lost, it will
Speaker 8: be because of the following. It will because of we
Speaker 8: didn't get her act together here, and we go through
Speaker 8: all the policies here, that we didn't have the strongest
Speaker 8: military in the world, and that we allowed Europe to
Speaker 8: fall apart.
Speaker 3: That was JP Morgan CEO Jamie Dimond speaking there to
Speaker 3: Bloomberg's Caroline Hyde. At the Reagan National Defense Forum, questions
Speaker 3: of European security and collaboration with the US will be
Speaker 3: major points of discussion at the Conference of Paris in
Speaker 3: the next few days. Speakers include Bruno Lemaire, the former
Speaker 3: French Economy and Finance Minister, and Ken Griffin, CEO and
Speaker 3: founder of Citadel. It's also an issue that will be
Speaker 3: on the minds of leaders at the upcoming EU Leader's
Speaker 3: Summit in Brussels. Well, joining me now for more is
Speaker 3: Ben Sils, Bloomberg's managing editor for European Government and Economy. Ben,
Speaker 3: good to speak to you. Firstly, I'd just like your
Speaker 3: reaction to what Jamie Diamond had to say. Really, his
Speaker 3: comments have dominated news in Europe over the past few days,
Speaker 3: saying that Europe has a big problem. What do you
Speaker 3: think the response and the thinking is in Brussels and
Speaker 3: across Europe.
Speaker 6: Well, I think he's right. For starters, I think most people,
Speaker 6: most European officials will recognize that he's right. He's not
Speaker 6: the first person to say this, but when somebody as
Speaker 6: influential as Jamie Dammon makes that sort of comment so publicly,
Speaker 6: it has to sting. I think that will it will
Speaker 6: it lead to a bit more soul searching. I'm not
Speaker 6: really sure. To be honest, I think that the Draggy
Speaker 6: report last year was arguably a more substantial and more
Speaker 6: kind of conspicuous call to arms for European officials, and
Speaker 6: the progress on the back of that has been limited,
Speaker 6: and the progress on so many of the critical files
Speaker 6: for the European Union has has continued to be kind
Speaker 6: of plagued by the same old problems of the need
Speaker 6: for consensus, like the divisions over the sort of kind
Speaker 6: of vision of the sort of European economy that people
Speaker 6: want to build and that just kind of constantly holds
Speaker 6: the European Union back.
Speaker 3: Do you think that it is something that European leaders
Speaker 3: are going to think about at this EU Council meeting
Speaker 3: or at the conference of Paris, where we're going to
Speaker 3: see again a number of leading US CEOs speaking to Bloomberg,
Speaker 3: speaking to the investor community. We know that the drug
Speaker 3: report has has not perhaps had the galvanizing impact that maybe,
Speaker 3: you know, the former ECV president might have wanted to see.
Speaker 6: I would imagine it's likely to be a topic for
Speaker 6: discussion on the sidelines. I would imagine that Emmanuel Macran,
Speaker 6: who is always one for articulating his grand vision, might
Speaker 6: be talking about those sorts of issues. But what we've
Speaker 6: seen some after some is that Macran's rhetoric is not
Speaker 6: successful in persuading the rest of the European leadership to
Speaker 6: kind of come along and to take decisions. And we've
Speaker 6: got we've got the very kind of concrete, tangible decision
Speaker 6: on the table of what they're going to do about Ukraine,
Speaker 6: what are they going to do about the frozen Russian assets.
Speaker 6: And that's the real test if the if the Europeans
Speaker 6: want to prove at this moment, when the White House
Speaker 6: is really stepping up its push for a settlement of
Speaker 6: the of the war in Ukraine, the single most important
Speaker 6: thing that Europeans can do is find a way to
Speaker 6: supply for substantial amounts of additional financing to Kiev with
Speaker 6: this mechanism based on the frozen Russian assets. And they've
Speaker 6: been going around around in circles on that for months,
Speaker 6: so now it's really time for them to deliver on
Speaker 6: that one.
Speaker 3: And that again is the issue that President Trump rays
Speaker 3: also just in the past few days, sizing the talk
Speaker 3: the lack of action as he sees it, also again
Speaker 3: using this very strong, very critical language about Europe. It
Speaker 3: really does seem that the Trump White House has the
Speaker 3: EU in its sights and he's talking about European nations,
Speaker 3: decaying this also must have an impact on leaders in
Speaker 3: Europe too. I mean, I just note that the former
Speaker 3: EU diplomaut Joseph Burrell saying European leaders must stop pretending
Speaker 3: that Trump is not our adversary. Are we at that
Speaker 3: point yet?
