Japanese Bonds, Yen at Risk as Unpopular Ishiba Holds On | Bloomberg: The Asia Trade 7/22/25
SUCCESS HERE AS SPORTS PEOPLE? ♪ THIS IS THE ASIAN TRADE. THE TOP STORIES THIS HOUR. A CAUTIOUS OPEN AHEAD FOR ASIA AFTER THE S&P 500 EDGES ABOVE 6300 FOR THE FIRST TIME. TREASURY YIELDS FALLING AS TRADERS LOOK FOR SIGNS OF EARNINGS RESILIENCE AMID TARIFF RISKS. JAPANESE BONDS LOOKING VULNERABLE AS MARKETS REOPEN FOLLOWING THE HISTORIC ELECTION DEFEAT FOR THE PRIME MINISTER. A PRESIDENT IS — PRESIDENT MARCOS IS EXPECTED TO MEET DONALD TRUMP AS HE SEEKS TO REDUCE THE THREATENED TARIFF RATE. RISKS AROUND TRADE WEIGHING ON ASSETS, ESPECIALLY WHEN IT COMES TO SAFE HAVEN DEMAND. 10 YEAR YIELDS FALLING TO THE LOWEST LEVEL IN MORE THAN A WEEK. TRADE HEADLINES FACTORED INTO THE U.S. STOCK MARKETS AS WELL. WE HAD A MARGINAL RISE FOR THE S&P 500. ABOVE 6300 FOR THE FIRST TIME EVER FOR THE S&P 500. WE ARE WATCHING TESLA AND ALPHABET THIS WEEK. IT IS REALLY ABOUT WHAT THE DOLLAR IS DOING ON THE OTHER SIDE OF THAT TRADE, THE JAPANESE CURRENCY, AND WE HAVE MORE OF A BOOST FOR THE JAPANESE CURRENCY IN THE OVERNIGHT SESSION. THIS AFTER WE SAW THE ELECTION RESULTS FOR THE UPPER HOUSE AND THE PRIME MINISTER STILL VOWING TO HOLD ONTO HIS LEADERSHIP. SO PERHAPS A LITTLE MORE RESILIENCE WHEN IT COMES TO JAPANESE ASSETS BUT MARKETS COMING BACK ONLINE AFTER A PUBLIC HOLIDAY. WE WILL WATCH WHAT HAPPENS TO JAPANESE STOCKS AS I MENTIONED JAPANESE GOVERNMENT BONDS AS WE HAVE SEEN THE LONG END OF YIELDS RISE TO MULTIYEAR HIGHS ON FISCAL CONCERNS. FOR MORE LET’S BRING IN OUR JAPAN POLITICS AND ECONOMICS REPORTER. WE’VE BEEN TALKING ABOUT PRIME MINISTER IS SHEBA TRYING TO HOLD ONTO POWER. THIS IS ALREADY HIS SECOND DISMAL ELECTION RESULT. WHAT ARE HIS COLLEAGUES WITHIN THE LDP SAYING AND COULD WE SEE A LEADERSHIP CHANGE? SAKURA: THERE ARE ALWAYS GOING TO BE CRITICS OF THE PRIME MINISTER, ESPECIALLY AFTER THE SELECTION SETBACK BUT THE KEY POINT TO LOOK OUT FOR IS WHETHER THIS — THESE KINDS OF VOICES TURN INTO A CHORUS, WHETHER THERE IS BROAD ATTRACTION AMONG THE LDP TO BRING HIM DOWN. WE ARE NOT SEEING THAT QUITE YET BUT THERE ARE A FEW VOICES COMING OUT. A FORMER PRIME MINISTER HAS COME OUT SPEAKING AGAINST HIM. THERE IS AN LDP REGIONAL BRANCH THAT IS GOING TO ASK HIM TO STAND DOWN. THERE IS SOME SORT — THERE ARE VOICES COMING THROUGH BUT WHETHER THIS WILL BECOME A BROADER CHORUS OF VOICES IS WHAT IS THE KEY TO LOOK OUT FOR. SHERY: ISHIBA’S ISSUES WITH THE PARTY HAVE NOT BEEN ABLE TO RESONATE WITH THE VOTERS GIVEN THE COST OF LIVING CRISIS WE ARE EXPERIENCING IN JAPAN. WILL THERE BE SOME SORT OF REFLECTION WITHIN THE RULING LDP THAT WHEN IT COMES TO SOME ACCOUNTABILITY OVER THE ELECTIONS? SAKURA: PRIME MINISTER ISHIBA HAS SAID HE IS NOT PLANNING ON CHANGING OUT THE PERSONNEL OF HIS TEAM, OF HIS CABINET OR THE EXECUTIVES OF THE LDP QUITE YET. BUT A SENIOR LDP MEMBER WAS SAYING THERE IS NO DENYING THAT THIS IS A HUGE LOSS AND THAT BASICALLY THEY WILL HAVE TO LOOK AT AND ANALYZE THE RESULTS. THEY WILL HAVE TO LOOK INTO THE DETAILS OF HOW THEY LOST THE ELECTION, IN ORDER TO CONSIDER HOW TO TAKE RESPONSIBILITY, WHAT KIND OF ACCOUNTABILITY THEY SHOULD TAKE. THAT WILL BE SOMETHING THAT WE WILL SEE IN THE COMING DAYS AND WEEKS. SHERY: IS NOW A GREAT TIME TO BE TALKING ABOUT ACCOUNTABILITY AMONG LEADERSHIP WHEN YOU HAVE ONGOING TRADE NEGOTIATIONS WITH THE UNITED STATES? THE TOP TRADE NEGOTIATOR IS IN WASHINGTON, HE SPOKE TO SECRETARY BESSENT. WHAT DO WE KNOW? SAKURA: THEY HAVEN’T SPOKEN YET AS FAR AS I KNOW BUT HE IS IN WASHINGTON AND HE IS PREPARING TO HAVE TALKS WITH THE TOP TRADE NEGOTIATORS OF THE U.S. SO FAR, WHAT BESSENT HAS SAID IS THAT THERE IS NO RUSH TO SEAL A DEAL BY AUGUST 1. THAT KIND OF CONTRADICTS WHAT THE TOP JAPAN NEGOTIATOR HAS BEEN SAYING. HE SAID THERE IS WILL ON BOTH SIDES TO SEAL THE DEAL BY AUGUST 1. THERE IS A BIT OF A DIFFERENCE IN THE WORDING AND MESSAGING, BUT THERE WILL BE A LOT OF INTEREST IN WHETHER THERE CAN BE SOME SORT OF A TRADE DEAL AT THAT POINT. IT’LL BE CRUCIAL HOW LONG ISHIBA ‘S CABINET AND ISHIBA’S ADMINISTRATION CAN GO ON FOR AS WELL. SHERY: RIGHT NOW, WHAT ARE THE MAIN STICKING POINTS? IS THERE ANY AREA THAT THEY COULD ACTUALLY COMPROMISE ON? SAKURA: THE AUTO TARIFFS. IT IS THE SAME ISSUES WE’VE BEEN TALKING ABOUT. THE AUTO TARIFFS ARE A BIG THING. SECTOR TARIFFS ARE A BIG ISSUE. PRIME MINISTER ISHIBA YESTERDAY HAD THE SAME MESSAGE. MORE INVESTMENT THAN TARIFFS. THERE IS A BIG DIFFERENCE. BESSENT IN AN INTERVIEW WAS SAYING THE DEAL HAS TO BE GOOD FOR AMERICANS. WHAT IS GOOD FOR AMERICANS, I THINK THERE IS A BIT OF A DIFFERENCE IN THE UNDERSTANDING. THERE ARE A FEW STICKING POINTS, BUT WE WILL SEE HOW THE TRIP IN THE U.S. PLAYS OUT. SHERY: CAN’T HELP BUT LAUGH TRYING TO UNDERSTAND WHERE THE NEGOTIATIONS ARE. THERE IS SO MUCH SECRECY AND THE STICKING POINTS DON’T NECESSARILY CHANGE. SAKURA MURAKAMI, WITH A BREAKDOWN OF THE JAPAN ELECTIONS AND THE TRADE NEGOTIATIONS ONGOING WITH THE U.S.. WASHINGTON ALSO BUSY NEGOTIATING WITH THE EUROPEAN UNION. THEY ARE RACING TO REACH A DEAL BEFORE THE AUGUST 1 DEADLINE. THIS OF COURSE COMING AT A TIME THAT IF THEY FAIL, WASHINGTON IS THREATENING 30% TARIFFS ON MOST GOODS COMING FROM EUROPE. BRUSSELS MEANWHILE IS PREPARING TO RETALIATE, IF TARIFF TALKS COLLAPSE. BRINGING IN BLOOMBERG’S SENIOR EDITOR WITH THE LATEST. WHAT DO WE KNOW AT THIS POINT? IT IS DIFFICULT TO GAUGE IF THERE ARE ANY COMPROMISES OR STICKING POINTS, AND STANCES HAVE BEEN STRONGLY FOR EVERY TRADING PARTNER WITH UNITED STATES. IS THERE ANY ROOM FOR COMPROMISE WHEN IT COMES TO THE WASHINGTON/EU TALKS? THE BIGGEST QUESTION HERE AND ONE OF THE DIFFICULTIES THAT HAS COME ALONG — COME ALONG IS A LOT OF COUNTRIES DON’T QUITE KNOW EXACTLY WHERE THE U.S. WANTS TO END UP. THEY KNOW THAT THEY WANT TO END UP SOMEWHERE BETTER THAN WHERE THEY ARE BUT WHAT IS GOING TO BE ENOUGH TO GET THE U.S. TO SAY YES? IN THE EUROPEAN TALKS WE ARE HEARING ABOUT PREPARATIONS THAT EUROPE A BE READY TO ACCEPT EVEN AN UNBALANCED DEAL, IF IT CAN TAKE SOME OF THE BIG THREATS OFF THE TABLE. THAT COULD LOOK LIKE SOMETHING WITH A UNIVERSAL TARIFF BASE RATE HIGHER THAN THE 10% GLOBAL MINIMUM THAT HAS BEEN THROWN OUT THERE. OF COURSE TRUMP HAS THREATENED TO HIT MOST EU EXPORTS WITH A 30% TARIFF ON AUGUST 1 IF WE DON’T HAVE SOME MOVEMENT BY THEN. SO THERE IS QUITE A LOT AT STAKE HERE STOP THE U.S. AND THE EU ARE MAJOR TRADING PARTNERS ACROSS A RANGE OF GOOD. REMEMBER, THAT IS ONLY THAT BASELINE TARIFF. WHEN YOU GET INTO SECTORAL TARIFFS, THE NUMBER IS EVEN HIGHER. THERE IS A LOT OF PRESSURE GOING ON HERE. U.S. SENIOR OFFICIALS HAVE SAID EUROPE WAS LATE TO THE GAME, IN TERMS OF NEGOTIATIONS COMPARED TO SOME OTHERS BUT AGAIN, WE DON’T HAVE TOO MANY DEALS THAT HAVE BEEN FINALIZED AT THIS POINT. WE DO HAVE A LOT THAT ARE SORT OF IN TALKS AS WE ARE GETTING CLOSER AND CLOSER TO THIS AUGUST DEADLINE. THE LAST THING I WILL SAY. IT IS ALWAYS WORTH REMEMBERING THE AUGUST DEADLINE IS THE LATEST IN A SERIES OF MOVING DEADLINES AS THE BIG IMPLEMENTATION HAS BEEN PUSHED BACK AND BACK AND BACK. SHERY: ONE OF THOSE TALKS WITH TRADING PARTNERS WAS TAIWAN. WHAT DO WE KNOW? DEREK: TAIWAN SAYS THERE ARE GOING TO BE MORE TRADE TALKS THIS WEEK. THERE IS SPECULATION THAT THEY HAVE RECEIVED A TARIFF LETTER FROM THE UNITED STATES. AGAIN, TRYING TO FIGURE OUT WHAT IT IS THE UNITED STATES IS GOING TO DEMAND. TAIWAN HAS A VERY PARTICULAR RELATIONSHIP WITH THE U.S. IN TERMS OF ITS GEO SECURITY POSTURE. THAT MAY PLAY IN AS WELL. IT IS A VERY UNIQUE ECONOMY, WHEN IT COMES TO ITS U.S. RELATIONSHIP. AS WELL AS THE U.S., AND PARTICULARLY THE TRUMP ADMINISTRATION HAS FOCUSED ON CHIPS. THAT IS WHERE TAIWAN IS A GLOBAL LEADER. THAT HAS BEEN AN IMPORTANT FOCUS OF THE OVERALL ECONOMIC RELATIONSHIP, AND WE’VE ALSO SEEN A PLAY BETWEEN THE U.S. DOLLAR AND THE TAIWANESE DOLLAR, AND WHERE THAT GOES. THERE HAVE BEEN A LOT OF LARGE FRAMINGS AROUND THIS DEAL, BUT AGAIN, TAIWAN MUCH THE SAME AS A LOT OF OTHER ECONOMIES TRYING TO FIGURE OUT HOW YOU GET TO A DEAL. CERTAINLY THAT IS A PLACE WHERE THEY NEED TO FIND STABILITY ON THE ECONOMIC FRONT AMID ALL OF THE GEOPOLITICAL TENSIONS FACING THAT PARTICULAR ECONOMY. SHERY: BLOOMBERG’S SENIOR EDITOR DEREK WALLBANK WITH THE LATEST ON THOSE TRADE NEGOTIATIONS. WE ALSO HAVE THE PHILIPPINE PRESIDENT IN WASHINGTON, SET TO MEET PRESIDENT TRUMP ON TUESDAY AT THE WHITE HOUSE, FOLLOWING VISITS TO THE PENTAGON AND STATE DEPARTMENT, FOCUSING ON TARIFFS AND SECURITY COOPERATION. FOR MORE, WE ARE JOINED NOW FROM D.C. WE HAVE SEEN SOME MOMENTUM FOR PRESIDENT MARCOS JR., ESPECIALLY WHEN IT COMES TO THOSE MEETINGS WITH SECRETARY BESSENT. WHAT DO WE KNOW HEADING INTO THAT MEETING WITH PRESIDENT TRUMP? RYAN: PRESIDENT MARCOS HAS SEEN SOME MOMENTUM DURING HIS VISIT. HE HAD QUITE A PACKED DAY EVEN BEFORE HE’S MEETING WITH PRESIDENT TRUMP. HE HELD BACK TO BACK TALKS WITH THE DEFENSE SECRETARY AND THE SECRETARY OF STATE. IN BOTH OF THOSE ENCOUNTERS, BOTH SIDES REALLY EMPHASIZED THE STRENGTH OF THE U.S.