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Speaker 1: Let's get to Ed Rogers CEO and c i O

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Speaker 1: at Roger's Investment Advisors. Well, I do want to talk

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Speaker 1: to you about Japan as an investment destination compared to China,

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Speaker 1: but I think we need to talk about the b

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Speaker 1: o J first and implications the b o J. I

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Speaker 1: suppose we could expect some warnings if if a change

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Speaker 1: was coming, and it seems like every economist that we

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Speaker 1: talked to does not expect much of a change in

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Speaker 1: in policy today. Are there some tweaks though that we

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Speaker 1: should look out for? Uh, good morning, Brian, thanks and Paul,

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Speaker 1: thanks for having me back on the show. Um it

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Speaker 1: is uh, Well again, everybody's pretty well telegraphed on this.

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Speaker 1: We we don't expect any major changes, even minor tweaks

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Speaker 1: would be minor tweaks to be perfectly honest. I think

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Speaker 1: there's absolutely zero expectation that Rachel will rise and and

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Speaker 1: there might be some tinkering with the curve management, but

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Speaker 1: it's it's going to be pretty inconsequential stuff given given

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Speaker 1: the the environment, the interest rate environment globally. Is this

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Speaker 1: how it's going to be until how a Corota's term ends. Yes,

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Speaker 1: I mean in a word. Uh, it's it's uh, you know,

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Speaker 1: you guys cited I think in the recent piece. Uh,

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Speaker 1: you know, inflation is real. You know, consumer prices are up.

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Speaker 1: I can tell you that when you go and you

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Speaker 1: buy your Starbucks coffee. It's it's it's it's certainly up

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Speaker 1: more than three. It's. Um. What the government really wants

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Speaker 1: to have happened. What everyone is really very keen to

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Speaker 1: see is wage inflation that starts to make this all

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Speaker 1: very much makes sense. That's that's the you know, this

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Speaker 1: is the way we conquer thirty years of deflation. The

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Speaker 1: inflation that we're getting there there at a certain level,

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Speaker 1: it's it's it's much. It's welcomed frankly, because we are

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Speaker 1: fighting thirty years of deflation. Um. But the real inflation

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Speaker 1: that they want hasn't happened yet, and that is in

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Speaker 1: the wage space. Let's talk a little bit about investing

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Speaker 1: in Japan versus invest in China, and maybe I just

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Speaker 1: use as a sort of microcosm story Caterpillar, because Japan

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Speaker 1: has a lot of these big machinery and earth moving

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Speaker 1: types of companies. So, uh, very good earnings from Caterpillar

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Speaker 1: because they had not only organic growth, but they had

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Speaker 1: pricing power. Are we seeing the same with companies like

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Speaker 1: Kamatsu and hit Taughts you Construction? Yeah, Look, it is weird,

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Speaker 1: a fascinating moment in time right now with dollar in

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Speaker 1: the you know, on fifty range, Japan is simply on sale.

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Speaker 1: There's no other way of putting it. And if you

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Speaker 1: consider the long term you know, two to three year

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Speaker 1: outlook for Japanese interest rates, it's impossible to think that

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Speaker 1: this zero industry policy continues forever. Does it continue through

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Speaker 1: uh B a j governor Crotas term almost certainly, you know,

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Speaker 1: into next year. After that, there's a lot more room

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Speaker 1: for question where it goes right now? Uh. We we

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Speaker 1: have clients even in our own Japan's on tour switching

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Speaker 1: from US dollar share class simply into the end share

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Speaker 1: class so that they could potentially benefit you know, six

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Speaker 1: to twenty four months down the road when dollar end

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Speaker 1: goes back to one. Uh. There's there's the the fex

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Speaker 1: moves now are real and they're impactful on your investment positioning.

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Speaker 1: UM Japan's on sale and you should take advantage of

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Speaker 1: the fact. That's the the simplest answer on that. So

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Speaker 1: if Japan's on sale. What do you buy anything specific? Well,

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Speaker 1: you'd want to buy something that has you know, current

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Speaker 1: income yield um. The real state, there's enormous amounts of

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Speaker 1: activity real estate, particularly in the hospitality space, you know,

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Speaker 1: stuff that generates income. I think it's probably a similar

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Speaker 1: situation in the United States quite frankly. You know, join

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Speaker 1: a homeowner or a home buyer right now? Or do

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Speaker 1: you want to have a property that you can rent out? Um,

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Speaker 1: there's a uh we see this as someone with a

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Speaker 1: zero sum game. By the way, the with every day,

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Speaker 1: every week, every month, the Chinese it's less attractive, Japan

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Speaker 1: gets more attractive across the board. Why is that? Because

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Speaker 1: these are second and third largest economies in the world.

