Speaker 1: One of the big questions this year is how Trump's
Speaker 1: tariffs will impact prices at home and abroad, especially in Asia,
Speaker 1: a region highly dependent on trade with the US. Tariffs
Speaker 1: are likely to be inflationary in the US, and they're
Speaker 1: usually disinflationary for other countries, weakening growth and demand.
Speaker 2: That impact will be felt at a time when much
Speaker 2: of the region was already preparing for more interest rate
Speaker 2: cuts as inflation eases. China has been mind with deflationary
Speaker 2: pressure for years. Meanwhile, Japan is trying to reinflate prices
Speaker 2: after the lost decades.
Speaker 1: You're listening to Asia Centric from Bloomberg Intelligence. I'm Kye
Speaker 1: Tidmytriva on Hong Kong.
Speaker 2: I'm John Lee also in Hong Kong, and today.
Speaker 1: We're looking at the landscape for inflation across Asia. Joining
Speaker 1: us is Gareth Leather, Senior Asia economist a Capital Economics.
Speaker 1: Thanks for joining us today.
Speaker 3: It's a pleasure to be here. Thank you for having
Speaker 3: me on.
Speaker 1: So maybe we should get started with a very big economy.
Speaker 1: We're talking about all the inflation today. While China is
Speaker 1: in deflation, it's been in that position for a few
Speaker 1: years now. You said in the past that it's largely
Speaker 1: due to over capacity in a certain sector. So you
Speaker 1: know over two hundred EV companies, more than one hundred
Speaker 1: AI large language models. Can you just walk us through
Speaker 1: why China has so much overcapacity and overproduction, like how
Speaker 1: we got here?
Speaker 3: Yeah, So China's deflation problem is a symptom of both
Speaker 3: very strong supply and very weak demand. I think in
Speaker 3: terms of the demand side, the government really hasn't been
Speaker 3: doing enough to try and get consumers to spend, whereas
Speaker 3: on the supply sign there's just been this glut of production,
Speaker 3: which is partly related to what happened during the pandemic
Speaker 3: that Chinese companies increased investments triun cater for strong Western
Speaker 3: demand for consumers when they were locked down. But also
Speaker 3: as well, it's kind of government, kind of local governments
Speaker 3: putting pressure on their kind of favored industry champions to
Speaker 3: try to be the next Tesla, to be the next Apple,
Speaker 3: and so you've seen this splurgeon production for companies trying
Speaker 3: to basically become the next kind of global champion, and
Speaker 3: that's led to this huge increase in supply which the
Speaker 3: domestic market hasn't been able to soak up. And so
Speaker 3: they've been engaged in quite vicious price walls, which is
Speaker 3: causing basically prices across the board to four. You mentioned
Speaker 3: in particular automotives, and that's worn. I think there's only
Speaker 3: a couple of automotive companies in China actually making money
Speaker 3: at the moment, but it's across the board solar panels
Speaker 3: as another one, electronics too, but it's a widespread problem.
Speaker 3: I've got interesting statistic for you if you wanted it. It
Speaker 3: was that about a decade ago, ten percent of manufacturing
Speaker 3: companies in China were losing money, whereas now it's around
Speaker 3: a third. So it just kind of goes to impress
Speaker 3: upon you the amount of capacity and that that companies
Speaker 3: are producing with very little financial reward.
Speaker 2: Why isn't there consolidation If all these companies are losing money,
Speaker 2: shouldn't they go out of business? And they shouldn't they
Speaker 2: be mergers and acquisitions.
Speaker 3: I think that's what you'd expect in a normal economy,
Speaker 3: that if companies are making sustained losses, they'd struggle and
Speaker 3: go out of business. I think the problem is in
Speaker 3: China that they're quite often backed by local governments who
Speaker 3: are kind of trying to champion these companies as the
Speaker 3: next you know, as I said, the next Tesla or whatever,
Speaker 3: and they're worried that if they did pull the plug
Speaker 3: on these companies, you get a big rise in unemployment
Speaker 3: and the shops slow down and economic growth. So, although
Speaker 3: they're being put under some pressure by the central government
Speaker 3: to try to do more to consolidate, it's very difficult
Speaker 3: just because they are champions of local governments and so
Speaker 3: it's proving a very difficult process.