-PHILIPPINES ALLIANCE, PARTICULARLY IN THE FACE OF THREATS IN THE ASIAN PACIFIC. THE DEFENSE SECRETARY EMPHASIZING THE PARTNERSHIP HAS NEVER BEEN STRONGER OR OR ESSENTIAL, AND REAFFIRMING THE MUTUAL DEFENSE TREATY BETWEEN THE PHILIPPINES AND THE U.S.. SECRETARY RUBIO HIGHLIGHTING A IRONCLAD PARTNERSHIP BETWEEN THE PHILIPPINES AND THE U.S., WHEN IT COMES TO MAINTAINING PEACE AND STABILITY IN THE INDO PACIFIC. ALL OF THIS SETTING THE STAGE FOR MARCOS’S MEETING WITH PRESIDENT TRUMP AT THE WHITE HOUSE. HE HAS A BIG TASK IN FRONT — AHEAD OF HIM. HE IS CAST WITH NEGOTIATING LOWER TARIFFS, TO BRING THE 20% RATE THAT PRESIDENT TRUMP HAS THREATENED ON PHILIPPINE PRODUCTS. HE IS UNDER SOME SORT OF PRESSURE BECAUSE SOME OF THE PHILIPPINES NEIGHBORS IN SOUTHEAST ASIA HAVE MANAGED TO NEGOTIATE LOWER TARIFFS AS PART OF THEIR TRADE AGREEMENTS WITH THE U.S.. SHERY: A LOT OF PRESSURE DOMESTICALLY AS WELL. HE DID SUFFER A SETBACK IN THE MIDTERM ELECTIONS. WHAT SORT OF LEVERAGE DOES PRESIDENT MARCOS HAVE GOING INTO THESE TRADE NEGOTIATIONS? RYAN: HE COULD PLAY UP THAT SECURITY ALLIANCE BETWEEN MANILA AND WASHINGTON WHICH HAS BECOME STRONGER UNDER HIS ADMINISTRATION. HE REALLY RESTORED THAT SECURITY RELATIONSHIP AFTER COMING UNDER STRAIN UNDER HIS PREDECESSOR, WHO HAS CLOSER TIES WITH CHINA. MARCOS HAS ALLOWED EXPANDED U.S. ACCESS TO MILITARY BASES IN THE PHILIPPINES. HE’S HOSTED THOUSANDS OF AMERICAN TROOPS FOR MILITARY EXERCISES AND EVEN ALLOWED THE DEPLOYMENT OF A U.S. MISSILE SYSTEM. THERE IS A SECURITY ASPECT BUT WHEN IT COMES TO ACTUAL TRADE, PHILIPPINE TRADE DELEGATION THAT HAS COME TO WASHINGTON FOR ROUNDS OF TALKS HAS PLEDGED TO INCREASE PURCHASES OF U.S. PRODUCTS INCLUDING SOYBEANS AND FROZEN MEAT. BUT WHETHER THAT WOULD BE ENOUGH TO SWAY PRESIDENT TRUMP REMAINS TO BE SEEN. HE IS KNOWN TO BE UNPREDICTABLE AND JUST BECAUSE THE PHILIPPINES IS A LONG-STANDING U.S. ALLY IN ASIA DOESN’T MEAN IT WILL BE GETTING FAVORABLE TRADE TERMS. PRESIDENT TRUMP HAS THREATENED HIGHER DUTIES ON PRODUCTS FROM SOUTH KOREA AND JAPAN DESPITE THOSE COUNTRIES BEING CLOSE ALLIES AS WELL. SHERY: RYAN CHUA WITH THE LATEST ON THOSE TRADE NEGOTIATIONS. COMING UP ON THE ASIA TRADE, MORE IN JAPAN’S SHIFTING POLITICAL LANDSCAPE. PLUS WE TALK MARKETS WITH MIZUHO SECURITIES ASIA. — PARLIAMENT RESUMES, WE HAVE MUCH MORE AHEAD. THIS IS BLOOMBERG. ♪ SHERY: JAPAN COMING BACK FROM HOLIDAY AFTER THE ELECTIONS OVER THE WEEKEND. PRIME MINISTER ISHIBA LOSING THE MAJORITY IN THE UPPER HOUSE ELECTIONS. NIKKEI FUTURES NOT DOING MUCH. WE HAVE SEEN A LITTLE BIT OF STRENGTH ON THE JAPANESE YEN. FUTURES TO THE UPSIDE, A 10TH OF 1% WHILE U.S. FUTURES ARE HOLDING STEADY. ALREADY RECORD HIGHS FOR THE S&P 500 ABOVE THAT 6300 MARK FOR THE FIRST TIME EVER. FOR MORE LET’S BRING IN THE EXEC IT OF EDITOR FOR ASIAN MARKETS, PAUL DOBSON. MARKETS COMING BACK FROM A PUBLIC HOLIDAY. WE WERE CONCERNED ABOUT A POTENTIAL TRIPLE DIP WHERE YOU HAVE BONDS, YEN AND STOCKS ALL FALLING. WHAT IS THE FUTURE LOOKING LIKE RIGHT NOW? PAUL: GOOD MORNING. A LITTLE BIT BRIGHTER THAN THAT PROGNOSIS. WE SAW THE REST — WE SAW THE YEN RALLY ABOUT 1% YESTERDAY. IT FEELS LIKE THERE WAS A LITTLE BIT OF RELIEF AMONG INVESTORS ABOUT THE IDEA THAT ISHIBA IS GOING TO TRY AND STAY IN POWER AND GET NEGOTIATIONS DONE OVER A TRADE DEAL WITH THE U.S. LET’S SEE WHAT HE DOES OVER THE BUDGET NEGOTIATIONS. THAT IS GOING TO BE WHAT IT COMES DOWN TO. HOW MUCH OF A TRADE OFF HOW MUCH HE HAS TO RELENT ON MEASURES THE OPPOSITION PARTY WOULD LIKE TO SEE, LIKE A REDUCTION IN THE SALES TAX. BECAUSE THE SPENDING OF THE JAPANESE GOVERNMENT IS THE SOMETHING BOND INVESTORS ARE PAYING ATTENTION TO, AND THAT’S BEEN CAUSING VOLATILITY ACROSS THE REST OF THE MARKETS AS WELL. BUT SO FAR, SIGNS ARE THAT MAYBE JUST MAYBE THE MARKET CAN FIND A LITTLE BIT OF STABILITY. SHERY: AT LEAST THE EARNINGS SEASON IN THE U.S. ALSO SEEMS TO BE SHAPING UP PRETTY RESILIENTLY AT THE MOMENT. WE DO HAVE SOME PIGMENT — SOME BIG TECH NAMES REPORTING AS WELL INCLUDING ALPHABET. PAUL: IT’S GOING TO BE MASSIVELY IMPORTANT TO WATCH ALL OF THOSE EARNINGS THROUGH THIS WEEK. WE GOT OFF TO A PRETTY BRIGHT START. THE MARKET DOESN’T SEEM TO BE REWARDING ALL THAT MUCH. THIS IS SOMETHING WE NEED TO WATCH MORE, JUST HOW MUCH IS ALREADY PRICED IN, AND TERMS OF THAT OPTIMISM. BECAUSE THE EARNINGS BEATS DON’T SEEM TO BE — HAVE A LOOK AT THE U.S. BANKS FOR EXAMPLE WHERE EARNINGS MISSING’S SEEM TO BE TRANSLATING INTO PRETTY NASTY NEGATIVE REACTIONS IN MARKETS AS WELL. THAT TELLS YOU WHERE THE PRICING IS. THAT SAID, ASIAN TECH HAS BEEN HAVING A DECENT TIME RECENTLY. TSMC, WHICH HAD REALLY GOOD LOOKING PROGNOSIS, REACHING A RECORD HIGH IN RECENT SESSIONS. VALUATION STRETCHING OVER $1 TRILLION. BECOMING JUST ABOUT THE 10TH OR 11TH BIGGEST COMPANY IN THE WORLD. SO TECH STILL LOOKING LIKE A FAVOR AND THE MOMENT, IF THOSE U.S. EFFORTS DELIVER ON THE ADMITTED THE — ADMITTEDLY VERY LOFTY EXPECTATIONS. MAYBE THAT TRANSLATE INTO FURTHER GAINS IN THE ASIAN MARKETS AS WELL. SHERY: WE ALREADY HAVE THE DOLLAR FALLING OVERNIGHT. WE CONTINUE TO SEE THAT DROWN TREND — DOWNTREND. ESPECIALLY WHEN WE ARE TRYING TO FACTOR IN ALL OF THE UNCERTAINTY OVER THE TRADE HEADLINES THAT WE KEEP GETTING FROM DIFFERENT PARTS OF THE WORLD. PAUL: YEAH, THOSE TRADE HEADLINES ARE GOING TO KEEP ON ROLLING. IT IS ALL RATCHETING UP TO THAT AUGUST 1 DEADLINE, WHICH IS GOING TO PUT MORE ATTENTION BACK INTO THE MARKET, AS WE GO THROUGH THIS WEEK. BUT THE LONG-TERM TREND IS THAT THE DOLLAR SLOWLY AND STEADILY EASING, A BIT OF A LET UP IN THE LAST COUPLE OF WEEKS AND NOW BACK ON THE DOWNWARD PATH. SO MAYBE THAT GIVES ASIAN CURRENCIES ANOTHER SPRING IN THEIR STEP. PAY ATTENTION TO THE CHINESE YUAN, WHAT THEY ARE DOING WITH THE FIX, ALLOWING THE YOU WANT TO SLOWLY DEPRECIATE AGAINST THE U.S. DOLLAR AS WELL. ASIAN FX IS TAKING ITS CUE FROM WHAT THE CHINESE AUTHORITIES ARE DOING AT THE MOMENT. SHERY: PAUL DOBSON WITH WHAT TO LOOK AT IN THE BLOOMBERG MARKETS. WE HAVE MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. ♪ SHERY: TIME TO LOOK AT SOME MARKET CALLS AHEAD OF THE ASIAN TRADE. MORGAN STANLEY SINK — THINKING THE RECENT REBOUND IN THE U.S. DOLLAR CREATES A GOOD ENTRY POINT FOR INVESTORS TO ADD EMERGENT MARKET EXPOSURE TO THE PORTFOLIO. THEY ALSO RECOMMEND INVESTORS BET ON DECLINES IN THE U.S. DOLLAR AGAINST SELECT EMERGING-MARKET CURRENCIES INCLUDING THE EGYPTIAN POUND ON THE TURKISH LIRA AND THE SOUTH KOREAN WON. — SEES BARGAINS IN NON-US STOCKS, ESPECIALLY IN THE MARGIN MARKETS. HE ALSO THINKS THE 10 YEAR GROWTH OUTLOOK FOR SMALL-CAP STOCKS IS BETTER. SCREAMING BARGAINS ARE IN NON-US, STOCKS RELATIVE TO U.S., NON-US VALUE IN PARTICULAR, EMERGING MARKETS VALUE IN PARTICULAR AND SMALL-CAP VALUE VERSUS LARGE-CAP GROWTH. OUR WORK ON DEVELOPING CAPITAL MARKETS EXPECTATIONS SHOWS A 10 YEAR OUTLOOK FOR SMALL-CAP VALUE OF 8% OR BETTER. SHERY: ALSO BACKING PRESIDENT TRUMP’S LANDMARK SPENDING BILL. HE TOLD US THE LEGISLATION WILL ULTIMATELY HAVE BIG BENEFITS FOR CORPORATE AMERICA. THE STIMULUS DOES NOT STIMULATE THE ECONOMY. IT DOES STIMULATE EARNINGS AND IT DOES — THINK OF IT AS A FIRE HYDRANT OPEN ON A CITY STREET. THE PEOPLE IN THE HOMES DON’T GET ANY OF THE WATER. THE PEOPLE WITH BUCKETS NEAR THE FIRE HYDRANTS GET ALL THE WATER. WHO ARE THE PEOPLE WITH THE BUCKETS? FINANCIAL SERVICES AND CORPORATE AMERICA ON THE PROPHETS SIDE. SO WHO BENEFITS? YOU LOOK AT VERIZON DIRECTLY CITING THE TAX REFORM ON THEIR GUIDANCE. ARE THERE PLACES WHERE YOU ARE LOOKING FOR THAT BILL TO BE IMPACTING CORPORATE AMERICA THE MOST? WE HAVEN’T DRILLED DOWN TO THAT. BROADLY IT WILL IMPACT CORPORATE EARNINGS IN A BIG WAY AND THAT CAN KEEP BUBBLES GOING LONGER. WE SAW THAT THROUGH THE WHOLE PERIOD OF MONETARY EASE WITH ZERO INTEREST RATES WHERE THE ZERO INTEREST RATES DIDN’T STIMULATE ECONOMIC GROWTH. ECONOMIC GROWTH WAS SLUGGISH THAT DECADE, BUT IT SURE STIMULATE IT CAPITAL MARKETS. — SURE STIMULATED CAPITAL MARKETS. IT IS NOT A HEALTHY FORM OF INCREMENTAL GROWTH IF IT IS REWARDING SHARE PRICES AND NOT THE BROAD PUBLIC. THAT IS THE BIG ISSUE, THE BIG DIVIDE. LET’S TALK ABOUT BUBBLES MORE BECAUSE I FEEL LIKE WE ARE ALL KIND OF FAMILIAR WITH HOW BUBBLES FORM. YOU GET SOME STIMULUS IN THE CAPITAL MARKETS, INVESTORS FALLING IN LOVE WITH A THEME SUCH AS AI, BUT HOW DO BUBBLES POP? WHAT IS THE TYPICAL CATALYST? FIRSTLY, CATALYSTS ARE BY DEFINITION A SURPRISE. THAT IS TRUE. I WAS HOPING YOU COULD JUST TELL US. IT IS STILL A FUN PARLOR GAME TO GUESS WHAT THEY COULD BE. SECOND, A THOUGHT EXPERIMENT, WHAT WERE THE CATALYSTS THAT CAUSED THE .COM BUBBLE TO BURST IN MARCH OF 2000? I HAVE YET TO HEAL HER — TO HEAR A POWERFUL ARGUMENT FOR WHAT IT WAS. MAYBE STOCK OPTIONS COMING UP FOR A REDEMPTION OF SHARES, BUT REALISTICALLY THE CATALYST CAN BE ALMOST ANYTHING. SHERY: ARNOTT SPEAKING WITH BLOOMBERG. TAKE A LOOK AT HOW CURRENCIES ARE TRADING AT THE MOMENT. WE HAVE SEEN STRENGTH IN THE JAPANESE YEN. SOME OF THOSE BULLISH TRENDS RETURNING BUT RIGHT NOW WE ARE UNDER A LITTLE BIT OF PRESSURE AGAINST THE U.S. DOLLAR DESPITE THE FACT THAT THE U.S. DOLLAR FELL WITH TREASURY YIELDS IN THE OVERNIGHT SESSION VERSUS ALL OF ITS DEVELOPED WORLD PEERS. YOU ARE SEEING THE EURO HOLDING STEADY. WE CONTINUE TO WATCH THE CREEK — THE TRADE NEGOTIATIONS BETWEEN THE EUROPEAN UNION AND THE U.S. AS WELL. THIS IS BLOOMBERG. ♪ WE THE LIBERAL DEMOCRATIC PARTY RECEIVED A VERY SEVERE JUDGMENT BY THE PEOPLE IN YESTERDAY’S UPPER HOUSE ELECTION. AS THE HEAD OF THE LIBERAL DEMOCRATIC PARTY I APOLOGIZE DEEPLY FOR THE UPPER HOUSE ELECTION RESULT. SHERY: JAPANESE PRIME MINISTER ISHIBA ON THE ELECTION RESULTS AND DESPITE THAT APOLOGY HE IS VOWING TO STAY ON AS