Speaker 6: The Trump administration, I mean, their rhetoric flips back and
Speaker 6: forth a little bit, but we heard. I was at
Speaker 6: the Munich Security Conference in February where j. D Rans
Speaker 6: delivered that really shocking speech attacking the European Union, attacking
Speaker 6: the kind of the democratic norms on which European societies
Speaker 6: are based. And it was pretty clear then that any support,
Speaker 6: any kind of legacy support that the Europeans were going
Speaker 6: to be getting from the US was going to be
Speaker 6: kind of limited, qualified and certainly not something that you
Speaker 6: could count on. And we've seen that come back with
Speaker 6: a vengeance with the US National Security Strategy, which came
Speaker 6: out last week with that really quite shocking language about
Speaker 6: civilizational Erasia, and you know, following up with those with
Speaker 6: Trump's comments in his interview this week about the weakness
Speaker 6: of European leaders. I have to say I've lived in
Speaker 6: Europe for more than twenty years, and I don't see
Speaker 6: much sign of civilizational Erasia. But I do think he's
Speaker 6: right when he says that the European leaders a week
Speaker 6: and I think that they've been demonstrating that with their
Speaker 6: failure to must have proper support for Ukraine despite all
Speaker 6: of their talk.
Speaker 3: H Yes, I suppose you know to that that raises
Speaker 3: issues around migration anti immigration within Europe. But also, as
Speaker 3: you say, the litmus test is Ukraine in the next
Speaker 3: few days, what do you think is going to change
Speaker 3: who is maybe best to engage with President Trump on
Speaker 3: the European side. The European has been trying to get
Speaker 3: into that negotiation, that process of the US wanting to
Speaker 3: get to a deal with Moscow, but it's about speed
Speaker 3: and who engages.
Speaker 6: Yeah, I think that it's pretty clear by this stage
Speaker 6: in the process that if the Europeans want to have
Speaker 6: a seat at the table, they need to earn that
Speaker 6: by putting down some either some serious support, whether that's money,
Speaker 6: whether that's weapons, whether that's political commitment, whether that's boots
Speaker 6: on the ground in Ukraine. They need to be making
Speaker 6: a real kind of concrete commitment to Ukraine, which will
Speaker 6: demonstrate to the US to Russia, to the Ukrainians that
Speaker 6: the Europeans are serious and serious about taking unilateral measures
Speaker 6: outside of the kind of US umbrella to defend and
Speaker 6: promote their own interests. And so far we haven't seen that.
Speaker 3: I think. I don't know for sure, but I think
Speaker 3: it would have flown a little bit more under the radar.
Speaker 3: Again in recent days the address that the Chance of Germany,
Speaker 3: Friedrich Mertz, made on TV to German voters in the
Speaker 3: last few days, where actually he was, you know, kind
Speaker 3: of count entering what was happening in the US and
Speaker 3: was a little bit critical, i'd say, even fairly critical
Speaker 3: of the United States. And I think again, there are
Speaker 3: moves in Europe to spend a lot more on defense,
Speaker 3: and just in the last few few days that has
Speaker 3: been commitment by Germany to build out its conventional armed forces.
Speaker 3: So there is a response that is happening, isn't there
Speaker 3: in Europe?
Speaker 6: Yeah, that's right actually, and I think German defense spending.
Speaker 6: If you're looking for arguments to support the idea that
Speaker 6: the Europeans are getting serious, then German defense spending is
Speaker 6: that should be top of the list. The increase in
Speaker 6: German defense spending is significant, it's real, it's happening, and
Speaker 6: it's going to have a meaningful impact on European security
Speaker 6: in the next decade. And that's, you know, without doubt,
Speaker 6: Matt's biggest achievement. I would say, be in a difficult
Speaker 6: first year in office.
Speaker 3: Ben, thank you so much for being with us. There'll
Speaker 3: be plenty then for both Europe's political and business and
Speaker 3: finance leaders to think about in the next few days,
Speaker 3: with a couple of big events in Europe. Ben Sils
Speaker 3: is Bloomberg's Managing editor for European Politics and Economy. Thank you.
Speaker 3: We will have full coverage in the next few days
Speaker 3: of the Conference of Paris with our own franc In
Speaker 3: Laqua and Danny Berger and the EU Leader's summit right
Speaker 3: here on Bloomberg Radio. I'm Caroline Hepget in London. You
Speaker 3: can catch us every weekday morning for Bloomberg Daybreak Europe,
Speaker 3: beginning at six am in London. That's one am on
Speaker 3: Wall Street.