Speaker 1: Doesn't that mean, though, that the Chinese government needs to
Speaker 1: rethink how they treat not just the private sector, but
Speaker 1: industry in general. I mean, there seems like a problem
Speaker 1: that's entrenched in the system itself.
Speaker 3: Yeah. I think it's basically a symptom of a very
Speaker 3: strong industrial policy that you've got in China, where the
Speaker 3: central government has been putting kind of or making targets
Speaker 3: for China to be the next industry leader in various
Speaker 3: different sectors. Local governments have responded by putting out subsidies,
Speaker 3: and that you've had this the emergence of so many
Speaker 3: different industries and so many different companies trying to do that,
Speaker 3: and it's finally it very difficult to work its way out. Ideally,
Speaker 3: you would have in a market economy that the companies
Speaker 3: that are losing money either out of business or consolidate
Speaker 3: emerged with stronger ones. But that hasn't happened in China.
Speaker 2: The government seems to be tackling this issue. You know,
Speaker 2: the government is pushing for this anti involution push, which
Speaker 2: is trying to restrict the aggressive pricing policies of many
Speaker 2: of these companies. Do you think it's going to.
Speaker 3: Work, Well, it's not working so far. The other side
Speaker 3: of this coin, of course, is stronger demand. If they
Speaker 3: can't focus enough or cramply down enough on strong supply,
Speaker 3: they need to do more to boost con sumption or
Speaker 3: alternatively export more. I think on consumption. You know, the
Speaker 3: government may argue that it's actually running a large budget deficit,
Speaker 3: so it's doing as much as it can to boost demand.
Speaker 3: I think the problem is that in China there are
Speaker 3: a lot of this extra demand. Extra government spending is
Speaker 3: going towards investment rather than consumption. And it's just the
Speaker 3: way that the Chinese government operates as they're very reluctant
Speaker 3: to do more to boost consumption because they don't see
Speaker 3: or they find it quite difficult to know where do
Speaker 3: you get the payback, where's the money going to come
Speaker 3: from to pay back these loans, whereas with investment you
Speaker 3: can at least see if the company makes a profit,
Speaker 3: they can then pay back the loan, So that would
Speaker 3: be I think the alternative is much stronger demand. The
Speaker 3: other side, of course, is that China can export, and
Speaker 3: that has been exporting its domestic surplus onto third markets,
Speaker 3: but that of course is running into problems itself. You've
Speaker 3: seen the big tariffs that the US is introduced against China,
Speaker 3: that the EU as well as fighting back, and there
Speaker 3: is also signed that some emerging economies are also fighting
Speaker 3: back against some big surge in Chinese exports too, because
Speaker 3: it's hurting their domestic manufacturing sectors as well. So there's
Speaker 3: a kind of an international side to all this too.
Speaker 1: Are there signs that it's causing a disinflationary impulse across Asia?
Speaker 3: Yet?
Speaker 1: Like are we seeing that in the data? And how
Speaker 1: much deflation is China going to export?
Speaker 3: Well, yeah, this is the concern, isn't it like kind
Speaker 3: of ten years ago that China is now kind of
Speaker 3: a deflationary force for the global economy. I'm not sure
Speaker 3: we're there yet, and certainly for Asian economies that data
Speaker 3: don't back that up quite yet, but you can certainly
Speaker 3: see a scenario that over the next kind of two
Speaker 3: or three years that if this continues, then then it
Speaker 3: could be one. Yes. But if you look at the
Speaker 3: Asian data at the moment, certainly that the headline figures
Speaker 3: are very very weak, below one percent we had in
Speaker 3: the Philippines this week. Thailand is in deflation, Taiwan's only
Speaker 3: one and a half percent. Inflation is weak across the board,
Speaker 3: but a lot of this at the moment at least
Speaker 3: is due to temporary factors. So fuel price inflation is
Speaker 3: very low. Food price inflation has come right down as well,
Speaker 3: but core inflation, which is a better measure of underlying
Speaker 3: price pressure in the economy, is still relatively high. So
Speaker 3: there's no sign a bit there yet at least.