PRIME MINISTER OF JAPAN. THAT PERHAPS GIVING A SENSE OF STABILITY TO THE MARKETS. MARKET OPENS WE HAD A PUBLIC HOLIDAY IN JAPAN SO WE ONLY SAW THE REACTION IN THE JAPANESE YEN. UNDER PRESSURE RIGHT NOW BUT STILL AFTER GAINING A LITTLE BIT OF GROUND AFTER THE UPPER HOUSE ELECTION RESULTS. WE CONTINUE TO WATCH JGB’S AS WELL BECAUSE RISKS ARE TO PERHAPS FURTHER SELLING WHEN TRADING RESUMES GIVEN OF COURSE THE CONCERNS ABOUT THE FISCAL PICTURE HERE IN THE COUNTRY. FOR MORE LET’S BRING IN ALICE FRENCH. WE THOUGHT PERHAPS WE COULD SEE A TRIPLE DIP. ARE WE GOING TO SEE THAT AT THE OPEN IN A FEW MINUTES? ALICE: IT IS DIFFICULT TO PREDICT BUT STOCK FUTURES ARE LOOKING PRETTY MUTED. THERE WAS QUITE A LOT OF SELLING AND CAUTION COMING INTO THIS ELECTION LAST WEEK SO WE MAY EVEN SEE SOME BUYING BACK. IN TERMS OF THE NEAR TERM OUTLOOK IT IS LOOKING LIKE THE TRIPLE DIP COULD BE ON THE CARDS. FISCAL POLICY IN PARTICULAR IS A BIG AREA OF CAUTION FOR INVESTORS. ISHIBA HAVING LOST A MAJORITY IN THE UPPER HOUSE MEANS YOU MAY HAVE TO MAKE CONCESSIONS TO THE OPPOSITION PARTIES. SOME ARE PUSHING FOR TAX CUTS AND THAT WILL PUT PRESSURE ON GOVERNMENT SPENDING. HOW WILL HE BE ABLE TO AFFORD THIS BIG INCREASE IN DEFENSE SPENDING HE IS PUSHING FOR. BONDS HAVE BEEN UNDER PRESSURE WORLDWIDE BECAUSE OF RISING GOVERNMENT SPENDING. I THINK THE FOCUS WILL REALLY BE ON JGB’S THIS MORNING. WE MAY SEE A LITTLE BIT OF BUYING BACK THAT MAY SUPPORT THEM TODAY AND THIS WEEK BUT I THINK THE KIND OF MIDTERM OUTLOOK IS STILL FOR MORE SELLING. SHERY: WE HAVE SEEN THE FINANCE MINISTRY TRY TO STABILIZE THE JGB MARKETS. WE HAVE SEEN THE BANK OF JAPAN ALSO PULL BACK ON ITS REDUCTION OF PURCHASES. SO WHAT SHOULD WE BE WATCHING OUT FOR IN TERMS OF LEVELS WHEN IT COMES TO JGB’S AND WHAT IS THE TIMELINE HERE? ALICE: IT IS GOING TO BE INTERESTING PARTICULARLY IN THE SUPERLONG AREA OF THE BOND MARKET. WE KNOW THERE IS A LOT OF FOREIGN BUYING. FOREIGN INVESTORS. IN TERMS OF THE TIMELINE WE KNOW WE HAVE A BOJ POLICY DECISION COMING UP AT THE END OF THE MONTH. IT IS ONLY DAYS AWAY. THAT WILL BE THE NEXT BIG EVENT FOR THE BOND MARKET AND THAT IS WHAT INVESTORS WILL BE LOOKING TO. IN THE SHORT-TERM DEFINITELY THERE WILL BE A LOT OF WORRIES AND THAT COULD PLAY OUT ALSO IN STOCKS AND THE YEN. SHERY: WHAT IS INTERESTING WITH THE YEN IS DESPITE YIELDS RISING WE HAVE SEEN THAT PRESSURE. SO COULD WE SEE RENEWED SELLING? ALICE: I THINK SO. WE SAW STRENGTHENING IN THE YEN YESTERDAY AFTER THE ELECTION. THAT IS PERHAPS MORE OF A SAFE HAVEN DEMAND, SOME RISK OFF TRADING BECAUSE OF THIS UNCERTAINTY AROUND POLITICS. PEOPLE I HAVE BEEN SPEAKING TO YESTERDAY AND TODAY ARE SAYING PROBABLY THAT STRENGTHENING WILL NOT CONTINUE. WE WILL SEE WEAKENING PRESSURE. OF COURSE IT IS ALSO VERY TIED UP WITH WHAT HAPPENED WITH TRADE. WE ONLY HAVE 10 OR SO DAYS LEFT UNTIL THE AUGUST 1 DEADLINE FOR THAT TRADE DEAL WITH THE U.S. AND IF THAT DOESN’T GO TO PLAN AND IF JAPAN CANNOT GET A FAVORABLE OUTCOME THAT COULD DEFINITELY PRESSURE THE YEN GOING FORWARD. SHERY: ALICE FRENCH WITH AN OUTLOOK OF THE JAPANESE MARKETS AS WE HEAD INTO THE OPEN IN LESS THAN HALF AN HOUR. THAT’S BRING IN MIEKO NAKABAYASHI, SHE PREVIOUSLY SERVED AS A MEMBER OF JAPAN’S HOUSE OF REPRESENTATIVES. ALWAYS GOOD TO HAVE YOU WITH US. PRIME MINISTER ISHIBA IS VOWING TO STAY ON BUT FOR HOW LONG WILL BE ABLE TO CLING ONTO POWER? WHAT WE HAVE SEEN WITH THE LAST THREE LDP LEADERS WHO LOST A MAJORITY IN THE UPPER HOUSE HAVING TO EVENTUALLY STEP DOWN. MIEKO: EXACTLY. THAT’S WHY PEOPLE ARE PRETTY WORRIED ABOUT THE STABLE NESS OF THE GOVERNMENT THAT MR. ISHIBA IS LEADING. THIS IS A VERY DIFFICULT MOMENT. BECAUSE FOR THE COALITION, THIS IS THE FIRST REAL DEFEAT IN BOTH THE UPPER AND LOWER HOUSES. SHERY: IT IS INTERESTING BECAUSE WE DON’T USUALLY PAY THAT MUCH ATTENTION TO THE UPPER HOUSE. IT IS USUALLY THE MORE POWERFUL LOWER HOUSE WE ARE WATCHING. WHY WAS THIS ELECTION SO CONSEQUENTIAL? MIEKO: THAT IS A GOOD POINT. USUALLY THE LOWER HOUSE IS THE ONE TO DETERMINE WHICH PARTY IS TAKING OVER THE GOVERNMENT. THE OTHER HOUSE IS NOT THE ONE TO DETERMINE SUCH THINGS. HAVING A SIX-YEAR TERM WHICH SHOULD BE PRETTY STABLE OVER THERE IN THE UPPER HOUSE. HOWEVER, THIS TIME MR. ISHIBA HAS ALREADY LOST THE LOWER HOUSE, LAST YEAR’S ELECTION. AND THE UPPER HOUSE WAS ALMOST CONSIDERED TO BE DETERMINING THE GOVERNMENT AND WHO IS CONTROLLING JAPANESE POLICIES IN THE COMING FUTURE UNTIL THE LDP DECIDEDWHETHER TO KEEP MR. ISHIBA OR A PLACE SOMEONE SO MAYBE THE GOVERNMENT CAN BE CONTROLLED BETTER. HOWEVER, IT IS VERY DIFFICULT TO LOSE BOTH HOUSES BECAUSE ALL THOSE OPPOSITION PARTIES ARE ALSO SPLIT. AND SMALL PARTIES ALMOST GAINED 5% OF PROPORTIONAL VOTING. THAT MEANS SEVERAL PARTIES ARE PRETTY PURPLE NOW AND MR. ISHIBA HAS TO COORDINATE WITH THEM BECAUSE HE ALREADY LOST THE LOWER HOUSE AND THIS WEEK OR LAST WEEK HE LOST THE UPPER HOUSE ALSO. THIS IS UNPRECEDENTED. SHERY: EXACTLY. ESPECIALLY GIVEN THAT SMARTER PARTIES LIKE THE RIGHT WING WON SO MANY SEATS. WHAT IS THAT TELLING YOU ABOUT THESE LARGER MORE ESTABLISHED POLITICAL PARTIES AND HOW IN TOUCH THEY ARE WITH ACTUAL JAPANESE VOTERS? MIEKO: USUALLY NEW PARTIES WOULD NOT GET THIS MANY SEATS. HOWEVER THEY ARE ACTUALLY PRETTY WELL ORGANIZED. THE LEADER OF THE SENSEI PARTY, HE IS CHARISMATIC, HE LEARNED A LOT FROM MR. TRUMP’S STYLE. AND HE WAS ABLE TO COLLECT SO MANY VOTES FROM YOUNGER GENERATIONS. THEREFORE MANY JAPANESE ARE FASCINATED BECAUSE EVENTUALLY JAPAN STARTED TO HAVE A RIGHT WING PARTY TO BE SO POWERFUL. HOWEVER WE HAVE TO BE VERY CAREFUL TO WATCH THIS PARTY. BECAUSE THE LEADER IS AN INTERESTING FIGURE. HE HAS BEEN WORKING TO BUILD THIS PARTY FOR ALMOST 10 YEARS. AND WHEN HE WAS ASKED WHAT KIND OF RESERVATION — LEGISLATION HE IS GOING TO PROPOSE BECAUSE HE CLAIMED THAT FOREIGNERS ARE THE PROBLEMS AND JAPAN FIRST IS THE PARTIES POLICY, IT WAS VERY INTERESTING TO HEAR HIS REPLY. BECAUSE HE SAID MAYBE WE SHOULD REFORM INTERNATIONAL PROBLEMS THAT IS INVITING A LOT OF FOREIGNERS TO JAPAN, BY THE WAY. AND IT WAS NOTHING NEW. ALL THE PARTIES HAVE ALREADY DISCUSSED ABOUT IT AND HIS REPLY WAS DISAPPOINTINGLY NORMAL. THEREFORE WE HAVE TO SEE HOW THAT PARTY TURNS TO. SHERY: RIGHT. WE HAVE TO SEE ALL THE INDIVIDUAL SMALLER PARTIES REALLY DEALING WITH THE GOVERNMENT ON AN ISSUE BY ISSUE BASIS GIVEN HOW EVERYTHING IS SO FRAGMENTED. HOW DOES THAT BODE FOR BIG ISSUES LIKE A SALES TAX CUT? BECAUSE SOME OF THE OPPOSITION PARTIES CAMPAIGNING ON THAT DID PRETTY WELL. ARE WE GOING TO EVENTUALLY SEE THAT HAPPEN? MIEKO: EXACTLY. THE DEMOCRATIC PARTY FOR THE PEOPLE, DPP, IS THE ONE CLAIMING THAT JAPAN SHOULD REDUCE THE SALES TAX, AT LEAST FOR A WHILE. AND A CONSTITUTIONAL DEMOCRACY PARTY ALSO CLAIMED THEY SHOULD REDUCE SALES TAX. AND THERE ARE OTHER TAX ISSUES TO BE CUT. I AM SURE THEY ARE GOING TO CLAIM THAT BECAUSE THE LDP AND THE COALITION DIDN’T REALLY REALIZE WHAT THEY PROMISED IN THE PAST ELECTION SUCH AS THE LOWER HOUSE ELECTION LAST YEAR. THEREFORE THEY ARE PRETTY ENERGIZED TO CLAIM TAXCUTTING. THIS IS THE REASON THE JAPANESE YEN AND THE MARKET ARE LITTLE BIT SHAKY. SHERY: RIGHT, AND THAT PLAYS WITH HOUSEHOLDS HERE IN JAPAN. MIEKO NAKABAYASHI, GOOD TO HAVE YOU WITH US. WE HAVE MORE AHEAD ON “THE ASIA TRADE.” THIS IS BLOOMBERG. ♪ ♪ SHERY: OIL UNDER A LITTLE BIT OF PRESSURE AS WE CONTINUE TO SEE TENSIONS AROUND TRADE. WE ARE HEADED TOWARDS THE AUGUST 1 DEADLINE FOR THOSE BLANKET TARIFFS FROM THE U.S. TO TAKE PLACE. OIL LITTLE CHANGED IN THE OVERNIGHT SESSION AND YOU CAN SEE THE DOWNSIDE IN THE EARLY ASIAN MORNING. WE ARE ALSO WATCHING COPPER AND IRON ORE. NEW HIGHS FOR COPPER RISING TO THE HIGHEST IN NEARLY TWO WEEKS. WE ARE SEEING SIGNS OF RISING DEMAND FOR CHINA. A LOT TO DO WITH 50% TARIFFS ON COPPER IMPORTS THAT SENT SHIPMENTS OF AMERICAN SCRAP METAL TO CHINA PLUNGING TO A 21 YEAR LOW. WE ARE SEEING LOCAL SMELTERS BRACING FOR THAT POTENTIAL SHORTAGE. IRON ORE AT A FOUR MONTH HIGH. THIS HAVING TO DO WITH THE MEGA DAM PROJECT CHINA IS PLANNING TO BUILD. IT HAS BEGUN, THE WORLD’S LARGEST HIGHER — HYDRO POWER PLANT IN TIBET. IT WILL PROVIDE AN ECONOMIC JOLT TO THE CONSTRUCTION SECTOR. LET’S BRING IN MINMIN LOW FROM HONG KONG. THE DAM IS EXPECTED TO PROVIDE A NEW SOURCE OF CLEAN ENERGY. TELL US HOW SIGNIFICANT THIS CONSTRUCTION IS NOT ONLY BECAUSE OF THE PROJECT ITSELF BUT ALSO FOR THE BEIJING LEADERSHIP. MINMIN: YES. HE BROKE GROUND SATURDAY AND CALLED IT THE PROJECT OF THE CENTURY. IT IS A PROJECT OF EPIC PROPORTIONS BECAUSE I REMEMBER WHEN THE DAM WAS BUILT IT WAS ALREADY SOMETHING OF UNTHINKABLE PROPORTIONS AT THE TIME. NOW THIS IS THREE TIMES AS LARGE , COSTING AS MUCH AS FOUR TIMES MORE. IT IS A PROJECT THAT KILLS MULTIPLE BIRDS WITH ONE STONE. NUMBER ONE, IT HELPS CHINA TO REACH ZERO CARBON EMISSION GOALS BY 2060. IT IS EXPECTED TO GENERATE 70 GIGAWATTS OF ELECTRICITY WHICH IS GREATER THAN THE TOTAL POWER GENERATION OF POLAND ALONE. AND NUMBER TWO IT IS AN ECONOMIC JOLT. THINK ABOUT SECTORS LIKE CONSTRUCTION AND STEEL, IRON ORE. WE SEE THESE BIG MOVES IN THE MARKETS YESTERDAY AND THIS — ESPECIALLY IN SOME OF THESE COMPANIES WITH 10% OR MORE. CITIGROUP EXPECTING THIS COULD BOOT — BOOST ECONOMIC GROWTH UP TO 0.1% IN THE FIRST YEAR OF CONSTRUCTION ALONE. THERE IS ALSO IMMENSE COST INVOLVED. THERE IS AN ENVIRONMENTAL COST BECAUSE THIS IS A RIVER THAT PASSES THROUGH