Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 1: top stories in the coming week from our day Break
Speaker 1: anchors all around the world. And straight ahead on the program,
Speaker 1: Wall Street set for another big week of earnings and
Speaker 1: economic reports. I'm Tom Busby.
Speaker 2: I'll have that story.
Speaker 3: I'm Stephen Caroen and London, who we're piecing together the
Speaker 3: clues on when the ECB will cut interest rates ahead
Speaker 3: of its first meeting.
Speaker 2: Of the year. I'm Dog Kristner looking at the risk
Speaker 2: tied to the meeting of the Bank of Japan.
Speaker 4: I'm Kavid Lyons in Washington, looking ahead to the New
Speaker 4: Hampshire primary where Nicky Harley is trying to talk former
Speaker 4: Prestment Trump.
Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend. The business
Speaker 5: news you need to wrap up your week. Available on Apple, Spotify,
Speaker 5: the Bloomberg Business Appen everywhere you get your podcasts.
Speaker 1: Good day to you. I'm Tom Busby, and we begin
Speaker 1: today's program with a focus on earnings. More than seventy
Speaker 1: companies in the S and P five hundred reporting their
Speaker 1: latest results this week, and one of the most highly
Speaker 1: anticipated reports comes on Tuesday from Netflix for a preview
Speaker 1: where pleased to welcome get the Raganathan, us media analyst
Speaker 1: with Bloomberg Intelligence. Well, we know Netflix has really changed
Speaker 1: with the ad supported tier that they added last year
Speaker 1: the crackdown on password sharing. What do you expect to
Speaker 1: see on Tuesday?
Speaker 6: Yeah, So what we've really seen with these two new
Speaker 6: initiatives from Netflix, as you just mentioned, both the ads
Speaker 6: as well as the password crackdown, has been that they've
Speaker 6: finally been able to now reinvigorate subscriber gains. And so
Speaker 6: we saw, of course during the pandemic, we had you know,
Speaker 6: pull growth that was pulled forward, and then we had
Speaker 6: the great Netflix correction with the company kind of losing
Speaker 6: subscribers and now they're back on track. So we actually
Speaker 6: expect them to or they themselves said that they would
Speaker 6: post something like about eight point seven to eight point
Speaker 6: eight million news subscribers in the fourth quarter, that is
Speaker 6: seasonally their strongest quarter. Just from kind of seeing all
Speaker 6: the tracking and the trending out there, we think they
Speaker 6: could easily get to about nine million subscriber gains. So
Speaker 6: that actually if you kind of then look at the
Speaker 6: whole year twenty twenty three for them, they're really back
Speaker 6: to pre pandemic levels. You know, we think they would
Speaker 6: have about twenty five million new subscriber gains in twenty
Speaker 6: twenty three. You compare that to about eight to nine
Speaker 6: million in twenty twenty two, and so it really looks
Speaker 6: like these two initiatives are paying off for them and
Speaker 6: paying off in a very big way.
Speaker 1: And where are these subscribers? How many in the US,
Speaker 1: how many outside the US.
Speaker 6: Yeah, so that's that's a really good question. So obviously
Speaker 6: in the US we think growth had kind of hit
Speaker 6: a wall. I mean, obviously the market was pretty mature,
Speaker 6: but the main problem in the US was one is,
Speaker 6: of course they did not they were not addressing kind
Speaker 6: of the affordability option, which is something that has been
Speaker 6: brought back into focus with the APT year. Of course,
Speaker 6: you had roughly about thirty million free loaders in the
Speaker 6: US market. So, you know, again we think that growth
Speaker 6: is back in the US, but majority of the growth,
Speaker 6: a majority of the subscriber growth is really coming from
Speaker 6: the international market. So if you kind of look at it,
Speaker 6: about eighty to ninety percent of new subscriber growth is
Speaker 6: coming from those overseas markets.
Speaker 1: And are there some countries they still haven't penetrated yet
Speaker 1: where there's a massive amount of potential customers.