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Speaker 2: and share. So, Gareth, do you think China is entering
Speaker 2: or is in a deflationary spiral ARKA similar to what
Speaker 2: he was like in Japan for many years.
Speaker 3: Well, that's certainly our forecast for the next couple of years.
Speaker 3: So the Junia headline data that we got it showed
Speaker 3: a very small increase in the inflation rates, so positive inflation,
Speaker 3: but it's likely that was very temporary and that for
Speaker 3: the next year or two at least, we'll see prices
Speaker 3: continuing to decline. I think the difference between China and
Speaker 3: Japan is that in Japan's case is due almost exclusively
Speaker 3: to very weak domestic demand and for a crash in
Speaker 3: the economy, whereas China it's mostly supply driven. So the
Speaker 3: solutions to the two are going to be very very different.
Speaker 3: But certainly we see China's remaining in deflation for the
Speaker 3: next couple of years, just because we don't think the
Speaker 3: government is doing enough to clamp down on supply and
Speaker 3: boost demand enough.
Speaker 1: On that point, like this deflutionary spial there's this idea
Speaker 1: that at some point it just becomes nearly impossible to
Speaker 1: get out of that spiral. Do you see this happening?
Speaker 1: And what signs would you be looking for to track that?
Speaker 1: Is it? You know, a certain reading on price data?
Speaker 2: Is it?
Speaker 1: You know, the economy failing to shift towards the consumer, Like,
Speaker 1: I guess how dangerous is it? Because right now, at
Speaker 1: least as a consumer in China, you're probably like, great,
Speaker 1: the prices aren't going up. This is okay, as long
Speaker 1: as you don't lose your job, of course.
Speaker 3: Yeah. So in the kind of very near term, consumers
Speaker 3: are benefit in them this because there's a big price
Speaker 3: war going on, which means they can buy you know,
Speaker 3: electric vehicles or mobile telephones for very low prices. And
Speaker 3: initially that was the government's response, that you know, deflation
Speaker 3: is good for consumers, why is it necessarily a bad thing?
Speaker 3: But as we saw for example, that with Japan's case
Speaker 3: for the past almost the past twenty years, that deflation
Speaker 3: wants it becomes ingrained can be very damaging for the
Speaker 3: economy and also as well importantly for policy makers, very
Speaker 3: difficult to get out of. You have long periods of
Speaker 3: negative interust rates that hasn't done enough or it didn't
Speaker 3: do enough in Japan's case to get the country out
Speaker 3: of deflation. And there's a concern that China is in
Speaker 3: deflation at the moment. But rather than kind of temporary
Speaker 3: from becomes perm and in terms of where to look
Speaker 3: at in the data, I'd suggest looking at wages. That
Speaker 3: if businesses have enough power, consumers don't feel as if
Speaker 3: they've got enough pricing power that they can't demand strong
Speaker 3: wage increases, then it becomes a kind of self fulfilling
Speaker 3: propercy almost that the wages remain low, so costs remain low,
Speaker 3: so they don't need to increase prices. So I think
Speaker 3: that would be the one area that i'd look for
Speaker 3: to see if this is becoming ingrained.
Speaker 2: And consumption is all about confidence, and a lot of
Speaker 2: Chinese households have lost some wealth due to the weak
Speaker 2: property market. How important is a property market and the
Speaker 2: potential rebound for consumption going forward.
Speaker 3: I think that there's two ways, isn't there, So there's
Speaker 3: the kind of wealth effect. If prices decline, then consumers
Speaker 3: feel porous and don't spend as much. Also, but also
Speaker 3: when people move houses, you know, they typically byload of
Speaker 3: consumer goods as well to kind of refurnish their property too.