TIBET IN A VERY BEAUTIFUL CANYON. ENGINEERS WILL HAVE TO STRAIGHTEN PART OF THE RIVER AND DIVERT THE WATER THROUGH TUNNELS. YOU CAN SEE THE PICTURE. ENVIRONMENTALIST GROUPS ARE CONCERNED ABOUT THE TECTONIC SHIFTS, POTENTIAL LANDSLIDE. THEN OF COURSE THERE IS THE GEOPOLITICAL TENSION WITH INDIA AND BANGLADESH GIVEN THE RIVER FLOWS THROUGH THOSE COUNTRIES DOWNSTREAM AS WELL THERE IS CONCERN ABOUT WHAT IS SECURITY FROM THOSE COUNTRIES THAT HAVE REGISTERED COMPLIANCE WITH BEIJING BUT CHINA SAYS THERE WILL NOT BE ANY IMPLICATIONS DOWNSTREAM AND THAT IT IS TAKING MEASURES TO PROTECT THE ENVIRONMENT AND IT WILL CONTINUE TO MAINTAIN COMMUNICATION WITH THESE COUNTRIES AND TAKE STEPS TO MITIGATE THE CONSEQUENCES. SHERY: SO MANY INTERESTS TO CONSIDER BUT WHEN IT COMES TO THE ECONOMIC JOLT YOU MENTIONED EARLIER, HOW NEEDED IS THIS FOR CHINA AT A TIME WHEN WE ARE ALSO HEARING FROM GOLDMAN SACHS REALLY WARNING ABOUT WAGE GROWTH IN THE COUNTRY? MINMIN: YES, GOLDMAN SACHS HAS ITS OWN INDICATOR OF WAGE GROWTH, SHOWING THAT WAGE GROWTH IS THAT THE WEAKEST OR SLOWEST ON RECORD OUTSIDE OF THE PANDEMIC YEARS. IN THE SECOND QUARTER IT WAS 3.9% GROWTH IN WAGES ON YEAR WHICH IS ONE PERCENTAGE POINT LOWER THAN WHAT THE OFFICIAL STATISTICS SHOW. MANY BELIEVE THE OFFICIAL STATISTICS MAY UNDERESTIMATE THE PROBLEM SO GOLDMAN SACHS INCORPORATED OTHER NUMBERS SUCH AS EMPLOYMENT SUB GAUGES AND PMI’S SURVEYS AS WELL AS UNEMPLOYMENT INSURANCE CLAIMS. CAN SEE THE OFFICIAL WAGE GROWTH SHOWING THAT WAGE GROWTH IN RECENT YEARS IS FAR BELOW THE PRE-PANDEMIC LEVELS. THE IMPLICATION OF THIS OF COURSE IS THAT CONSUMPTION RECOVERY COULD BE AFFECTED, EVEN AS WE SEE PRETTY ROBUST NUMBERS IN RECENT MONTHS THANKS OF THE GOVERNMENT SUBSIDIES. LONGER-TERM THERE IS A CONCERN AND IT ALSO PUTS A CONSTRAINT ON THE GOVERNMENT’S EFFORT TO TRY TO REIN IN THAT PRICE COMPETITION AMONG INDUSTRIAL PLAYERS RIGHT NOW BECAUSE A CONSOLIDATION OF INDUSTRIAL CAPACITY IS GOING TO LIKELY LEAD TO JOB LOSSES. AND GIVEN THE SELECT LABOR MARKET, THAT WILL BE A CONCERN FOR THE CHINESE GOVERNMENT SO THEY MIGHT HAVE TO TAKE A GRADUAL PACE IN TRYING TO REIN IN EXCESS CAPACITY. SHERY: MINMIN LOW THERE WITH THE LATEST ON THE CHINESE ECONOMY. THESE ARE SOME OTHER STORIES WE ARE FOLLOWING. 28 COUNTRIES INCLUDING THE U.K., JAPAN, AUSTRALIA, CANADA AND MANY EUROPEAN NATIONS ISSUED A JOINT STATEMENT SAYING ISRAEL’S WAR IN GAZA MUST END NOW. THE NATION’S FOREIGN MINISTER SAME THE SUFFERING OF GAZAN CIVILIANS HAS REACHED NEW DEPTHS, CONDEMNING THE RECENT KILLING OF MORE THAN 800 PALESTINIANS WHO WERE SEEKING AID. ISRAEL’S FOREIGN MINISTRY CALLS THE CRITICISM DISCONNECTED FROM REALITY. THE TRUMP ADMINISTRATION SAYS IT IS DEPLOYING MORE IMMIGRATION AGENTS TO NEW YORK AFTER A MIGRANT ALLEGEDLY SHOT A FEDERAL OFFICER. KRISTI NOEM BLAMES THE CITY SANCTUARY POLICIES ARE RELEASING REPEAT OFFENDERS. NEW YORK OFFICIALS SAY THEY FOLLOW STATE LAW AND ARE TARGETING DANGEROUS INDIVIDUALS IN COORDINATION WITH FEDERAL PARTNERS. A NEW REPORT SAYS PRESIDENT TRUMP’S RECENTLY PASSED TAX AND SPENDING LAW WILL ADD $3.4 TRILLION TO U.S. DEFICITS OVER A DECADE. THE LATEST ESTIMATE FROM THE NONPARTISAN CONGRESSIONAL BUDGET OFFICE ALSO WARNS MILLIONS WILL LOSE HEALTH CARE COVERAGE. THE ANALYSIS DOES NOT FACTOR DYNAMIC EFFECTS LIKE THE BELT’S POTENTIAL IMPACT ON GROWTH OR INTEREST RATES. WE HAVE MORE AHEAD ON “THE ASIA TRADE.” THIS IS BLOOMBERG. ♪ ♪ SHERY: HEYMAN C I L KYLE BASS SAYS HE IS WARY OF THE OUTLOOK FOR MAJOR ASIAN CURRENCIES INCLUDING BOTH THE YEN AND THE HONG KONG DOLLAR. HE TOLD US WHY JAPAN’S CURRENCY IS PARTICULARLY CONCERNING. JAPANESE SOVEREIGN DEBT TO GDP IS NORTH OF 260%. IT IS KIND OF THE WORLD’S MOST INTERESTING DEBT LABORATORY. SO WHEN YOU GET A SCENARIO LIKE WHAT YOU HAD WITH COVID, THE WHOLE WORLD IS PRICED IN DOLLARS. SO WHEN THE U.S. FED AND THE U.S. ADMINISTRATION DECIDES TO PRINT AND SPEND AS MUCH AS WE DID, WE PUT 40% MORE INTO THE SYSTEM BETWEEN 2020 AND 2023, AN D WHAT DID WE GET? WE GOT ABOUT A 40% TO 50% INFLATION OF ALMOST EVERYTHING. A COUPLE THINGS DIDN’T, BUT LET’S SAY DWELLINGS AND CONSUMER GOODS AND THINGS THAT PEOPLE HAVE TO BUY EVERY DAY OR PAY FOR RENT DID. WHAT HAPPENED IN JAPAN IS THE YEN WENT FROM ROUGHLY 100 TO 160, AND NOW IT’S AROUND 145, 147. SO WHEN YOU THINK ABOUT THE YEN, THE YEN IS JUST MOVING THE AMOUNT OF PURCHASING POWER IT HAS IN DOLLARS. IT IS THAT SIMPLE. SO THEY ARE IN A REALLY BAD SITUATION FROM A DEBT PERSPECTIVE. THEY HAVE A POPULATION DECLINE. THEY ARE A VERY IMPORTANT TRADING PARTNER OF THE UNITED STATES AND ONE OF THE STALWARTS OF HOURS IN ASIA. I THINK WE ARE GOING TO DO ALL WE CAN TO TRADE IN HEALTHY JAPANESE GOING FORWARD BUT THEY ARE IN A PRECARIOUS POSITION. THEY EITHER HAVE TO LET THEIR CURRENCY GO OR THEIR BOND MARKET GO AND THEY WILL NEVER LET THEIR BOND MARKET GO SO I WOULD BE AWARE OF THE YEN INTO THE FUTURE. SHERY: WE WILL KEEP AN EYE ON THAT ONE. I MENTIONED THE HONG KONG DOLLAR. YOU BET AGAINST THE HONG KONG DOLLAR IN THE PAST WHICH OF COURSE IS PEGGED TO THE U.S. CURRENCY AND IT HAS EXPERIENCED SWINGS BECAUSE OF PRESIDENT TRUMP’S TARIFFS. THE HKMA REVEALING. EVERY SO OFTEN BUT WONDER WHETHER IT IS TIME FOR THE HONG KONG DOLLAR TO BE RE-PEGGED TO A BASKET OF CURRENCIES OR RE-PEGGED MAY BE TO THE CHINESE CURRENCY. ARE WE AT ONE OF THOSE TIMES RIGHT NOW? WHEN YOU THINK ABOUT THIS PEG, IT HAS BEEN AROUND SINCE 1983. THE REASON THE PEG WAS PUT INTO PLACE IS THERE WAS A MASSIVE RUN ON THE HONG KONG DOLLAR. IN 1981 IN 1982 ABOUT THE BRITISH AND AND COMIC-CON BACK TO THE CHINESE AND WHEN THOSE RUMORS GOT OUT MONEY STARTED FLEEING HONG KONG AND ASIA WRIT LARGE. SO THE HONG KONG DOLLAR IN A BASKET OF WORLD CURRENCIES. AND THE UNITED STATES AND THE UNITED STATES DOLLAR PROVIDES THE STABILITY TO HONG KONG AND THEREFORE CHINA AND THEIR CURRENCY REGIME. SO WHEN YOU THINK ABOUT THAT PEG, WE AS HONG KONG’S ECONOMY WENT, SO DID THOSE OF THE UNITED STATES AND THE WEST. NOW HONG KONG’S ECONOMY IS MORE INEXTRICABLY LINKED WITH CHINA’S AND THERE IS A DIVERGENCE IN ECONOMIC ACTIVITY. CHINA HAS HAD ITS WORST FINANCIAL CRISIS IN MAYBE IT’S MODERN DAY HISTORY IN THE LAST TWO OR THREE YEARS. 10 YEAR BOND AT 1.5%. OVERNIGHT RATES ROUGHLY 1.5%. CHINA IS HAVING A REALLY DIFFICULT ECONOMIC PERIOD INTERNALLY. THOSE ECONOMIES NO LONGER MOVE WITH THE SAME SYNCHRONICITY THAT WAS REQUIRED. HONG KONG’S OVERNIGHT RATES TODAY, IT IS STILL CLOSE TO ZERO. U.S. OVERNIGHT RATES ARE 4.3%. ONE YEAR RATES IN HONG KONG ARE AROUND 1%. HOURS ARE STILL AROUND 4%. YOU CAN INTERCHANGEABLY ON THE EDGE QE OR USD YOU WOULD BE CRAZY NOT TO CONVERT IT TO USD. YOU WOULD EARN 3% OR 4% MORE. THAT IS WHY YOU SEE WEAKNESS IN THE HONG KONG DOLLAR. BUT CAN HONG KONG AFFORD TO MOVE RATES HIGHER? THE MAJORITY ARE MORTGAGES TIED TO SHORT RATES. HONG KONG IS IN A REALLY BAD POSITION RIGHT NOW AND ALSO THE GEOPOLITICAL RISKS ARE THERE. SHERY: HEYMAN CAPITAL CIO KYLE BASS THERE. THE LATEST FROM THE CORPORATE FRONT. CITIGROUP ASKING ITS INCOMING INVESTMENT BANKING ANALYST TO DISCLOSE WHETHER THEY HAVE ALREADY ACCEPTED JOB OFFERS ELSEWHERE. THE BANK SAYS THE MOVE IS MEANT TO FOSTER A FAIR AND TRANSPARENT ENVIRONMENT AS PRIVATE EQUITY FIRMS INCREASINGLY RECRUIT JUNIOR BANKERS EARLY. GOLDMAN SACHS AND MORGAN STANLEY RECENTLY INTRODUCED SIMILAR POLICIES. OFFICIALS IN CYBERSECURITY RESEARCH ARE SAYING HACKERS HAVE EXPLOITED A FLAW IN MICROSOFT SOFTWARE. MICROSOFT RELIEVED A PATCH OVER THE WEEKEND THAT WARNS MORE FIXES ARE COMING AS ATTACKERS CONTINUE ATTACKING CLIENTS. THE VULNERABILITY WERE FIRST IDENTIFIED IN MADE BY RESEARCHERS AT A BERLIN CYBERSECURITY CONFERENCE. CRYPTO BETTING PLATFORM POLY MARKET STRUCK A DEAL TO RETURN TO THE U.S. MARKET JUST WEEKS AFTER PROSECUTORS SHUT DOWN AN INVESTIGATION OF THE COMPANY. THE COMPANY SAYS IT IS REENTERING THE U.S. BY ACQUIRING DERIVATIVES EXCHANGE QCX IN A $112 MILLION DEAL. POLY MARKET ROSE TO PROMINENCE DURING THE 2024 ELECTION, ALLOWING USERS TO BET ON POLITICAL OUTCOMES. TAKE A LOOK HOW CRYPTOCURRENCIES ARE TRADING AFTER A WEEK OF LOSSES. WE ARE HEADED TO THE JAPAN MARKET OPENS AFTER A PUBLIC HOLIDAY AND FACTORING IN THE UPPER HOUSE ELECTION LAWS FOR PRIME MINISTER ISHIBA. THE OPENS ARE NEXT. SHERY: WE ARE COUNTING DOWN TO ASIA’S MAJOR MARKET OPENS. AS WE FACTOR IN ALL THE TRADE HEADLINES OF COURSE WE HAVE THE U.S. NEGOTIATING WITH SEVERAL TRADING PARTNERS INCLUDING THE EUROPEAN UNION, JAPAN, AND SOUTH KOREA AND THE LIKE. BUT HERE IN JAPAN THERE WILL ALSO BE A REACTION TO THE UPPER HOUSE ELECTION OVER THE WEEKEND. PAUL: ABSOLUTELY. NOT A SURPRISING RESULT AND NOT THE RESULT SHIGERU ISHIBA WAS HOPING FOR. THE QUESTION NOW TURNS TO CAN HE HANG ON AND IF YOU CAN HANG ON, FOR HOW LONG? SHERY: IN ORDER TO HANG ON WILL HE GIVE UP CONCESSIONS LIKE SALES TAX CUTS AND WHAT THAT WILL MEAN FOR THE FISCAL PICTURE HERE IN JAPAN IS A KEY QUESTION FOR INVESTORS. OF COURSE THAT WAS THE PICTURE GOING INTO THE UPPER HOUSE ELECTIONS AND WE EXPECT TRIPLE DIP OF WEAKNESS IN THE JAPANESE YEN GOVERNMENT BONDS NOT TO MENTION THE STOCK MARKET. PERHAPS NOT AS SIGNIFICANT FOR THIS MARKET OPEN BECAUSE WE SAW A LITTLE MORE STABILITY IN THE JAPANESE YEN RIGHT AFTER THE UPPER HOUSE ELECTIONS. IN FACT WE SAW STRENGTH HOLDING AT THAT 147 LEVEL AGAINST THE U.S. DOLLAR. STOCKS AT THE MOMENT GAINING ABOUT .2%. OF COURSE WE WILL BE WATCHING THE POLICY SENSITIVE SECTORS LIKE UTILITIES, CONSTRUCTION, BANKING AND SO FORTH, BUT IT WILL BE ABOUT THE JGB SPACE. 