Speaker 2: Nathan, Thanks Caroline, and coming up on Bloomberg Daybreak weekend,
Speaker 2: we look ahead to a monetary policy decision from the
Speaker 2: Bank of Japan. I'm Nathan Hagger and this is Bloomberg.
Speaker 2: This is Bloomberg day Break weekend, our global look ahead
Speaker 2: at the top stories for investors in the coming week.
Speaker 2: I'm Nathan Hagger in Washington. In the coming days, the
Speaker 2: Bank of Japan is expected to raise its policy interest rate.
Speaker 2: For a closer look, let's bring in the host of
Speaker 2: the Daybreak Asia podcast, Doug Krisner, Nathan.
Speaker 4: Over the last month, we have seen more bets placed
Speaker 4: on a BOJ rate hike in the coming week. Right now,
Speaker 4: the swaps market has assigned a ninety one percent probability
Speaker 4: of a twenty five basis point increase. Now, if that
Speaker 4: comes to pass, it would take the boj's policy rate
Speaker 4: to seventy five basis points, and that would be a
Speaker 4: thirty year high. Just a month ago, the probability of
Speaker 4: a rate hike was less than fifty percent. Let's take
Speaker 4: a closer look now at the dynamics surrounding the boj's
Speaker 4: decision with Bloomberg's Paul Jackson. Paul cover the economies of
Speaker 4: Japan and South Korea, and he joins us from our
Speaker 4: studios in Tokyo. Thank you for making time. Can you
Speaker 4: help me understand how we got to a ninety one
Speaker 4: percent probability when a short while ago, the probability was
Speaker 4: less than fifty percent.
Speaker 9: Well, it all relates really to a speech at the
Speaker 9: beginning of December by a Bank of Japan governor Kazuo Uida,
Speaker 9: in which he said the central Bank would consider the
Speaker 9: pros and cons of raising interest rates at its next meeting.
Speaker 9: Now that is seen as key language hinting at a
Speaker 9: rate hike. Subsequently, Bloomberg reported that key government officials would
Speaker 9: not try to block a rate hike, and also separately
Speaker 9: we reported that officials at the bank were ready to
Speaker 9: raise the rate, and so that has had a dramatic
Speaker 9: effect on expectations for a rate hike at the upcoming meeting.
Speaker 4: Is there any conversation around the possibility that the BOJ
Speaker 4: may have fallen a bit behind the curve.
Speaker 9: Absolutely, Obviously, We've seen comments from American officials, including Scott Pssant,
Speaker 9: about the risk of falling behind and whether the BOJ
Speaker 9: is acting fast enough. We have inflation at three percent.
Speaker 9: I don't know about you, Doug, but to me that
Speaker 9: seems to be higher than the Bank of Japan's two
Speaker 9: percent target. And you know what, he's been there for
Speaker 9: more than three and a half years, so in terms
Speaker 9: of conventional policy making, you would want to raise rates
Speaker 9: to cool inflation. And you know, just another perspective on
Speaker 9: this is that with inflation at three percent, if your inflation,
Speaker 9: if you're a central bank rate, even if you raise
Speaker 9: it to zero point seventy five percent, you're still way
Speaker 9: below the inflation rate. That means real interest rates are
Speaker 9: deeply zero. And to extend that model a bit further,
Speaker 9: if you think in terms of where inflation was in
Speaker 9: April twenty twenty one, it was actually falling. Prices were
Speaker 9: falling by zero point nine percent, So at that time
Speaker 9: a negative interest rate at the Bank of Japan of
Speaker 9: minus zero point one was actually positive zero point eight
Speaker 9: percent positive at that time, whereas now we're deeply, deeply negative. So,
Speaker 9: I mean, to all intents and purposes, it seems crazy
Speaker 9: that we're still solow.
Speaker 4: So Paul, when we consider the rates environment in Japan
Speaker 4: and we look at the Japanese bond market, what becomes apparent.
Speaker 9: Well, I think in the bond market among investors, there
Speaker 9: are concerns on the one hand about how much spending
Speaker 9: Sanattakichi's government is going to conduct. We've seen this hefty
Speaker 9: economic package unveiled last month, and you know there could
Speaker 9: be more spending down the line, So that raises some
Speaker 9: concerns about what's going to happen with bondishents and so on. Also,
Speaker 9: I mean, if interest rates at the shorter end are
Speaker 9: going to be going up, then that's going to affect
Speaker 9: things across the curve when you think about it. I mean,
Speaker 9: just getting back to the earlier point. You know, if
Speaker 9: inflation is at a much higher level, then interest rates
Speaker 9: also naturally would be expected to go up.