Speaker 3: So I think that the downtown the property market is
Speaker 3: probably having an impact on the consumer market too. Yeah.
Speaker 1: One of the things we had talked about was, of
Speaker 1: course the issue is not just domestic. There's a possibility
Speaker 1: of exporting this impulse across the region. And one of
Speaker 1: the other things globally impacting prices in the region is
Speaker 1: of course tariffs. So we now have a bit more
Speaker 1: certainty on what teriff levels will be globally with the
Speaker 1: lists we got on August first, they're in forced now.
Speaker 1: So how do you think of tariffs first of all globally?
Speaker 1: You know, do you see inflation in the US as
Speaker 1: a result? Do you see disinflation elsewhere as a result?
Speaker 1: How do you kind of think about it in the
Speaker 1: whole price realm.
Speaker 3: Yeah, so the main impact of these tests was probably
Speaker 3: going to be felt on the US. If you look
Speaker 3: kind of historically, it's either the consumers or businesses in
Speaker 3: the US that will pay for these I think what's
Speaker 3: been interesting so far is that the data in the
Speaker 3: US hasn't shown a big increase in inflation, and our
Speaker 3: sense is that that's because there's still a bit of
Speaker 3: uncertain about what's going to happen with final tariff rates,
Speaker 3: so businesses have been reluctant to pass on the increase.
Speaker 3: Also the fact that they've been able to run down
Speaker 3: in ventories too, so they haven't had the need to
Speaker 3: increase prices. But you know, with these tariffs now becoming
Speaker 3: seemingly permanent, that's unlikely to last forever, so we do
Speaker 3: see prices inflation in the US increasing. In terms of
Speaker 3: the rest of the region, obviously, it's a big exporter
Speaker 3: to the US, the most trade dependent part of the
Speaker 3: global economy, and so tariffs will have an impact, but
Speaker 3: I'd caution that they may not be as severe as
Speaker 3: some people seem to think. I think the first point
Speaker 3: to make is that that certainly most of Southeast Asia
Speaker 3: and Northeast Asia has been hit by a blanket tariff
Speaker 3: of around about twenty percent, so they haven't experienced a
Speaker 3: loss of competitiveness compared with other non US producers. So Vietnam,
Speaker 3: for example, has been hit with the same tariff as
Speaker 3: the Philippines, Thailand, and so act, it doesn't experience a
Speaker 3: big loss of competitiveness compared to those countries, so that's
Speaker 3: the first point to make. Also as well, that countries
Speaker 3: very significantly in how exposed they are to the US economy.
Speaker 3: So Vietnam, for example, is by head and shoulders in
Speaker 3: Asia the country most dependent on US demand, and with
Speaker 3: car growth forecast for Vietnam for this year and next
Speaker 3: year to reflect that. But for countries such as for example, Indonesia,
Speaker 3: the Philippines, they're not especially externally driven economy, so they
Speaker 3: should be able to withstand tariffs much better, we suspect.
Speaker 2: So Gareth, just to summarize your points, global tariffs will
Speaker 2: be inflationary in the US and you think you'll start
Speaker 2: seeing possibly the CPI start to rise over the next
Speaker 2: few months, But outside the US it will be deflationary.
Speaker 3: Is that correct? The US tariffs that Trump has introduce,
Speaker 3: they won't have any direct impact on Asia themselves. The
Speaker 3: way that they could still impact is if Asia decided
Speaker 3: to retaliate itself so it increased tariff on US imports,
Speaker 3: but it hasn't done that. The other ways, of course,
Speaker 3: is that they could cause growth across Asia to slow,
Speaker 3: so the economy's weakest. There's less price pressures that way,
Speaker 3: and that the final channel will be through the exchange rates.
Speaker 3: Auasian currencies have generally appreciated against the US dollar, so
Speaker 3: that's going to mean the price of imports is a
Speaker 3: bit weaker, so that it could affect prices that way.