10 YEAR YIELD HOLDING AT 154 BUT COULD WE SEE MORE PRESSURE ON JGB’S GIVEN THE FISCAL PICTURE? POTENTIAL CONCESSIONS WHEN IT COMES TO FISCAL SPENDING. ALREADY THE GLOBAL PICTURE HAS BEEN ONE OF CONCERN AND WE HAVE SEEN THE ULTRA LONG END FOR JAPANESE YIELDS REALLY RISING TO TWO DECADE HIGHS. TAKE A LOOK AT HOW SOUTH KOREA IS COMING ONLINE BECAUSE WE HAVE WORD FROM SOUTH KOREAN MEDIA THAT OFFICIALS THEY ARE WITH U.S. OFFICIALS WILL HOLD ANOTHER MEETING BY THIS WEEK ON JULY 25. TAKE A LOOK AT THE KOSPI NOT DOING MUCH AT THE MOMENT AS WE ARE SEEING THE KOREAN WON HOLDING STEADY AT THAT 1382 LEVEL AS WE CONTINUE TO WATCH THOSE TRADE NEGOTIATIONS PAUL. PAUL: WE ARE JUST OPENING FOR TRADE IN AUSTRALIA AS WELL. SEEING MODEST POSITIVITY ON THE ASX. WATCHING SOME BIG MINING COMPANIES. FORTESCUE METALS HAS JUST STARTED TRADING, THE BIGGEST MARKET CHINA, UP BY MORE THAN 1%. I MENTION THAT IN THE CONTEXT THAT CHINA IS BELIEVED TO BE PLANNING A NEW DAM, TRIPLE THE SIZE OF THE THREE GORGES DAM. THAT IS OBVIOUSLY BULLISH FOR COMMODITIES. COPPER PRICES THE MOST IN THREE YEARS. THE AUSSIE DOLLAR MIGHT FACE SOME PRESSURE. WE WILL GET MINUTES FROM THE LAST RESERVE BANK MEETING LATER ON TODAY AND THAT OF COURSE IS WHEN THE RBA SURPRISED MANY WATCHERS STAYING ON HOLD. EASING HAD BEEN EXPECTED BUT BETS ARE INCREASING ON MORE AGGRESSIVE EASING TO COME. YIELDS ON U.S. TREASURIES NOT A GOOD DEAL OF CHANGE. WE SAW LONGER DATED NOTES SLIPPING A LITTLE BIT IN THE U.S. SESSION. JOINING US NOW IS SEAN DARBY, MANAGING DIRECTOR AT MIZUHO SECURITIES ASIA. I WANT TO START YOU OFF IF I CAN WITH SOME REACTION TO WHAT WE ARE SEEING WITH JAPAN. WE ARE BACK TRADING FOR THE FIRST TIME SINCE THE ELECTION, PUBLIC HOLIDAY YESTERDAY. HOW DO YOU APPROACH JAPANESE ASSETS AT THE MOMENT? UNCHARACTERISTIC INFLATION, TARIFF UNCERTAINTY, AND NOW POLITICAL UNCERTAINTY AS WELL. WHAT IS YOUR RESEARCH HERE? SEAN: THE WHOLE OF NORTH ASIA IS UNDER THIS CLOUD OF HAVING NOT YET AGREED A TRADE DEAL SO IT IS VERY DIFFICULT TO SEE ANY BRIGHT LINING FOR THESE EQUITY MARKETS. FOR JAPAN IN PARTICULAR I THINK IF SHIVA HAD WANTED TO GET A TRADE DEAL. WITH THAT HE COULD HAVE GONE TO THE PUBLIC AND RECOGNIZED THE FACT THAT A LOT OF THE UNCERTAINTY HAD BEEN REMOVED AND THEN HE WOULD HAVE BEEN ABLE TO SEE THE CENTRAL BANK GO BACK AND START TO RAISE RATES TO QUELL SOME OF THE INFLATION. UNFORTUNATELY THEY ARE STILL IN A VICIOUS CYCLE IN WHICH THERE IS NO TRADE DEAL, INFLATION CONTINUES TO RISE, AND THAT IS MAKING THE POPULATION UNHAPPY. I THINK IN THE SHORT-TERM THEY WILL HAVE SOME CONCESSIONS IN TERMS OF TAX RELIEF TO AGAIN PROVIDE STIMULUS TO THE ECONOMY AND THEN HOPE THERE IS A TRADE DEAL IN THE BACKGROUND THAT CAN BE SIGNED FOR HIM TO PERHAPS GO BACK AND SEEK A SECOND ELECTION. HE IS STILL IN THAT SPIRAL IN WHICH THE TRADE DEAL REALLY IS THE CORE ISSUE IN TERMS OF BEING ABLE TO GO BACK TO THE PUBLIC AND HOPEFULLY GET A BETTER ELECTION OUTCOME THAN PERHAPS THE ONE THAT JUST HAPPENED. PAUL: BLOOMBERG AS YOU MAY HAVE HEARD HAS BEEN SPEAKING TO KYLE BASS OF HAMAN CAPITAL AND HE HAS LONG HAD VIEWS ON JAPAN. HE HAS HAD VIEWS ON THE YEN AS WELL. LET’S TAKE A QUICK LESSON. JAPANESE SOVEREIGN DEBT TO GDP IS NORTH OF 260%. IT IS KIND OF THE WORLD’S MOST INTERESTING DEBT LABORATORY. THEY ARE IN A PRECARIOUS POSITION, I.E. THEY EITHER HAVE TO LET THEIR CURRENCY GO OR THE BOND MARKET GO AND THEY WILL NEVER LET THEIR BOND MARKET GO. SO I WOULD BE REALLY — I WOULD BE AWARE OF THE YEN IN THE FUTURE. PAUL: WITH THAT IN MIND, WHAT IS YOUR VIEW ON WHERE THE FLOOR COULD BE FOR THE YEN? SEAN: I AM NOT NECESSARILY THE CURRENCY EXPERT FOR MIZUHO BUT I WOULD TAKE ISSUE WITH HIS COMMENTS ON THE INSTABILITY OF JAPAN’S BOND MARKET. YOU HAVE TO LOOK AT THE OTHER SIDE OF THE BALANCE SHEET AND JAPAN HAS BEEN RUNNING A CURRENT ACCOUNT BECAUSE IT SAVINGS ARE HUGE. THERE IS NO DIFFICULTY IN JAPAN BEING ABLE TO FINANCE ITS DEBT. THAT IS NOT AN ISSUE FOR JAPAN NOR NECESSARILY THE YEN. YES JAPAN HAS A LARGE DEBT TO GDP RATIO BUT ALL OF THAT DEBT IS IN JAN AND THEY ARE RUNNING VERY LARGE SAVINGS. THIS IS AT THE END OF LAST YEAR THEIR CURRENT ACCOUNT WAS THE LARGEST IN HISTORY FOR AS WELL AS CHINA. MARKETS ARE PROBABLY NOT GOING TO BE THAT CONCERNED WITH THE LEVEL OF DEBT. WHAT REALLY MATTERS IN JAPAN AT THE MOMENT IS GETTING INFLATION NORMALIZED AND GETTING THE CENTRAL BANK BEING ABLE TO START TO USE MONETARY POLICY AGAIN TO QUELL SOME OF THAT INFLATION. SO I’M LESS CONCERNED WITH MR. BASS ON THE OUTCOME FOR THE YEN AND JAPAN STEP MARKETS. SHERY: WE HAVE BEEN REALLY FOCUSING ON THE DEBT MARKETS JUST BECAUSE OF THE PERFORMANCE OF PREVIOUS OPTIONS WHEN IT COMES TO THE ULTRA LONG IN JAPAN. WE HAVE SEEN THE BOJ PERHAPS PULLING BACK SOME REDUCTIONS OF PURCHASES WE HAVE SEEN. THE FINANCE MINISTRY HAS BEEN TALKING ABOUT THE OPTIONS AS WELL. WHEN IT COMES TO YIELDS THAT CONTINUE TO SURGE IN THE LONG END THE TWO DECADE HIGHS, AT WHAT POINT DOES IT BECOME A PROBLEM FOR THE STOCK MARKET? SEAN: THAT IS A GOOD QUESTION. I THINK AT THE MOMENT IT HAS BEEN LESS OF AN ISSUE THE JAPANESE EQUITY MARKET PRINCIPALLY BECAUSE REAL INTEREST RATES BOTH AT THE SHORT END AND TO SOME EXTENT AT THE LONG END, IF YOU LOOK AT INFLATION SWAPS, HAVE BEEN NEGATIVE. WITH REAL RATES IN NEGATIVE YOU TEND TO FUND THAT EQUITY MARKETS TEND TO BE WELL SUPPORTED. SO THE MOVE IN YIELDS HAS NOT COME ABOUT WITH SUCH A VICIOUS FORCE THAT IT HAS CREATED A DOWNWARD SPIRAL IN ASSET MARKETS AS YOU WOULD HAVE SEEN PERHAPS IN EUROPE IN 2011 OR IN THE U.K. BOND MARKETS A COUPLE YEARS AGO. SO FAR YOU HAVE NOT HAD THAT SPILLOVER EFFECT CALMING THE JAPANESE EQUITIES. YOU ALSO HAVE TO BEAR IN MIND THERE ARE A LOT OF FINANCIALS IN JAPAN THAT TEND TO BENEFIT FROM A STEEPENING OF THE YIELD CURVE. AND AGAIN, JAPAN HAS QUITE A LOT OF WAITING IN HIS INDUSTRIES SO IT IS NOT HAS ADVERSELY HIT BY LONGER-TERM RATES. PROVIDED REAL RATES REMAIN RELATIVELY NEGATIVE WHERE WE ARE AT THE MOMENT I AM NOT SO SURE WE ARE GOING TO GET THE VERY BAD SPILLOVER EFFECTS PARENT — CHARMING JAPANESE WERE AT NORTH ASIAN EQUITIES IN THE SAME MANNER. SHERY: ALSO A PERIOD OF TIME WHERE WE ARE SEEING THE STOCK MARKET LOOK FOR ANY EXCUSE TO TO TREAT — CONTINUE ITS UPWARD TRAJECTORY. WE ARE GOING TO GET THE LIGHT OF TECH GIANTS REPORTING THIS WEEK. WHEN IT COMES TO THE SEMICONDUCTOR CYCLE AND THAT TECH CYCLE HERE IN ASIA HOW DURABLE HAS IT BEEN AND CAN IT CONTINUE TO BE THIS RESILIENT? SEAN: THAT IS A REALLY GOOD QUESTION. THE WAY I WOULD LOOK AT IT AT THE MOMENT IS THAT IRONICALLY, THE ONE, BIG, BEAUTIFUL BILL ACT THAT MR. TRUMP GOT SIGNED OFF ON A WEEK OR SO AGAIN ENCOURAGED FRONTLOADING OF INVESTMENT INTO DATA CENTERS AND ALSO INTO TECH EQUIPMENT. HE HAS ALLOWED PURCHASES OF EQUIPMENT TO WRITE THAT OFF IN ONE YEAR OR DEPRECIATE IT BY 100%. THAT’S AN ENORMOUS INCENTIVE TO GO OUT AND SPEND ON TECH EQUIPMENT. EVERYTHING FROM SERVERS ALL THE WAY DOWN TO PC PERIPHERALS. IRONICALLY FOR ASIA WE ARE GOING TO GET AN ADDED BOOST FROM THOSE MEASURES COMING THROUGH. AND I THINK IT WILL STILL BE RELATIVELY GOOD NEWS FOR THE TECH INDUSTRY IN TAIWAN AND KOREA. CERTAINLY WHEN WE HAVE LOOKED AT THE PMI FOR TAIWAN, FOR ELECTRONICS IT HAS REMAINED IN AN EXPANSION PHASE FOR THE BEST PART OF THE YEAR AS WELL AS BACKDOOR BORDERS HAVE REMAINED FIRM. SO I DO NOT THINK WE WILL SEE ANY BETTER EARNINGS NUMBERS NECESSARILY FROM U.S. TECH OR ASIA TECH FOR THE NEXT QUARTER OR SO. PAUL: I JUST WANT TO GET YOUR VIEWS ON WHAT WE SEE IN THE COMMODITIES SPACE AS WELL. IRON ORE THE MOST ACTIVE TRADE IN SINGAPORE. HOW SUSTAINABLE ARE SOME OF THESE GAINS? SEAN: THAT IS ALSO A GOOD QUESTION. THE COMMODITY EQUITY CLASS HAS BEEN A VERY BIG UNDERPERFORMER AFTER THE BOOST FROM POST-COVID. FROM MY PERSPECTIVE THE WHOLE ELECTRICITY AND GRID ELECTRIFICATION THEME IS GOING TO UNDERWRITE THE COPPER AND ALUMINUM METAL PRICES AND CERTAINLY THE EVIDENCE WE ARE SEEING FROM THE BUILDOUT OUT OF THE DAM IN TIBET AS WELL AS ALSO THE INFRASTRUCTURE GOING ON IN THE UNITED STATES FOR NUCLEAR POWER IS GOING TO BE VERY BULLISH FOR THOSE COPPER AND ALUMINUM METAL PRICES. BUT OVERALL IF YOU LOOK AT THE COMMODITY INDICES THEY SHOULD BE DOING A LOT BETTER WHERE IT NOT FOR THE WEAKNESS IN OIL PRICES. AS I HAVE ALLUDED TO A NEW MENTAL MARKETS THE FISCAL STIMULUS THAT HAS COME THROUGH THE UNITED STATES AND CHINA OVER THE LAST 12 MONTHS WILL BE VERY BULLISH FOR FIXED ACTS THAT INVESTMENTS. I WOULD EXPECT WITH A WEAK DOLLAR AND FISCAL EXPENDITURE THAT METAL PRICES CAN HOLD AGAINST AND PROBABLY DO PRETTY WELL FOR THE REST OF THE YEAR. SHERY: THE BLOOMBERG COMMODITY INDEX UP FOR THREE CONSECUTIVE WEEKS ALREADY. SEAN DARBY, ALWAYS GOOD TO HAVE YOU WITH US. WE HAVE MORE AHEAD. THIS IS BLOOMBERG. ♪ ♪ WE THE LIBERAL DEMOCRATIC PARTY RECEIVED A VERY SEVERE JUDGMENT BY THE PEOPLE IN YESTERDAY’S UPPER HOUSE ELECTION. AS THE HEAD OF THE LIBERAL DEMOCRATIC PARTY I APOLOGIZE DEEPLY FOR THE UPPER HOUSE ELECTION RESULT. SHERY: JAPANESE PRIME MINISTER ISHIBA SPEAKING YESTERDAY ABOUT HIS PARTY’S LOSS OF ITS UPPER HOUSE MAJORITY STILL BOWING TO STAY ON AS LEADER. WE ARE SEEING MORE STABILITY ESPECIALLY WHEN IT COMES TO THE JAPANESE WHICH HAS REBOUNDED IN THE OVERNIGHT SESSION. HOLDING STEADY AT THE MOMENT. WEAKENING A LITTLE BIT NOW AS THE DAY PROGRESSES. 