Speaker 4: What do we know about the path of radio increases
Speaker 4: in the new year? Might we see any I'm wondering
Speaker 4: if Governor Uwada has dropped any hints. What do we know?
Speaker 9: Well, I think this is going to be the key
Speaker 9: point of interest that this meeting, given that the raid
Speaker 9: increases is largely expected by everyone. So what is mister
Speaker 9: Awada going to say about the future course? I mean,
Speaker 9: I think he's going to stick to some formulaic language
Speaker 9: on if our outlook is realized, we will continue to
Speaker 9: raise interest rates. But the key point is how fast
Speaker 9: are they going to do that and how far will
Speaker 9: they go? And I think before we had Donald Trump's tariffs,
Speaker 9: before Takaichi took over as prime minister. The understanding was
Speaker 9: that the Bank of Japan wanted to raise interest rates
Speaker 9: at a pace of about every six months, once every
Speaker 9: six months, and then with those tariffs and the arrival
Speaker 9: of Takichi's Prime minister, that understanding kind of changed to, oh, well,
Speaker 9: maybe it's more like once every year, once a year. Now.
Speaker 9: I think that's what investors are going to be looking
Speaker 9: at at this meeting. You know which one is it?
Speaker 9: Is it once every six months or once every year.
Speaker 4: We know the Japanese economy has struggled a bit in
Speaker 4: the face of those US tariffs. Is there the sense
Speaker 4: now that Japan by and large has been able to
Speaker 4: absorb the initial shock without too much difficulty.
Speaker 9: Well, the Ladies' GDP figures showed a contraction of two
Speaker 9: point three percent in the quarter, so that's not a
Speaker 9: great number. Part of that was a tariff effect, but
Speaker 9: that was kind of a reflected a pulling back of
Speaker 9: exports over the summer after some front loading ahead of
Speaker 9: what people were fearing would come from the tariff barrage
Speaker 9: from Donald Trump. So I think the takeaway is okay,
Speaker 9: bad GDP figures for the summer, but we're probably going
Speaker 9: to return to growth now, and the hit from the
Speaker 9: tariffs is, you know, surprisingly mild compared from what expectations
Speaker 9: were in the darkest moments earlier this year.
Speaker 4: So when you say growth, is that based on the
Speaker 4: notion that Prime Minister at taki Ichi is going to
Speaker 4: deliver the sort of stimulus to reinvigorate the economy in
Speaker 4: a meaningful way.
Speaker 9: Yeah, I think we're going to have rebound from the summer.
Speaker 9: There were some technical factors in the housing market that
Speaker 9: also contributed to the contraction. So I think we're going
Speaker 9: to return to growth now. We're not talking gangbus the growth.
Speaker 9: We're talking like, you know, moderate growth. But in the
Speaker 9: environment of tariffs, is that can take place. That is
Speaker 9: a positive. And in terms of whether the Japanese consumer
Speaker 9: is adjusting to the reality, the new reality for many
Speaker 9: Japanese of inflation of prices going up, we are seeing
Speaker 9: consumption very very slowly on an upward path. It's not
Speaker 9: a hugely strong, but it is pointing in the right direction.
Speaker 4: I'd like to get your sense of this skirmish, if
Speaker 4: I can use that term between Tokyo and Beijing. Maybe
Speaker 4: it's a little more than that. After Prime Minister taki
Speaker 4: ICHI's comments on Taiwan. I'm trying to get a sense
Speaker 4: of the risk of stress in the trade relationship between
Speaker 4: China and Japan, and if China were to create some
Speaker 4: difficulty here, how that might impact the overall Japanese economy.
Speaker 9: I think the spat between China and Japan can have
Speaker 9: an observable effect on Japan's economy. Coming up this week,
Speaker 9: we will be seeing the latest tourist information data and
Speaker 9: we expect to see a drop in the number of
Speaker 9: Chinese tourists to Japan in the month of November. Now,
Speaker 9: the Chinese tourists are the biggest spenders in among foreign
Speaker 9: visitors to Japan, so that will have an effect. But
Speaker 9: this kind of impact on GDP is that enough to
Speaker 9: move the needle and change the Japanese government's thoughts on
Speaker 9: how it should respond to China. I don't think so.
Speaker 9: I think it's going to be an observable impact, but
Speaker 9: not big enough to really move the needle. However, China
Speaker 9: does have some other possibilities, and of those the scariest
Speaker 9: probably would be cutting off rare earth supplies. Now, that
Speaker 9: might give policymakers in Tokyo food for.