Speaker 3: To the extent that it does have an impact on prices,
Speaker 3: it's likely to be mildly deflationary, but not by very much.
Speaker 1: So you're saying that basically you do expect over time
Speaker 1: that inflation is going to go up in the US
Speaker 1: as a result of these tariffs. We haven't really seen
Speaker 1: that yet in CPI, but I guess the natural question is, well,
Speaker 1: what are the implications for the FED, because of course
Speaker 1: central banks in Asia can ease. I mean they have
Speaker 1: been easing, even though the FED hasn't. But what are
Speaker 1: sort of the implications for the rest of the year
Speaker 1: if the FED cuts once, if they choose not to
Speaker 1: cut because it's not coming through into the data as
Speaker 1: much as they expected, what are sort of the implications
Speaker 1: for Asia central banks?
Speaker 3: Yeah, we'll start with a FED. I think it's in
Speaker 3: a bit of a bind at the moment that it's
Speaker 3: concerned about the potential inflationary impacts, even though it hasn't
Speaker 3: seen a big spike yet, but also as well, they're
Speaker 3: concerned about the impact on growth that we saw from
Speaker 3: the US jobs report that there are signs that it's
Speaker 3: starting to have an impact on confidence and possibly the
Speaker 3: broader economy. So against that backdrop of potentially higher prices
Speaker 3: but also weaker growth, what does the FED do? I
Speaker 3: think the expectations certainly since the jobs have shifted towards easing,
Speaker 3: but I suspect they will do so very gradually until
Speaker 3: they can get if they do so at all, until
Speaker 3: they can get greater clarity on what the implications are
Speaker 3: for inflation. In terms of the rest of the region,
Speaker 3: I think they're looking mainly at the impact on growth.
Speaker 3: We said that they'll be very minimal implications for inflation,
Speaker 3: so they're all looking what this means for growth, and
Speaker 3: by and large they're going to be negative. There'll be
Speaker 3: a much bigger impact for the very open economies such
Speaker 3: as for example, Vietnam, Thailand later they're probably the most
Speaker 3: exposed ones, much less of an impact save for Indonesia
Speaker 3: the Philippines. But you know, nesting all of this out,
Speaker 3: I suspect it generally means more inter strate cuts and
Speaker 3: probably coming a little bit sooner than maybe we'd expect
Speaker 3: as well as a kind of insurance policy, they want
Speaker 3: to bring this easing forward. And that is by and
Speaker 3: large what we've seen over the past year that if
Speaker 3: you look at the Central Bank statements, very close to
Speaker 3: the tariffs are a big concern for them, and that
Speaker 3: the easing has generally coming maybe a little bit sooner
Speaker 3: than we'd been expected as well.
Speaker 2: So, Gareth, in this environment, which Asian countries do you think,
Speaker 2: you know, will perform better and worse, you know, across
Speaker 2: the board economically into the GDP growth.
Speaker 3: Well, I think probably in terms of what we were
Speaker 3: kind of concerned about on you know, early April, on
Speaker 3: Liberation Day, when Trump announced these large scale tariffs, that
Speaker 3: Vietnam was going to initially hit hit by forty six
Speaker 3: percent tariffs, and just given how much of its economy
Speaker 3: is dependent on US demand, we were kind of in
Speaker 3: the process of writing down GDP growth forecasts by quite
Speaker 3: significant mounts, maybe kind of two percentage points or so.
Speaker 3: Then they had the ninety day reprieve, and since then
Speaker 3: we've had the trade deal with Vietnam, which gives it
Speaker 3: a twenty percent tariff, which is more or less in
Speaker 3: line with other countries. So I think in terms of
Speaker 3: which countries come best out of these negotiations, it's probably
Speaker 3: Vietnam because it's now being hit with the same tariff
Speaker 3: as everyone else. In terms of the countries that are
Speaker 3: going to be kind of hit hardest and that have
Speaker 3: done least well out of these negotiations, I think you'd
Speaker 3: have to say India that at the start of the process,
Speaker 3: you know, they were seen as being a strong US allies.