147 IS YOUR LEVEL BUT OF COURSE WE CONTINUE TO WATCH JD B’S AND VULNERABILITY TO FURTHER SELLING. SEEING THE 10 YEAR YIELD RISING AT THE MOMENT AS OF COURSE TRADERS ARE PRESSING POTENTIALLY CONCESSIONS WHEN IT COMES TO FISCAL SPENDING. FOR MORE JAPAN AND KOREA EDITOR PAUL JACKSON JOINS US AFTER THE UPPER HOUSE ELECTION AND THAT LOSS BY PRIME MINISTER ISHIBA. THE QUESTION IS WHO WANTS THAT JOB AT THIS POINT. THAT IS A KEY POINT BECAUSE YOU HAVE AN ADMINISTRATION THAT DOESN’T HAVE A MAJORITY IN EITHER HOUSE. SO IN TERMS OF MOVING FORWARD WITH LEGISLATION, YOU ARE IN GRIDLOCK CITY. WHO IS GOING TO BE ABLE TO STEP IN WITH A SUPERHERO CAPE AND TRANSFORM THINGS? IT IS A VERY DIFFICULT SCENARIO THEY ARE IN. WHO ACTUALLY WANTS THAT JOB? MAYBE IT IS A WAITING GAME. YOU LET ISHIBA STUMBLE ON AND THEN WAIT FOR THE PERFECT MOMENT LATER ON. BUT LET’S BE VERY CLEAR ABOUT THIS. ISHIBA IS STILL ON VERY SHAKY GROUND. ALTHOUGH HE IS TALKING ABOUT CONTINUING, HE WILL REMAIN AS PRIME MINISTER, HE IS NOT ON SOLID TERRITORY YET. SHERY: ARE THE U.S. TRADE TALKS HAS LEVERAGED TO STAY ON? PAUL J.: THEY DEFINITELY ARE. YES DEFINITELY PLAYED A TRUMP CARD, NO PUN INTENDED. IT MEANS HE CAN SAY IN THE NATIONAL INTEREST OF JAPAN, DOES IT MAKE SENSE TO GET RID OF ME NOW WHEN WE ARE AT THIS CRITICAL MOMENT THAT IS SO IMPORTANT FOR JAPAN? THESE TARIFFS, WE HAVE 25% ON CARS THAT ACCOUNTS FOR MORE THAN 80% OF THE TRADE DEFICIT WITH THE U.S. GOING TO BE VERY DIFFICULT TO DONALD TRUMP TO GAIN ANY GROUND ON THAT. THEN YOU HAVE 25% ON EVERYTHING ELSE. SO WE ARE REALLY GOING TO NEED TO SEE SOME KIND OF CONCESSIONS IN ORDER FOR ISHIBA TO SELL IT AS A DEAL THAT WORKS FOR JAPAN. IF HE CAN ACHIEVE THAT OF COURSE THAT IS STILL A BIG QUESTION MARK. PAUL: TO WHAT DEGREE WAS THE ELECTION RESULT INDICATIVE OF MAY BE A DEEPER PROBLEM OF NOT JUST THE LDP BUT WITH BOTH MAJOR PARTIES? ARE WE SEEING A FRACTURING OF THE POLITICAL LANDSCAPE IN JAPAN AS WE ARE SEEING IN SOME OTHER DEMOCRACIES? PAUL J.: IF YOU LOOK AT THE VOTING FIGURES WE HAD MUCH HIGHER TURNOUT, PEOPLE GETTING A BIT MORE INVOLVED. YOUNGER GENERATION VOTING MORE. YOUNGER BOULDERS HAVE ALWAYS BEEN OUT IN FORCE AND OF COURSE THEY TEND TO VOTE FOR THE TRADITIONAL PARTIES. SO ARE WE STARTING TO SEE SOME DISCONNECT BETWEEN YOUNGER PEOPLE, PEOPLE WHO ARE SAYING WHAT IS THIS INFLATION? WE DIDN’T EVEN WANT THIS INFLATION. THOSE TRADITIONAL POLICYMAKERS WANT INFLATION BUT WE DON’T WANT IT. WE WANT MORE TAKE-HOME PAY. THEN WE HAVE SEEN A FRACTURING IN TWO OF THE DIFFERENT SMALLER POPULIST PARTIES, THE DEMOCRATIC PARTY FOR THE PEOPLE HAVE BEEN FOCUSING ON THIS INCREASING TAKE-HOME PAY RESONATING WITH YOUNGER VOTERS. BUT WE ARE ALSO SEEING A FRACTURING ON THE RIGHT WING SIDE. PEOPLE REACT INTO THE INFLUX OF FOREIGNERS, TOURISTS, AND PEOPLE LIVING IN HEAVY MANUFACTURING AREAS AND FOREIGNERS TAKING OVER SKI RESORTS AND STUFF. WE SEE THEM WINNING MEMBERS AND SOME HIGHLY LOCALIZED AREAS. PAUL: PAUL JACKSON THERE ON THE JAPAN ELECTION. U.S. AND EU TRADE NEGOTIATORS ARE RACING TO REACH A DEAL BEFORE PRESIDENT TRUMP’S AUGUST 1 DEADLINE. IF THEY FAIL WASHINGTON IS THREATENING AT 30% TARIFF ON MOST EUROPEAN GOODS. BRUSSELS MEANWHILE IS PREPARING TO RETALIATE IF TARIFF TALKS COLLAPSE. LET’S GET TO DEREK WALLBANK NOW. A LOT AT STAKE HERE. WHAT ARE THE KEY STICKING POINTS AND CAN THEY BE RESOLVED BEFORE AUGUST 1 WHICH IS JUST OVER A WEEK AWAY? DEREK: YOU OUTLINED THE STAKES AND THEY ARE VERY SIMPLE BUT VERY CONSEQUENTIAL. THE THREAT IS 30%. THAT IS NOT INCLUDING SECTORAL TARIFFS OF WHICH THERE HAVE BEEN A FEW IMPLEMENTED AND A FEW MORE THREATENED ON KEY INDUSTRIES OF WHICH EUROPE HAS A LOT. THIS IS A MAJOR TRADING RELATIONSHIP. THIS IS ONE WITH TONS AT STAKE ACROSS EVERY POSSIBLE SECTOR. SO ITS CONSEQUENCES CANNOT BE UNDERSTATED HERE. THE GOAL IS THERE IS THIS 10% UNIVERSAL LEVY THAT MAY BE GOES UP A LITTLE FROM THERE BUT GETTING DOWN TO THAT AS MUCH AS YOU POSSIBLY CAN AND THEN AVOIDING OR PULLING TARGETED EXEMPTIONS FROM SOME OF THESE SECTORAL TARIFFS TO THE GREATEST DEGREE POSSIBLE. THAT IS A LITTLE BROAD BUT THAT IS THE BIG MAJOR MAP STAKES HERE. SUE — SENIOR OFFICIALS SAID EUROPE WAS SLOW OFF THE MARK OF TALKS BUT THOSE HAVE BEEN INCREASING. THERE IS NOTHING LIKE AN DEADLINE IN POLITICS OR TRADE TO KIND OF GET PEOPLE GOING TOWARDS TALKS. THE LATEST DEADLINE IS AUGUST 1 AND I STRESS THE LATEST, BECAUSE DEADLINES AS YOU KNOW HAVE SORT OF MOVED BACK AND MOVED BACK AND MOVED BACK FROM LIBERATION DAY WHICH WAS IN APRIL, WHICH FEELS A VERY LONG TIME AGO NOW. THE LATEST ONE IS AUGUST. THE WHITE HOUSE SAID IT WILL NOT GET EXTENDED AGAIN. WE SHALL SEE. BUT THAT IS THE DEADLINE WE ARE FACING RIGHT NOW. SO TALKS ARE ONGOING. THERE IS A GREAT EFFORT TO TRY TO GET SOMETHING DONE BEFORE THIS COMES IN WE ARE EVEN HEARING THAT EUROPE MIGHT BE WILLING TO SETTLE FOR A SLIGHTLY UNBALANCED DEAL IF IT CAN GET CERTAINTY AND GET SOME OF THESE WORST-CASE SCENARIOS AVOIDED. SHERY: WE ARE SEEING IN THESE TRADE NEGOTIATIONS IN ALL DIFFERENT FRONTS. WHAT IS THE LATEST WITH TAIWAN? DEREK: WE ARE EXPECTING ANOTHER ROUND OF NEGOTIATIONS THIS WEEK. IT IS A VERY COMPLICATED RELATIONSHIP. THE U.S. IS THE NUMBER ONE PRINCIPAL SECURITY PARTNER FRED TAIWAN. IT IS ITS MAJOR ARMS SUPPLIER. AND YOU HAVE A GEOPOLITICAL SITUATION WITH CHINA THAT CAN’T BE UNDERSTATED AS WELL. SO THERE ARE A LOT OF COMPLICATIONS THAT GO INTO THIS. THE OTHER THING TO WATCH IS THAT THE U.S. HAS SAID, I GUESS I MIGHT USE THE WORD COITUS, OF SOME OF THE SUCCESS THAT ONE HAS THAT WITH CHIPS. ONCE MORE CHIP PRODUCTION DOMESTICALLY. THERE ARE ADDITIONAL THINGS YOU MIGHT SAY ARE IN PLAY AT THE BROAD LINE NEGOTIATIONS. THERE HAS BEEN SPECULATION ABOUT WHETHER OR NOT TAIWAN HAS RECEIVED A DEMAND LETTER FROM THE AMERICANS. TAIWAN HAS SAID THEY HAVE NOT IN TERMS OF JUST FLATLY SETTING THE BASELINE RATE IF THINGS FAIL. SO THERE IS SOME IDEA THAT MAYBE THESE TALKS ARE GOING A LITTLE BETTER. THE NUMBER OF ECONOMIES WE HAVE SEEN BROADLY ACTUALLY COME TO A FRAMEWORK AGREEMENT OR A TOPLINE OR WHATEVER YOU WANT TO CALL THOSE EARLY AGREEMENTS, IT IS VERY SMALL. A LOT OF ECONOMIES THAT WE HAVE THOUGHT WERE MAYBE TOWARDS THE FRONT OF THE LINE OR ONES THAT WOULD GET ACROSS THE LINE, MANY OF THEM HAVE NOT YET. AND SO TAIWAN IS VERY MUCH IN THIS POSITION THAT I THINK A LOT OF OTHER ECONOMIES ARE OF TRYING TO FIGURE OUT WHAT IS IT THAT IS GOING TO GET THE UNITED STATES TO SIGN ON TO A DEAL BECAUSE THEY REALLY HAVE NOT BEEN THAT MANY SUCCESSFUL EXAMPLES AS OF YET AND THE CLOCK IS TICKING. SHERY: DEREK WALLBANK WITH THE LATEST ON ONGOING TRADE NEGOTIATIONS ON ALL DIFFERENT FRONTS INCLUDING EUROPE AND THE POSSIBILITY THAT THEY COULD BE WILLING TO ACCEPT AN UNBALANCED AGREEMENT THAT FAVORS THE U.S. ACCORDING TO SOURCES SPEAKING TO BLOOMBERG. YOU CAN SEE THE DOWNSIDE WITH EUROPEAN FUTURES. WE HAVE SEEN EUROPEAN STOCKS FALLING IN THE REGULAR SESSION. A MIXED BAG OF EARNINGS OUT OF EUROPE. THE EURO ALSO HOLDING AT THE 116 LEVEL. WE HAVE MORE AHEAD. THIS IS BLOOMBERG. ♪ PAUL: LET’S GET THE LATEST FROM THE CORPORATE FRONT. CITIGROUP IS ASKING ITS INCOMING INVESTMENT BANKING ANALYSTS TO DISCLOSE WHETHER THEY HAVE ALREADY ACCEPTED JOB OFFERS ELSEWHERE. THE BANKS AS THE MOVE IS MEANT TO FOSTER A FAIR AND TRANSPARENT ENVIRONMENT AS PRIVATE EQUITY FIRMS INCREASINGLY RECRUIT JUNIOR BANKERS EARLY. GOLDMAN SACHS AND MORGAN STANLEY HAVE RECENTLY INTRODUCED SIMILAR POLICIES. OFFICIALS IN CYBER SECURITY RESEARCHERS SAY HACKERS EXPLOITED A FLAW IN MICROSOFT’S SHAREPOINT, BREACHING GOVERNMENTS, BUSINESSES, AND ORGANIZATIONS WORLDWIDE. MICROSOFT RELEASED A PATCH BUT WARNS MORE FIXES ARE COMING AS ATTACKS CONTINUE. VULNERABILITIES WERE IDENTIFIED FIRST IN MAY AT A BERLIN CYBERSECURITY CONFERENCE. INDIA SECURITIES REGULATOR SAYS JANE STREET CAN RESUME TRADING AFTER DEPOSITING MORE THAN $560 MILLION IN ALLEGED UNLAWFUL GAINS. THE SECURITIES AND BOARD SAYS THE FIRM MUST CEASE ANY MANIPULATIVE PRACTICES AND COMPLY WITH REGULATIONS. THEY DENY WRONGDOING CALLING ITS TRADES BASIC INDEX ARBITRAGE AND SAYS THAT COOPERATING WITH THE INVESTIGATION. SHERY: TAKE A LOOK AT THE STOCK WE ARE WATCHING IN TOKYO. SOFTBANK WHICH OF COURSE IS A MAJOR SHAREHOLDER OF ARM THAT IS ALSO A BIG BACKER OF AN BIC MICRO. WE ARE HEARING THIS COMPANY IS SEEKING TO RAISE AS MUCH AS $85 BILLION FROM AN INITIAL PUBLIC OFFERING SO WE HAVE ARM RALLYING OVERNIGHT AND YOU CAN SEE SOFTBANK NOW GETTING MORE THAN 4% IN TOKYO TRADING. WE HAVE MORE AHEAD. THIS IS BLOOMBERG. ♪ MBERG. ♪ PAUL: YOU ARE WATCHING “THE ASIA TRADE.” HERE ARE SOME HEADLINES WE ARE TRACKING. THE TRUMP ADMINISTRATION SAYS IT IS DEPLOYING MORE IMMIGRATION AGENTS TO NEW YORK AFTER A MIGRANT ALLEGEDLY SHOT A FEDERAL OFFICER. KRISTI NOEM BLAMES THE CITY’S SANCTUARY POLICIES. NEW YORK OFFICIALS SAY THEY FOLLOW STATE LAW AND ARE TARGETING DANGEROUS INDIVIDUALS IN COORDINATION WITH FEDERAL PARTNERS. TREASURY SECRETARY SCOTT BESSENT IS CALLING FOR AN EXHAUSTIVE REVIEW OF THE FED’S NONMONETARY POLICY OPERATIONS INCLUDING RENOVATIONS TO ITS HEADQUARTERS IN WASHINGTON. THE AND JEROME POWELL HAVE FAKES — HAVE FACED WEEKS OF CRITICISM FROM DONALD TRUMP AND FOR NOT CUTTING INTEREST RATES. BESSENT SAID THIS MAY BE JEOPARDIZING THE INDEPENDENCE OF THE CENTRAL BANK’S CORE MISSION. A NEW REPORT SAYS PRESIDENT TRUMP’S RECENTLY