Speaker 6: Oh, absolutely, So if you kind of look at the
Speaker 6: Asian region, I mean, this is a region which has massive, massive,
Speaker 6: untapped potential. If you look at Netflix's penetration in the
Speaker 6: Asian market, and this is excluding China, it is roughly
Speaker 6: about nineteen to twenty percent, So they are present right
Speaker 6: now in about twenty percent of all households with a
Speaker 6: broadband connection. In the US that number is close to
Speaker 6: about seventy to eighty percent, So obviously there's huge upside
Speaker 6: for them the Asian market. And then again if you
Speaker 6: kind of look at Europe as well, in a lot
Speaker 6: of the Eastern European country, we see that penetration is
Speaker 6: fairly low, so totally you know, if you look at
Speaker 6: the European region, it's at about thirty thirty five percent. Again,
Speaker 6: we see a lot more penetration upside in Europe as well.
Speaker 1: To that point, when I go to Netflix, I see
Speaker 1: a lot of content coming from India produced in India,
Speaker 1: I see Australia, Europe, so obviously they have they have
Speaker 1: a global outlook. Is this original content a hit?
Speaker 5: You know?
Speaker 1: Is something coming from India coming from Asia, coming from
Speaker 1: Europe in the US and vice versa.
Speaker 6: Yes, it has worked actually really really well for them.
Speaker 6: So one thing is when you have kind of this
Speaker 6: global content production machine, one thing is, of course you're
Speaker 6: able to, you know, appeal to a very vast audience space.
Speaker 6: It does content, you know, believe it or not, local content,
Speaker 6: as long as it's made well and as long as
Speaker 6: it's authentic and has that authentic and genuine feel, it
Speaker 6: travels really well globally. They actually Netflix actually just released
Speaker 6: something called, you know, the Watch Report, And if you
Speaker 6: just kind of take a look at the top one
Speaker 6: hundred titles, thirty of those top one hundred titles are
Speaker 6: actually Korean and Spanish language originals, and these are titles
Speaker 6: that are watched across the world. So that that just
Speaker 6: goes to tell you how well some of these local
Speaker 6: language content titles are performing.
Speaker 1: Our thanks to Geet the raganathin US media analyst with
Speaker 1: Bloomberg Intelligence Now, it's also a busy week on the
Speaker 1: economic calendar. Bloomberg International Economics and Policy correspondent Michael McKee
Speaker 1: joins US Now, and Michael, let's start first with jobs,
Speaker 1: because last week, initial jobless claims fell to the lowest
Speaker 1: level in over a year, down to one hundred and
Speaker 1: eighty seven thousand. What is behind that and as we
Speaker 1: head toward the end of this month, how is January
Speaker 1: shaping up?
Speaker 7: I think what you have to do is ask the
Speaker 7: question about what essentially the direction of jobless claims is
Speaker 7: telling you, because this is still the time of year
Speaker 7: when we see distortions in the jobless claims numbers because
Speaker 7: of hiring in four of the last five years. If
Speaker 7: you leave out the pandemic years when jobless claims were
Speaker 7: sky high, they went down in that week. And it
Speaker 7: may be residual seasonality because of the times when we
Speaker 7: used to hire a lot of people at holidays and
Speaker 7: then let them go in the middle of January. That
Speaker 7: happens a lot less these days, So there may be
Speaker 7: some quirks to this number. That said, when you talk
Speaker 7: about what the direction of it is, it still suggests
Speaker 7: that there's a strong labor market out there. Companies are
Speaker 7: still holding on to employees. And the interesting thing is
Speaker 7: for January jobs that you're asking about, this was the
Speaker 7: survey week for January jobs. The jobless claims numbers for
Speaker 7: this week, so they still suggest we will see reasonable
Speaker 7: strength in hiring in the month of January.
Speaker 1: Strength in jobs, and we know what that means for inflation.
Speaker 1: This coming week we get the Fed's preferred read on
Speaker 1: inflation for last month. What do you know about that?
Speaker 1: What can you tell us?
Speaker 7: The interesting thing there is that people were worried because
Speaker 7: the consumer price Index went up a little bit, and
Speaker 7: that caused people to rethink what the FED might do.