Speaker 3: There was reasons why the US might want to go
Speaker 3: soft on them. Everyone thought that the trade deal with
Speaker 3: them might be quite straightforward. Is now looking as if
Speaker 3: they're going to have fifty percent tasks, which should be
Speaker 3: higher than what we're expecting on China as well. So
Speaker 3: I think India has done very badly out of these negotiations.
Speaker 3: And I guess the kind of one saving grace for
Speaker 3: India at least is that it's not especially trade dependent economy,
Speaker 3: so the hit will be manageable. But in terms of
Speaker 3: you know, all the kind of China plus one talk
Speaker 3: and India doing doing well and being a kind of
Speaker 3: friendshuring destination and stuff like that, that's looking a lot
Speaker 3: less rosy now than the kind of predictions from a
Speaker 3: month or two ago, do.
Speaker 1: You think we will end the year at about these
Speaker 1: tariff levels? Like, I'm curious as an economist, you're looking
Speaker 1: out across this trade landscape. There's a lot going on,
Speaker 1: you know, every minute of every day. But I wonder
Speaker 1: when you look towards let's say we're sitting here in December,
Speaker 1: end of December, what kind of rates do you expect
Speaker 1: we'll be in this ballpark as well? Like should we
Speaker 1: take solace in the list we saw on August first?
Speaker 3: I think we've got a little bit more certain now
Speaker 3: than we did, for example, have on April or second
Speaker 3: on Liberation Day. I think for most countries we can
Speaker 3: be relatively sure the tariffs of about twenty percent on
Speaker 3: most of their goods will be what we can expect.
Speaker 3: I think there will be certain negotiations for carve out
Speaker 3: on certain sectors. For example, it doesn't make much sense
Speaker 3: for the US to be imposing big tariffs on products
Speaker 3: that it can't provide domestically, especially commodities, so Malaysia and
Speaker 3: Indonesia may be able to negotiate carve outs. I think
Speaker 3: there's still quite a bit of uncertainty about what India
Speaker 3: will be facing in December. You know, this fifty percent
Speaker 3: tariff that Trumpers announced twenty five plus twenty five. They've
Speaker 3: got until the end of the month to agree some
Speaker 3: kind of deal. It's possible that if you get a
Speaker 3: peace agreement in Ukraine, then he won't obviously need to
Speaker 3: clamp down on countries that are buying Russian oil. So
Speaker 3: there's a possibility that India won't be facing such high tariffs.
Speaker 3: I think the big uncertainty as though regardless electronics and semiconductors.
Speaker 3: We can have heard the latest threats today of one
Speaker 3: hundred percent tariffs on semiconductors. Does he go ahead with
Speaker 3: those which countries will be able to negotiate calves out
Speaker 3: Taiwan seems pretty confident that TSMC won't be hit by
Speaker 3: these tariffs, and is it just going to be semiconductors
Speaker 3: or electronics More broadly, I think that's for Asia where
Speaker 3: the big kind of uncertainty lies. So by December maybe
Speaker 3: something around what we're getting. But the big uncertainly is
Speaker 3: in dear and electronics and.
Speaker 2: Gareth, what are the potential big risks both on the
Speaker 2: upside and the downside. You know, potential blackswans you see
Speaker 2: coming over the next say, six or twelve months.
Speaker 3: Well, I guess the first one will be electronics. That
Speaker 3: if Trump really did decide to clamp down not just
Speaker 3: on semiconductors, but electronics more broadly, so you know, kind
Speaker 3: of computers, tablets, iPads, that kind of stuff, then that
Speaker 3: would really hit Asia quite hard. I think Taiwan's the
Speaker 3: most exposed in that respect, but it's kind of you know,
Speaker 3: countries across the board will be hit quite drastically by that.