PASSED TAX AND SPENDING LAW WILL ADD $3.4 TRILLION TO U.S. DEFICITS. THE LATEST ESTIMATE FROM THE NONPARTISAN CONGRESSIONAL BUDGET OFFICE ALSO WARNS MILLIONS WILL LOSE HEALTH CARE COVERAGE. SHERY: TAKE A LOOK AT HOW ASIAN MARKETS ARE TRADING. A MIXED PICTURE WITH THE KOSPI DOWN SLIGHTLY .2%. YOU CAN SEE ON THE RIGHT SIDE THE NIKKEI IS GAINING GROUND AND BEING LED BY COMMUNICATION SERVICES, MATERIALS. SOME POLICIES SENSITIVE SECTORS. WHEN IT COMES TO DEFENSES IT IS LEADING THE LOSSES. PERHAPS A SIGH OF RELIEF GIVEN THAT DESPITE THE FACT THAT ISHIBA GOVERNMENT LOST THE UPPER HOUSE ELECTIONS AND LOST THEIR MAJORITY HE IS VOWING TO STAY ON AS LEADER HEAD OF TRADE NEGOTIATIONS ONGOING WITH THE UNITED STATES. WE ARE ALSO KEEPING A WATCH ON THE OFFSHORE YUAN, OFFSHORE AND ONSHORE ADVANCED IN THE PREVIOUS SESSION AS WE CONTINUE TO WATCH THE LATEST ON A MEGA PROJECT BEING BUILT BY BEIJING. THIS WOULD BE THE WORLD’S LARGEST HYDROPOWER PROJECT IN TIBET, ESTIMATED TO COST FOUR TIMES MORE THAN THE PREVIOUS PROVIDING AN ECONOMIC JOLT TO THE PREVIOUS SECTOR. LET’S BRING IN MINMIN LOW FROM HONG KONG. HOW SIGNIFICANT IS THIS PROJECT? MINMIN: IT IS EXTREMELY SIGNIFICANT FOR THE CHINESE COMMUNIST PARTY. THIS IS SOMETHING THE PLAN FOR THE LONG TIME IN 2020 AS PART OF THE 14TH FIVE-YEAR PLAN. SOMETHING OF AN EPIC SCALE THREE TIMES MORE THAN THE PREVIOUS PROJECT EXPECTED TO GENERATE 70 GIGAWATTS OF ELECTRICITY. $167 BILLION. IT CAN TAKE 10 YEARS TO COMPLETE AND WOULD GENERATE AN AMOUNT OF ELECTRICITY GREATER THAN THE TOTAL POWER GENERATION CAPACITY IN THE COUNTRY OF POLAND. SO IT IS GOING TO HELP WORK TOWARDS CHINA’S ZERO EMISSION GOALS BY 2060. THE SECOND THING IS DOES IS THE ECONOMIC JOLT TO THE ECONOMY. WE ARE TALKING PERHAPS 0.1% GROWTH THE GDP ACCORDING TO CITIGROUP IN THE FIRST YEAR OF CONSTRUCTION. WE ARE ALSO TALKING ABOUT THE CONSTRUCTION SECTOR, IRON ORE AND STEEL BENEFITING. WE SAW SIZABLE MOVES IN THE MARKETS YESTERDAY. TALKING ABOUT COMPANIES MOVING UP 10% OR MORE. THE IRON ORE COMMODITIES AS WELL. WE SAW 30 YEAR BOND FUTURES SELLING OFF ON MONDAY BY THE MOST SINCE MAY. A LOT OF EXCITEMENT FROM INVESTORS AROUND US. THE QUESTION IS WHETHER IT IS WORTH THE COST BECAUSE BLOOMBERG EDITORS ESTIMATE THE COST WILL BE FOUR TIMES MORE THAN WIND POWER GENERATION AND SIX TIMES MORE THAN SOLAR WHICH MEANS THIS PROJECT WILL HAVE TO BE RUN AT CONSISTENTLY HIGH CAPACITY TO GENERATE GOOD RETURNS AND THAT IS SOMETHING INCREASINGLY UNCERTAIN IN AN ERA WHERE CLIMATE CHANGE HAS CAUSED A LOT OF FLUCTUATION IN WATER LEVELS IN CHINA. AND I’M NOT EVEN MENTIONING SOME OF THE ECONOMIC — ECOLOGICAL CHALLENGES. A LOT OF OPPOSITION FROM INDIA AND BANGLADESH BECAUSE THIS RIVER FLOWS DOWNSTREAM TO THOSE COUNTRIES AND POTENTIALLY MILLIONS OF PEOPLE COULD BE AFFECTED ALL OF THE CHINESE GOVERNMENT SAYS THERE WILL NOT BE ANY IMPLICATIONS DOWNSTREAM AND THEY ARE TAKING ALL MEASURES TO ENSURE PROTECTION TO THE ENVIRONMENT. PAUL: TELL US MORE ABOUT THE ECONOMIC JOBS YOU MENTIONED BECAUSE IT IS QUITE TIMELY CONSIDERING THE RECENT WAGE DATA WE HAVE HAD OUT OF CHINA. MINMIN: YES. WE HAVE NEW DATA OUT OF GOLDMAN SACHS. THIS IS SHOWING WHICH GROWTH IN CHINA IS AT ITS SLOWEST PACE OUTSIDE THE PANDEMIC YEARS. THIS IS AN ALTERNATIVE DATA SET THAT SHOWS WAGE GROWTH IN THE SECOND QUARTER WAS 3.9%, 1% LOWER THAN THE OFFICIAL NUMBERS. ALTHOUGH SOME ANALYSTS BELIEVE THE OFFICIAL NUMBERS UNDERESTIMATE THE WAGE GROWTH ISSUE GIVEN THAT WE DID SEE DEBORD — A DIVERGENCE IN THE EMPLOYMENT INDEXES OF VARIOUS PMI VERSUS THE OFFICIAL UNEMPLOYMENT DATE AT WHICH SOME ANALYSTS SAY COULD BE BECAUSE OFFICIAL DATA CAPTURES A LOT OF FLEXIBLE SELF EMPLOYMENT OR OTHER TYPES OF INFORMAL EMPLOYMENT. OVERALL THE TAKE AWAY IS WE CAN SEE THE OFFICIAL CHART SHOWS RECENT YEARS REAL WAGE GROWTH HAS BEEN FAR BELOW PRE-PANDEMIC LEVELS. THAT HAS IMPLICATION ON CONSUMPTION RECOVERY AS WELL AS CONSTRAIN TO REIN IN THE PRICE COMPETITION AMONG INDUSTRY PLAYERS BECAUSE THE CONSOLIDATION OF INDUSTRIAL CAPACITY AND LIKELY LEAD TO JOB CUTS WHICH WILL BE ANOTHER CONCERN FOR THE GOVERNMENT GIVEN THE ALREADY SLIGHT LABOR MARKET WE ARE ALREADY SEEING. SHERY: MINMIN LOW THERE. OTHER STORIES AT THE MOMENT, 28 COUNTRIES INCLUDING THE U.K., JAPAN, AUSTRALIA, CANADA IN MANY EUROPEAN NATIONS ISSUED A JOINT STATEMENT SAYING ISRAEL’S WAR IN GAZA MUST END NOW. THE NATION’S FOREIGN MINISTER SANDIA SUFFERING OF GAZAN CIVILIANS HAS REACHED NEW DEPTHS, AND DUNG THE RECENT KILLINGS OF MORE THAN 800 PALESTINIANS WHO WERE SEEKING AID. ISRAEL’S FOREIGN MINISTRY BECAUSE THE CRITICISM DISCONNECTED FROM REALITY. VIETNAM IS BRACING FOR CYCLONE FORECAST TO INTENSIFY TO A STRONG TROPICAL STORM BEFORE MAKING LANDFALL TUESDAY. THE GOVERNMENT HAS WARNED OF POTENTIAL FLOODING INCLUDING IN PROVINCES WERE COMPANIES INCLUDING SAMSUNG HAVE FACTORIES. IT LASHED HONG KONG SUNDAY WITH GALE FORCE WINDS. THE PHILIPPINE PRESIDENT IS SET TO MEET PRESIDENT TRUMP TUESDAY AT THE WHITE HOUSE FOLLOWING VISITS OF THE PENTAGON AND STATE DEPARTMENT FOCUSED ON TARIFFS AND SECURITY COOPERATION. SO HOW MUCH MOMENTUM THOSE PRESIDENT MARCOS HAVE COMING OFF THESE CABINET MEETINGS WITH TRUMP OFFICIALS? ANDREO: MARCOS HAS STRONG MOMENTUM GOING INTO THE TRUMP MEETING. THE MEETINGS WITH THE DEFENSE AND STATE SECRETARY HAS HIGHLIGHTED A STRONG DEFENSE ALLIANCE BETWEEN THE U.S. AND THE PHILIPPINES. DEFENSE SECRETARY HEGSETH HAS EVEN SAID THE ALLIANCE HAS NEVER BEEN STRONGER AND THE ASIA-PACIFIC REGION IS A PRIORITY FOR THE U.S. SO, WHAT WE HAVE TO SEE RIGHT NOW IS IF ASSURANCES ON THE DEFENSE SIDE WILL BEAR FRUIT INTO THE ECONOMIC SIDE, ESPECIALLY WITH A HIGHER 20% TARIFF RATE LOOMING OVER THE PHILIPPINES. PAUL: SO WHAT IS TOP OF THE AGENDA FOR THE MEETING BETWEEN TRUMP AND MARCOS AND WHAT OUTCOMES MIGHT WE EXPECT? ANDREO: MARCOS SAID HE HOPES TO PUSH FOR A TRADE AGREEMENT WITH THE TRUMP ADMINISTRATION TO LOWER THE 20% TARIFF THAT HAS BEEN THREATENED ON THE PHILIPPINES. MARCOS DESCRIBED THIS AS VERY SEVERE AND HAS SIGNALED HE WANTS TO REACH AN AGREEMENT WITH TRUMP . ESPECIALLY SINCE THERE IS PRESSURE ON HIM TO DO SO BECAUSE OUR NEIGHBORS VIETNAM AND INDONESIA HAVE REACHED A SIMILAR AGREEMENT WITH THE U.S. BUT FOR TRUMP, IT’S ALWAYS EXPECTED. THERE IS ALWAYS THE POSSIBILITY THAT HE COULD TORPEDO THE SCRIPT THAT HAS BEEN LAID OUT BY HIS TOP OFFICIALS. SHERY: HOW MUCH PRESSURE IS THERE DOMESTICALLY FOR PRESIDENT MARCOS GIVEN THE RECENT SETBACK IN MIDTERM ELECTIONS? ANDREO: AN ECONOMIC WIN WOULD BE VERY WELCOME FOR MARCOS RIGHT NOW. JUST A FEW MONTHS AGO HIS SENATE UNDERPERFORMED IN THE MIDTERM ELECTIONS AND IT SHOWED THAT HIS MAIN RIVAL NOW, THE VICE PRESIDENT, REMAINS POPULAR. SO HE WILL NEED AN ECONOMIC WIN RIGHT NOW, ESPECIALLY TO PUSH FOR HIS DREAM TO MEET — MAKE THE PHILIPPINES AND INVESTMENT DESTINATION IN THE REGION. SO IF YOU WILL NOT BE ABLE TO SECURE A LOWER TARIFF COMPARED TO OUR NEIGHBORS, THAT WILL DEAL A BLOW TO HIS AMBITION TO MAKE US MORE ATTRACTIVE TO INVESTORS. PAUL: ANDREO CALONZO THERE. WE HAVE MORE AHEAD. THIS IS BLOOMBERG. PAUL: AUSTRALIA’S PARLIAMENT WILL SIT TODAY FOR THE FIRST TIME SINCE THE LABOUR GOVERNMENT’S LANDSLIDE ELECTION VICTORY IN MAY. PRIME MINISTER ANTHONY ALBANESE JUST RETURNED FROM A SIX DAY CHINA VISIT WHILE THE TRUMP TARIFF DEADLINE IS CLOSER. HERE’S A REMINDER OF WHAT THE TREASURE OF TOLD US ABOUT THE GOVERNMENT STANCE ON U.S. TRADE THREATS AT THE G20 MEETING IN SOUTH AFRICA. WE SEE THESE TARIFFS AS SELF-DEFEATING AND INACTIVE ECONOMIC SELF-HARM. WE HAVE MADE IT CLEAR WE ARE NOT HERE TO DIMINISH OR WEAKEN THE PDS TO GET A DEAL AND WE HAVE BEEN CLEAR ABOUT THAT SINCE THE BEGINNING. PAUL: LET’S GET MORE ON THE OUTLOOK FOR TRADE AND FOREIGN POLICY UNDER THE SECOND ALBANY IS A GOVERNMENT WITH MERRIDEN VARRALL. THANK YOU SO MUCH FOR JOINING US TODAY. JIM CHALMERS ALSO SAID HE VIEWS THESE U.S. TARIFFS AS AN ACT OF SELF-HARM. THERE IS CERTAINLY A FAIR BIT OF CONFUSION IN AUSTRALIA ABOUT WHY AUSTRALIA HAS TARIFFS CONSIDERING THE TRADE SURPLUS AUSTRALIA RUNS WITH THE U.S., BUT NEVER MIND THAT. HE ALSO SAID WHAT IS NOT UP FOR REFORM AND THAT IS THE PHARMACEUTICAL BENEFITS WHICH PROMOTES DOMESTIC PRODUCTION. IS THAT SOMETHING AUSTRALIA WILL HAVE TO TALK ABOUT WITH UNITED STATES AND HOLD THE LINE? DR. VARRALL: GREAT QUESTION AND SOMETHING THAT SEEMS LIKE BOTH SIDES OF AUSTRALIAN POLITICS RIGHT NOW ARE PRETTY PROTECTIVE AND DETERMINED TO DEFEND. AND I IMAGINE THAT WITH THAT ENVIRONMENT THAT WE ARE HEARING AND SEEING IN AUSTRALIA AT THE MOMENT THAT AUSTRALIA WILL GO IN DETERMINED TO PROTECT THAT SHOULD THOSE 200% TARIFFS COME ANY CLOSER TO US. PAUL: ANOTHER THING PRESIDENT TRUMP HAS BEEN TALKING ABOUT IS A DESIRE TO SEE AUSTRALIA IT INCREASES DEFENSE BUDGET TO 3.5%. IT IS A POLICY YOU CAN IMAGINE HAS TREMENDOUS SUPPORT BY THE DEFENSE BUDGET IS GOING UP, JUST NOT THAT MUCH. IS THIS ANOTHER POTENTIAL BARGAINING CHIP THE GOVERNOR WILL HAVE TO DEAL WITH HERE? DR. VARRALL: THIS QUESTION OF DEFENSE SPENDING HAS BEEN SOMETHING THE AUSTRALIAN SECURITY COMMUNITY HAS BEEN TALKING ABOUT FOR MANY YEARS. 