Speaker 4: Thought so, Paul, we know in the last week the
Speaker 4: FED cut its policy rate by twenty five basis points. Now,
Speaker 4: that move was widely expected, and at the same time,
Speaker 4: officials maintained the outlook for just one rate cut in
Speaker 4: the new year, and if you look at the FED statement,
Speaker 4: it was rewarded in a very subtle way to suggest
Speaker 4: greater uncertainty now about when the FED might cut again. Nonetheless,
Speaker 4: we did see some dollar weakness, and of course the
Speaker 4: flip side of that was a stronger Japanese currency. When
Speaker 4: you look at what's happening with the Fed vis a
Speaker 4: VI the Bank of Japan. Does FED policy right now
Speaker 4: take much pressure off the Bank of Japan, particularly going
Speaker 4: back to this notion of a stronger currency, what it
Speaker 4: would do in fighting inflationary pressure.
Speaker 9: Well, the currency dynamics are very interesting. I mean, a
Speaker 9: large factor in yen weakness is the difference in real
Speaker 9: interest rates between Japan and the US. Now, I think
Speaker 9: what we've seen since the whole tariff war started was
Speaker 9: that differential element. That aspect has had less of a
Speaker 9: you know, the correlation between the difference in interest rates
Speaker 9: and where the Japanese yen is against the dollar is
Speaker 9: kind of out of sync quite a bit from where
Speaker 9: you'd expect it to be. In other words, what I'm
Speaker 9: saying is the yen would actually be quite a bit
Speaker 9: stronger than where it is at the moment. So that
Speaker 9: kind of speaks to the uncertainty factor out there.
Speaker 4: We know inflation in Japan has been persistently above the
Speaker 4: boj's two percent target for quite a number of months. Now,
Speaker 4: I think that may be an understatement. I'm curious about
Speaker 4: the inputs that have been the primary drivers.
Speaker 6: Well.
Speaker 9: I think in terms of the inflation at the moment,
Speaker 9: the main culprit is food food inflation, and I think
Speaker 9: it's the movements there that will be one of the
Speaker 9: key drivers to the inflation trend over the coming months.
Speaker 9: Another factor that we need to be a cognizant of
Speaker 9: is that in Prime Minister Tack HG's package for the economy,
Speaker 9: there are some more subsidy measures for households to deal
Speaker 9: with electricity bills and gas bills, and some of these
Speaker 9: measures are already forecast by the government to shave off
Speaker 9: about zero point seven percentage point off inflation. So I
Speaker 9: think we are going to see much lower figures coming
Speaker 9: in over the coming months. And you know, you could
Speaker 9: argue that that's why the BOJ also wants to get
Speaker 9: a rate hike out of the way, because you want
Speaker 9: to go wile the figures still looking hot.
Speaker 4: What about the story on wages that was such a
Speaker 4: focal point for such a long time, waiting for wages
Speaker 4: to have a meaningful uptick. Has wage inflation improved?
Speaker 9: We're seeing a pretty solid trend. If you look at
Speaker 9: the figure for wages for full time employees in regular jobs,
Speaker 9: it's around the two point two percent mark for a
Speaker 9: stable sample. There's lots of out there, but I think
Speaker 9: that's one of the ones to really focus on. It
Speaker 9: gives a much more stable view of the trend now
Speaker 9: compared with previous years, that's a very very solid figure.
Speaker 9: But compared with three percent inflation, that is not a
Speaker 9: great number because that means your purchasing power is getting
Speaker 9: weaker in real terms all the time. And I think
Speaker 9: that's the big thing that needs to change, is we
Speaker 9: need to get the wage increases ahead of where the
Speaker 9: inflation rate is to really turn around the consumption figures
Speaker 9: in the economy and drive growth.
Speaker 4: Paul, it's always a pleasure. Thank you so much for
Speaker 4: helping US preview this week's boj decision. Paul Jackson there
Speaker 4: from Bloomberg News. He covers the economies of Japan and
Speaker 4: South Korea. I'm Doug Krisner. You can catch us weekdays
Speaker 4: for the Daybreak Asia podcast. It's available wherever you get
Speaker 4: your podcast.
Speaker 2: Nathan, Thanks Doug, and that does it for this edition
Speaker 2: of Bloomberg Daybreak Weekend. Join us again Monday morning at
Speaker 2: five am Wall Street Time for the latest don markets,
Speaker 2: overseas and the news you need to start your day.
Speaker 2: I'm Nathan Hager. Stay with us. Top stories and global
Speaker 2: business headlines are coming up right now.