Speaker 7: But the FED does look at the Personal Consumption Index
Speaker 7: and it is expected to show much more of a
Speaker 7: decline than CPI, particularly the core, where there's forecast the
Speaker 7: economist survey by Bloomberg forecast that we could get down
Speaker 7: to less than three percent. The headline is already at
Speaker 7: two point six percent, and if we get down to
Speaker 7: two point nine percent of something like that on the core,
Speaker 7: that would be strong evidence to the Fed that they
Speaker 7: are moving in the right direction. They want to get
Speaker 7: to two, of course, but they have always said we
Speaker 7: need to see inflation moving towards our target before we
Speaker 7: even think about cutting rates. So maybe I'll give them
Speaker 7: a chance to think about cutting rates. We see inflation
Speaker 7: fall like.
Speaker 1: That, and despite stubbornly high inflation, we saw retail sales
Speaker 1: in December, surprise to the upside.
Speaker 7: Yeah, well, the inflation has been going away in a
Speaker 7: lot of the areas that retail sales represent. Goods prices
Speaker 7: have been deflating, and so that helped, I'm sure a
Speaker 7: lot with the holiday shopping experience. Not only did people
Speaker 7: find that things might have been cheaper than they anticipated,
Speaker 7: but the companies were able to lower prices to attract
Speaker 7: customers in without a big penalty. The other aspect of
Speaker 7: the retail number that was good as it has been
Speaker 7: Philastphy months since the decline in gasoline prices. Gasoline prices
Speaker 7: have gone down a lot. Retail sales are measured in dollars,
Speaker 7: so that puts a little bit of weight on the
Speaker 7: overall number, but it means there's more money available to
Speaker 7: go into other categories. And we saw a lot of
Speaker 7: strength in retail sales.
Speaker 1: Strength, retail sales strength and jobs. We got to bump
Speaker 1: up in manufacturing after the UAW strikes ended. All this
Speaker 1: leading to the first read, the initial read on fourth
Speaker 1: quarter GDP and what's your outlook on that it's changing.
Speaker 7: The third quarter was so strong that pretty much there
Speaker 7: was unanimity that the fourth quarter was going to be
Speaker 7: relatively weak, and a lot of people, including a number
Speaker 7: of people at the FED, thought we'd come in to
Speaker 7: the fourth quarter with growth between one and one and
Speaker 7: a half percent, perhaps, and last week's numbers suggest that
Speaker 7: there's more strength in the economy. The Atlanta Fed's GDP
Speaker 7: now number went from one and a half percent to
Speaker 7: two point four percent after those retail sales numbers. So
Speaker 7: if the Atlanta Fed is reasonably accurate, and they get
Speaker 7: more accurate the closer we get to the release of GDP,
Speaker 7: then the fourth quarter is going to look fairly strong,
Speaker 7: and that would set us up for a stronger first quarter,
Speaker 7: and that is upending some of the thinking about how
Speaker 7: the economy is going to develop in the first part
Speaker 7: of the year, and that is maybe pushing back against
Speaker 7: the idea that the FED would be cutting soon.
Speaker 1: And if it's strong in the fourth quarter, what looking
Speaker 1: back to twenty twenty three, what would the whole year
Speaker 1: look like.
Speaker 7: Well, we're looking about three to three and a half
Speaker 7: percent somewhere in that area for the whole year, which
Speaker 7: would be very strong, and it would be it would
Speaker 7: be good good news for the overall economy, good news
Speaker 7: for the FED, suggesting that they were able to raise
Speaker 7: rates as high as they did and not send the
Speaker 7: economy into recession, which may give them hope that they
Speaker 7: can keep rates high enough for long enough to bring
Speaker 7: down inflation to two percent without a recession.
Speaker 1: Well our thanks to Bloomberg International Economics and Policy correspondent
Speaker 1: Michael McKee, and coming up on Bloomberg Daybreak weekend, we
Speaker 1: head overseas and preview a key interest rate meeting from
Speaker 1: the European Central Bank. I'm Tom Busby, and this is Bloomberg.
Speaker 1: This is Bloomberg day Break weekend, our global look ahead
Speaker 1: at the top stories for investors in the coming week.
Speaker 1: I'm Tom Busby in New York. Up later in our
Speaker 1: program a preview of the Bank of Japan's latest policy meeting.