2% OF GDP HAS BEEN THE GOAL FOR MANY YEARS. THE CONTEXT THAT NEEDS TO BE TAKEN INTO CONSIDERATION, THE CONTEXT IS CHANGING. THE BROADER GEOPOLITICAL ENVIRONMENT IS THE WORST IT HAS BEEN IN A LONG TIME AND THAT SECURITY CONTEXT IS GETTING WORSE. FROM A NATIONAL INTEREST POINT OF VIEW AUSTRALIA HAS TO ASK ITSELF REGARDLESS OF WHAT THE AMERICAN ADMINISTRATION WANTS US TO DO, WHAT IS BEST FOR US? IF WE THINK IT IS APPROPRIATE TO INCREASE OUR DEFENSE SPENDING WE NEED TO MAKE SURE WE ARE HAVING A NATIONAL CONVERSATION WITH THE AUSTRALIAN COMMUNITY TO HELP THEM UNDERSTAND AND EXPLAIN WHY THAT IS NECESSARY. BECAUSE THE GENERAL POPULATION WANTS TO SEE MONEY SPENT ON HEALTH AND EDUCATION, SOCIAL SERVICES. NOT ON DEFENSE. UNLESS THEY CANUNDERSTAND THERE IS A REASON. THERE IS A BROADER GEOPOLITICAL CONTEXT WITH THIS AS WELL AS AUSTRALIAN DOMESTIC CONTEXT. THE AUSTRALIAN POLITICIANS IN PARLIAMENT WILL HAVE TO NEGOTIATE THAT REGARDLESS OF WHAT THE U.S. ADMINISTRATION WANTS FROM US. SHERY: LOOMING LARGE IN THE GEOPOLITICAL CONTEXT OF COURSE IS AUSTRALIA’S RELATIONSHIP WITH CHINA. HOW WOULD YOU ASSESS THE RECENT VISIT FROM THE PRIME MINISTER TO BEIJING? DR. VARRALL: THE FEEDBACK HAS BEEN REALLY POSITIVE. HE SPENT SIX DAYS THEY ARE RATHER THAN THE USUAL THREE, THAT HE WENT TO THREE CITIES, IT ALL LOOKS REALLY POSITIVE. THE ENGAGEMENT NARRATIVE, THE IDEA THAT AUSTRALIA IS BUILDING RESILIENCE IN THE RELATIONSHIP WITH OUR GREATEST AND MOST IMPORTANT TRADING PARTNER IS REALLY POSITIVE AND REALLY IMPORTANT. BECAUSE IN THIS BROADER RAPIDLY CHANGING GEOPOLITICAL LANDSCAPE WE HAVE TO MAKE SURE THAT WE ARE KEEPING OUR FRIENDSHIPS AND OUR RELATIONSHIP STRONG WITH EVERYONE THAT WE NEED TO. IT CANNOT BE A ZERO-SUM GAME WHERE WE INCREASE OUR RELATIONSHIP WITH ONE AT THE EXPENSE OF ANOTHER. AUSTRALIA WAS A VERY EXPOSED TRADING NATION. WE RELY ON GOOD TRADING RELATIONSHIPS FOR OUR PROSPERITY. SO IT IS ESSENTIAL AND PRAGMATIC THAT WE NEED TO TRY AND MAINTAIN A PRAGMATIC RELATIONSHIP WITH OUR GREATEST TRADING PARTNER. SHERY: HOW DO MULTILATERAL FRAMEWORKS FIT INTO HERE? DR. VARRALL: IT IS A SMALL MULTILATERAL GROUPING AND WHAT IT MEANS IS THAT AUSTRALIA, THE U.K. AND THE U.S. ARE WORKING TOGETHER TO TRY AND IMPROVE THE SECURITY GLOBALLY AS WELL AS FOR EACH OF THE ACTORS WITHIN IT. IN TERMS OF THAT BROADER GEOPOLITICAL CONTEXT IT IS A VERY DIFFICULT AND SENSITIVE ISSUE TO NAVIGATE BECAUSE WE NEED TO BE CONCERNED AND THINKING ABOUT OUR DEFENSE AND SECURITY SITUATION. BUT AT THE SAME TIME WE NEED TO BUILD THOSE RELATIONSHIPS. IT IS LIKE A HORSE WRITER TRYING TO RIDE TWO HORSES AT THE SAME TIME. WE NEED TO BE ABLE TO NAVIGATE THOSE RELATIONSHIPS AT THE SAME TIME AND IT IS BECOMING INCREASINGLY COMPLICATED BECAUSE OF THE BIGGER GEOPOLITICAL PICTURE. PAUL: AT THE MOMENT THERE ARE QUESTIONS ABOUT THE RELIABILITY OF THE U.S. AS A TRADE PARTNER BUT IT WAS NOT THAT LONG AGO THAT THERE WERE WORSE QUESTIONS ABOUT CHINA WHEN WE CONSIDER THE NUMBER OF TRADE STRIKES CHINA LEVIED AGAINST AUSTRALIA. DO YOU FEEL LIKE THE LESSONS OF THE PAST HAVE BEEN LEARNED WHEN WE LOOK AT ALL THE SMILES THAT CAME OUT OF ANTHONY ALBANESE’S TRIP TO CHINA LAST WEEK? DR. VARRALL: I HOPE SO. I HOPE WE ARE NOT CONSIDERING THAT EVERYTHING IS ROSES AND THAT EVERYBODY IS BUDDIES. WE CANNOT RETURN TO THE STATUS QUO. AND IF WE THINK WE CAN THEN WE ARE BEING NAIVE AND COMPLACENT. THE REALITY HAS CHANGED AND WE CANNOT GO BACK. IT IS MUCH MORE COMPLEX THAN WE HAVE BEEN FOR DECADES. WE NEED TO BE PRAGMATIC AND EXTRICATE POLITICS FROM ECONOMICS WITH OUR RELATIONSHIPS. THAT IS EXTREMELY DIFFICULT CONSIDERING THE WAY TRADE AND INVESTMENT ARE BEING WEAPONIZED. THE ALBANY’S E-GOVERNMENT OR WHOEVER IS IN GOVERNMENT IN AUSTRALIA IT WILL HAVE A VERY DIFFICULT TIME OF NAVIGATING THAT COMPLEXITY AND WE NEED TO PLAY IT VERY CAREFULLY. PAUL: MERRIDEN VARRALL, THANK YOU SO MUCH FOR JOINING US. WE WILL HAVE MORE ON AUSTRALIA HEAD EVERY TUESDAY AT 11:40 A.M. IF YOU’RE WATCHING IN SYDNEY AND 8:40 A.M. IN HONG KONG. YOU CAN ALSO TUNE INTO THE BLOOMBERG AUSTRALIAN A PODCAST WHICH DELVES INTO THE BIGGEST STORIES FACING THE COUNTRY’S ROLE IN GLOBAL BUSINESS ON APPLE, SPOTIFY OR BLOOMBERG.COM. WE HAVE MORE AHEAD. THIS IS BLOOMBERG. ♪ ERG. ♪ SHERY: WELCOME BACK. HAVEN C I L KYLE BASS SAYS HE IS WARY OF THE OUTLOOK FOR MAJOR ASIAN CURRENCIES INCLUDING BOTH THE YEN AND HONG KONG DOLLAR. HE TOLD US WHY JAPAN’S CURRENCY IS PARTICULARLY CONCERNING. JAPANESE SOVEREIGN DEBT TO GDP IS NORTH OF 260%. KIND OF THE WORLD’S MOST INTERESTING THAT LABORATORY. WHEN YOU GET A SCENARIO LIKE WHAT YOU HAD WITH COVID WHERE IF YOU REMEMBER THE WHOLE WORLD IS PRICED IN DOLLARS. SO WHEN THE U.S. FED AND THE U.S. ADMINISTRATION DECIDES TO PRINT AND SPEND AS MUCH AS WE DID, WE PUT 40% MORE IN TUNE TO THE SYSTEM BETWEEN 2020 AND 2023 AND WE GOT A 40% OR 50% INFLATION OF ALMOST EVERYTHING. THERE ARE A FEW THINGS IT DID NOT. BUT LET’S SAY DWELLINGS AND CONSUMER GOODS AND THINGS PEOPLE HAVE TO BUY EVERY DAY OR PAY FOR RENT DEAD. WHAT HAPPENED IN JAPAN IS THE YEN WENT FROM RUSH — ROUGHLY 100 TO 160. NOW IT IS AROUND 145. SO WHEN YOU THINK ABOUT THE YEN, THE YEN IS JUST MOVING IN THE AMOUNT OF PURCHASING POWER IT HAS IN DOLLARS. IT IS THAT SIMPLE. THEY ARE IN A REALLY BAD SITUATION FROM A DEBT PERSPECTIVE. THEY HAVE A POPULATION DECLINE. THEY ARE A VERY IMPORTANT TRADING PARTNER OF THE U.S. AND ONE OF THE STALWARTS OF HOURS IN ASIA. I THINK WE ARE GOING TO DO ALL WE CAN TO TRADE AND HELP THE JAPANESE GOING FORWARD BUT THEY ARE IN A PRECARIOUS POSITION. THEY EITHER HAVE TO LET THE CURRENCY GO OR BOND MARKET GO AND THEY WILL NEVER LET THE BOND MARKET GO SO I WOULD BE AIR — BEWARE OF THE YEN. I MENTIONED THE HONG KONG DOLLAR. YOU HAVE BET AGAINST THAT THE PAST AND IT HAS EXPERIENCED SWINGS BECAUSE OF PRESIDENT TRUMP’S TARIFFS AND THE IMPACT THERE. EVERY SO OFTEN BUT WONDER WHETHER IT IS TIME FOR THE HONG KONG DOLLAR TO BE RE-PEGGED TO A BASKET OF CURRENCIES OR RE-PEGGED MAYBE TO THE CHINESE CURRENCY. ARE WE AT ONE OF THOSE TIMES RIGHT NOW? WHEN YOU THINK ABOUT THIS PEG, IT HAS BEEN AROUND SINCE 1983. BACK THEN THE REASON THE PEG WAS PUT INTO PLACE IS THERE WAS A MASSIVE RUN ON THE HONG KONG DOLLAR. IF YOU REMEMBER THERE WERE RUMORS IN 1981 AND 1982 ABOUT THE BRITISH HANDING HONG KONG BACK TO THE CHINESE AND WHEN THOSE RUMORS GOT OUT MONEY STARTED FLEEING HONG KONG AND ASIA WRIT LARGE. SO THE HONG KONG DOLLAR DEPRECIATED 50% VERSUS THE IN A DOLLAR BASKET OF WORLD CURRENCIES. AND THE UNITED STATES AND THE UNITED STATES DOLLAR PROVIDES THE STABILITY TO HONG KONG AND THEREFORE CHINA AND THEIR CURRENCY REGIME. SO WHEN YOU THINK ABOUT THAT PEG, WE AS HONG KONG’S ECONOMY WENT, SO DID THOSE OF THE UNITED STATES AND THE WEST. NOW HONG KONG’S ECONOMY IS MORE INEXTRICABLY LINKED WITH CHINA’S AND THERE IS A DIVERGENCE IN ECONOMIC ACTIVITY. CHINA HAS HAD ITS WORST FINANCIAL CRISIS IN MAYBE ITS MODERN DAY HISTORY IN THE LAST TWO OR THREE YEARS. 10 YEAR BOND AT 1.5%. OVERNIGHT RATES ROUGHLY 1.5%. CHINA IS HAVING A REALLY DIFFICULT ECONOMIC PERIOD INTERNALLY. THOSE ECONOMIES NO LONGER MOVE WITH THE SAME SYNCHRONICITY THAT WAS REQUIRED. HONG KONG’S OVERNIGHT RATES TODAY, IT IS STILL CLOSE TO ZERO. U.S. OVERNIGHT RATES ARE 4.3%. ONE YEAR RATES IN HONG KONG ARE AROUND 1%. OURS ARE STILL AROUND 4%. YOU WOULD BE CRAZY NOT TO CONVERT IT TO USD. YOU WOULD EARN 3% OR 4% MORE. THAT IS WHY YOU SEE WEAKNESS IN THE HONG KONG DOLLAR. THE QUESTION IS CAN HONG KONG AFFORD TO MOVE RATES HIGHER? BECAUSE THE MAJORITY OF HONG KONG MORTGAGES ARE TIED TO SHORT RATES. HONG KONG IS IN A REALLY BAD POSITION RIGHT NOW AND ALSO THE GEOPOLITICAL RISKS ARE THERE. PAUL: HEYMAN CAPITAL CIO KYLE BASS THERE. WE WANT TO LEAVE YOU WITH A LOOK TODAY AT HOW THE AUSTRALIAN MINERS ARE PERFORMING. ALL THE BIG NAMES UP I ALMOST 3% AT THE MOMENT. THAT WOULD BE DUE TO THE BIG BUMP IN IRON ORE PRICES. IRON ORE 10360 IN SINGAPORE, WHEN OF THE MOST ACTIVELY TRADED CONTRACTS AT THE MOMENT. THANKS OF THIS GOES TO THE NEW DAM UNDER CONSTRUCTION IN CHINA. GOING TO BE THREE TIMES THE SIZE AT A COST OF $167 BILLION. THAT IS IT FOR “THE ASIA TRADE.” MARKETS CAN COVERAGE CONTINUES.
“Bloomberg: The Asia Trade” brings you everything you need to know to get ahead as the trading day begins in Asia. Bloomberg TV is live from Tokyo and Sydney with Shery Ahn and Paul Allen, getting insight and analysis from newsmakers and industry leaders on the biggest stories shaping global markets.
Chapters:
00:00:00 – Bloomberg: The Asia Trade begins
00:03:16 – Japan’s Ishiba tries to buy time after historic election setback
00:06:28 – EU is racing to secure US trade deal and preparing for worst
00:10:36 – Philippine President Marcos heads to White House
00:15:04 – Japanese yen advances as Ishiba holds on
00:20:23 – Rob Arnott on Trump’s ‘big, beautiful’ spending bill
00:24:24 – Japanese bonds, stocks face post-election pressure
00:27:12 – Waseda University’s Mieko Nakabayashi on Japan’s elections, trade talks
00:34:56 – China advances $167B Tibetan mega-dam despite risks
00:40:36 – Hayman’s Bass says beware of the Japanese yen
00:46:38 – Markets open in Japan, South Korea & Australia
00:49:47 – Mizuho Securities’ Sean Darby on market strategy
00:58:52 – Ishiba vows to stay and push US tariff talks
01:13:03 – China is building the world’s largest hydropower project in Tibet
01:19:09 – Philippine President Marcos set to meet Trump Tuesday
01:21:17 – KPMG Australia Geopolitics Hub Partner Merriden Varrall on Australia’s trade policy
——–
More on Bloomberg Television and Markets
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2 Comments
Short nikkie and spy
❤❤ very nice