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Speaker 1: You know, China fourteen trillion or thereabouts, Japan at five

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Speaker 1: trillion US dollars or thereabouts. If you have large numbers

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Speaker 1: amount of assets to deploy, you you still can't go.

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Speaker 1: You know, if you're a U S investor with significant

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Speaker 1: you know, billions of dollars has been as as Warren

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Speaker 1: Buffett famously noted a couple of years ago when he

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Speaker 1: invested in Japanese trading houses, there aren't that many places

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Speaker 1: in the world to go and put ten billion dollars. Well,

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Speaker 1: guess what Japan has, as you know the United States

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Speaker 1: major ally in Asia, as politically you know, uh, capitalists

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Speaker 1: and secure democracy as you can find in this part

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Speaker 1: of the world. It's also a safe place to put

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Speaker 1: ten billion dollars. There's there's enormous opportunity for investments. Let's

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Speaker 1: talk about a little of the downside that could happen

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Speaker 1: with the rising rates in Japan. You know, like you said,

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Speaker 1: I'm not expecting real adjustment and yield curve control and

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Speaker 1: certainly not to just let it go. Uh. You know,

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Speaker 1: we talked about maybe edging up to fifty basis points

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Speaker 1: or or perhaps something in between. But but I think

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Speaker 1: a lot of people are are thinking about what happens

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Speaker 1: if at some point inflation gets very powerful in Japan

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Speaker 1: and and the authorities start to let yields rise and

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Speaker 1: they talk about, you know, the earthquake that could happen

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Speaker 1: and walk us through it, Well, there could be real pain. Um.

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Speaker 1: I think one has to consider the significant amount of

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Speaker 1: j GB holdings within the domestic ecosystem, and if rates

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Speaker 1: rise and you have a real mark to market change

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Speaker 1: in the value of those jgbs, that would also be uh,

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Speaker 1: very impactful for certain investors who are very long jgbs

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Speaker 1: um that that's not an insignificant concern I think for

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Speaker 1: the b J everyone watching. For instance, if, for instance,

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Speaker 1: a lot of people borrowed money in yend because it

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Speaker 1: was cheap and yields were low, and then all of

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Speaker 1: a sudden races started to go up, there would be

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Speaker 1: a massive repatriation uh and buying of the yen would

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Speaker 1: there not be And that could be like also a

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Speaker 1: pretty vicious move, I you know, kind of it depends

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Speaker 1: on the terms. I mean, is it fixtures are floating

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Speaker 1: and you know what have you done with the money

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Speaker 1: that you borrowed? Um? And you know what are the yields?

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Speaker 1: It's it's it's yesh my my nature coractions, Yes, completely

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Speaker 1: agree with you. My my further responses, it's a bit

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Speaker 1: more nuanced. It kind of depends on what you do

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Speaker 1: with the money. I mean, we've we've sent you know,

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Speaker 1: yen carry trades going back thirty or forty years in

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Speaker 1: various ways. So um to what extent is that now

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Speaker 1: a very you know again it's potentially risky, but also

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Speaker 1: very attractive. Just move on to some slightly femine territory

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Speaker 1: and just a few seconds we have remaining after the

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Speaker 1: Chip Act. Is there a big opportunity here for Japan? Absolutely, Again,

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Speaker 1: it's a zero sum game. China's going down, Japan's going

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Speaker 1: up in the eyes of investors. Coincidental with China's current

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Speaker 1: repositioning politically, shall we say, regionally and in the in

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Speaker 1: the in the global sense, this is creating enormous opportunities

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Speaker 1: for US Japan to establish a firmer BI later asset

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Speaker 1: management relationship and joint development across many energy, h and

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Speaker 1: financial security opportunities. And thanks very much for being with us.

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Speaker 1: Always a pleasure, always learned something from you. Ed Rodgers

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Speaker 1: CEO and ce IO at Rodgers Investment Advisors,