Speaker 1: But before that, the first European Central Bank meeting of
Speaker 1: the year happening in the coming days. Markets will be
Speaker 1: listening closely to President Christine Legard for clues about when
Speaker 1: to expect interest rate cuts, but recent geopolitical uncertainty is
Speaker 1: set to further complicate decision making for more. Let's go
Speaker 1: to London and bring in Bloomberg Daybreak eurobanker Stephen Carroll.
Speaker 3: Tom Inflation in the euro Area ticked up to two
Speaker 3: point nine percent in December, but it's a far cry
Speaker 3: from the nine point two percent reading at the end
Speaker 3: of twenty twenty two. So the focus on this week's
Speaker 3: European Center Bank meeting well yet again beyond when interest
Speaker 3: rate cuts might come. It comes at a time when
Speaker 3: the worlds of monetary policy and geopolitics seem more in
Speaker 3: linked than ever. In recent days, Christine Legard described the
Speaker 3: prospect of another Donald Trump presidency in the US as
Speaker 3: a threat to European interests. It's a topic that came
Speaker 3: up again when the ECB presidents spoke to Bloomberg's Francine
Speaker 3: Laqua and Davos. They also talked about the path they
Speaker 3: had for interest rates. Here's what she had to say.
Speaker 8: We have to stay restrictive for as long as necessary
Speaker 8: to make sure that we get to that state where
Speaker 8: we are all saying, okay, confident that it is at
Speaker 8: two percent medium term. I know some people argue that
Speaker 8: maybe we are overshooting, maybe we're taking risks. I think
Speaker 8: the risk would be worse if we went too fast
Speaker 8: and had to come back to more tightening, because we
Speaker 8: would have wasted all the efforts that everybody has put
Speaker 8: in the last fifteen months.
Speaker 9: But this would be again economically or also the trust
Speaker 9: in central banks. If you get this wrong, does it
Speaker 9: hurt the credibility.
Speaker 10: Credibility matters.
Speaker 8: Let's face it, when we say we will get to
Speaker 8: two percent medium term and this will happen in the
Speaker 8: medium term as we define it.
Speaker 10: If people believe in that, then.
Speaker 8: They should because we will do it.
Speaker 10: It matters.
Speaker 8: It is a component in the sort of chemistry that
Speaker 8: determines inflation going forward.
Speaker 9: And again, so the time is quite fluid, but there
Speaker 9: seems to be a majority on the Governing Council that
Speaker 9: expected probably by the summer, if not in the summer.
Speaker 8: You know, and you've talked to some of them, they
Speaker 8: have spoken recently, and each of them has their view,
Speaker 8: which I respect completely. We generally coalesce towards the decisions
Speaker 8: that we make on the basis of data. Some of
Speaker 8: them have their local domestic data, They have their respective
Speaker 8: inflation rates which are different from one country to the
Speaker 8: other in the Euro Area, where if you look at Portugal,
Speaker 8: if you look at Germany, it's going to be different, obviously,
Speaker 8: but it's and it's their job to say, well, it's
Speaker 8: likely that I would say it's likely too, but I
Speaker 8: have to be reserved because we are also saying that
Speaker 8: we are data dependent and that there is still a
Speaker 8: level of a certainty and some indicators that are not
Speaker 8: anchored at the level where we would like.
Speaker 10: To see them.
Speaker 8: And don't forget that services, for instance, is still cruising
Speaker 8: at four percent inflation. Services is the most sort of
Speaker 8: labor intensive sector of the economy, and it's one that
Speaker 8: we have to bring down towards two percent. The US election, Yeah,
Speaker 8: let me have some coffee.
Speaker 10: How arid are you about the US election.
Speaker 8: It's for the American people to decide what they want
Speaker 8: with their politics, with their government, with their future.
Speaker 10: But obviously we are.
Speaker 8: All concerned about it because the United States is the
Speaker 8: largest economy, the largest defense country in the world, and
Speaker 8: has been a beacon of democracy with all its upside
Speaker 8: and downside. But this is what they should be considering,
Speaker 8: and of course we cannot interfere with their choice. It's
Speaker 8: their choice and that's the beauty of democracy. But we
Speaker 8: have to be extremely attentive and anticipate, just as we
Speaker 8: do with inflation.