Speaker 3: I think the second one maybe concerns the kind of
Speaker 3: outlook for interest rates in the US that if you
Speaker 3: do get I think most people are now expecting rate
Speaker 3: cuts over the next few months, but if you do
Speaker 3: get inflation in the US spiking quite sharply, I think
Speaker 3: the FED would find it very difficult to cut interest
Speaker 3: rates in that kind of environment, and that might entel
Speaker 3: a kind of repricing of financial markets across the board,
Speaker 3: from kind of bonds to currencies, and there could be
Speaker 3: some fallout for Raisian financial markets from that as well.
Speaker 1: You know, earlier we were talking about sort of price
Speaker 1: trends in the region. One thing we didn't talk about,
Speaker 1: you know, because we had talked about deflation, disinflation, inflation.
Speaker 1: We haven't talked yet about reflation, which is what Japan
Speaker 1: has been trying to do. So after their last decades,
Speaker 1: they're trying to get inflation back. You know, what's your
Speaker 1: report card for the Japanese government, the central bank? I mean,
Speaker 1: how are they doing on that path?
Speaker 3: Yeah? So Japan's a very interesting case, isn't it That
Speaker 3: for years it's been stuck in deflation. People or economists
Speaker 3: were wondering, how is it going to get out of it?
Speaker 3: This cut interest rates in negative territory, it doesn't seem
Speaker 3: to be working. And now the opposite problem almost is
Speaker 3: that the inflation is too high that the central banks
Speaker 3: raising trace is noticeable that pretty much out of every
Speaker 3: major economy in the region, inflation is now higher in
Speaker 3: Japan than elsewhere.
Speaker 1: Yeah. What a world.
Speaker 3: And in terms of how we got there, I think
Speaker 3: you had the first of all, the kind of pandemic
Speaker 3: related shock of supply chain disruptions which pushed up the
Speaker 3: price of goods everywhere. You also had the shock from
Speaker 3: the Ukraine War pushing up the price of oil and
Speaker 3: natural gas, and then also the impact of the weak
Speaker 3: pushing up import costs. Now all of those should have
Speaker 3: proved temporary. But what's happened is it's come across or
Speaker 3: it's kind of fed through to a kind of a
Speaker 3: waged price viral as well, so that you know, consumers
Speaker 3: household see the prices of goods increasing, they try and
Speaker 3: demand higher wages. Because wages are now higher, that companies
Speaker 3: have to charge more. So this kind of this virtuous circle,
Speaker 3: which hopefully means Japan and the kind of the era
Speaker 3: of prolonged deflation is now at an end. And it's
Speaker 3: quite interesting as well that businesses are also kind of
Speaker 3: changing their behavior as well. For years, they're very reluctant
Speaker 3: to raise prices that were concerned it would lose the
Speaker 3: market shared, but that seems sort of changed as well.
Speaker 3: So the situation in Japan has kind of, you know,
Speaker 3: in the past kind of five years, has changed quite
Speaker 3: considerably and for the better.
Speaker 2: And what's your expectations for the BOJ over the next
Speaker 2: twelve months.
Speaker 3: Well, I think further ray hikes are likely. We've got
Speaker 3: one penciled in for October. I think at the moment
Speaker 3: that's a kind of fifty to fifty cores, but certainly
Speaker 3: kind of a steady, gradual tiping of policy seems the
Speaker 3: most likely outcome.
Speaker 1: There, Japan leading the world and price growth.
Speaker 3: I would have thought, yes, it's not something you'd have
Speaker 3: said for five years ago.
Speaker 1: What an interesting discussion. Thank you so much for joining
Speaker 1: us today, Gareth.
Speaker 3: Thank you very much for having me. It's a pleasure.
Speaker 3: Thank you, Thanks so much.
Speaker 2: You've been listening to ASI Eccentric from Bloomberg Intelligence. I'm
Speaker 2: John Lee in Hong Kong and.
Speaker 1: I'm latching me Treva, also in Hong Kong. You can
Speaker 1: find more episodes on Apple Podcasts, Spotify, wherever you listen.
Speaker 1: Our show was produced and edited by Claire Chen. Let's
Speaker 1: see you next time.