Speaker 10: You know, we do scenarios. What if, what if? Then?
Speaker 10: What do we do. So.
Speaker 3: That was the ECB president Christine Lagard, speaking to Bloomberg's
Speaker 3: Francine Laqua in Davos. Well, as we look ahead to
Speaker 3: this week's Governing Council meeting, let's bring in our ECB
Speaker 3: reporter Yanaranda, who's in Frankfurt, Yana. Great to have you
Speaker 3: with us. Can we start with the inflation backdrop, if
Speaker 3: we bring things right back down to the mechanics of
Speaker 3: all of this. The number for December did tick up
Speaker 3: slightly for the Eurozone, but does that really change the
Speaker 3: overall picture that's facing policymakers when they get together.
Speaker 11: It doesn't really. The pickup was really widely expected. It
Speaker 11: comes down to a large extent to energy aid and
Speaker 11: how that you know, plays out in the statistics in Germany.
Speaker 11: So the pickup in December itself, it doesn't change the
Speaker 11: inflation outlook one bit. What's true is that price pressures
Speaker 11: in the Eurozone have come down, and also have come
Speaker 11: down a bit faster than most people had expected. So
Speaker 11: the latest projections the ECB put out in December, they
Speaker 11: see headline inflation back at two percent in the third
Speaker 11: quarter of next year, that is, in the third quarter
Speaker 11: of twenty twenty five core a bit later than that,
Speaker 11: but of course that is far far far ahead in
Speaker 11: the future if you're a central banker. And that's also
Speaker 11: one reason why policymakers say they cannot declare victory over
Speaker 11: inflation just yet. And of course the UK is a
Speaker 11: good example that there can be set backs, that there
Speaker 11: can be yeah, that things can go wrong, and of
Speaker 11: course the risks are plentiful.
Speaker 3: Yeah, true, and the risks those inflation trajectory very much
Speaker 3: in focus. We heard a little bit of what Christine
Speaker 3: Leguard had to say about that in Davos as well.
Speaker 3: She's pointing to likely interest rate cuts by the summer. Now,
Speaker 3: we heard from a lot of ECB policy makers in
Speaker 3: the past few days in Davos as well. What else
Speaker 3: have we been hearing in terms of this when question
Speaker 3: when interest rate cuts might come, Well.
Speaker 11: They seem to coalesce around a red cut in the summer,
Speaker 11: but they haven't committed to a specific month month. Also,
Speaker 11: you know, you wouldn't really expect them to at this
Speaker 11: point in time. What we heard was already a bit
Speaker 11: more outspoken than I would have expected them to be,
Speaker 11: to be perfectly honest, simply because the ECB always insists
Speaker 11: it's not in the business of offering forward guidance, and
Speaker 11: they have an explanation which you know, I cannot repeat
Speaker 11: because you know it escapes me all the time, why
Speaker 11: what they're doing is not forward guidance. But that said,
Speaker 11: you know, June is, given everything we heard, a pretty
Speaker 11: good month to focus on, just because it is the
Speaker 11: start of summer, but also because the ECB will have
Speaker 11: updated economic projections available at that time that that will
Speaker 11: just simply show how inflation and economic growth will develop.
Speaker 3: Yeah, I think that the June and July meeting is
Speaker 3: very much in focus because of course there's that big
Speaker 3: break between the meeting at the end of July and
Speaker 3: the next one in mid September. That's been a part
Speaker 3: of the thought process, and people have been thinking about
Speaker 3: what defines the exact dates of summer as well, which
Speaker 3: is the key to this conversation too. There does seem
Speaker 3: to be that sort of discrepancy between some of the
Speaker 3: speakers that we've heard from in the past few days,
Speaker 3: Jokim Nagel talking about him being open to rate cuts
Speaker 3: this summer, but Robert Holtzman saying that they may not
Speaker 3: even be coming this year at all. When we think
Speaker 3: about the conversations and the perhaps arguments that happen within
Speaker 3: that governing council room as well, what sort of split
Speaker 3: and opinions are there at the moment among policymakers.
Speaker 11: Yeah, I mean, for the most part, people seem to
Speaker 11: say summer is a good moment when we should really
Speaker 11: have that discussion and when we should really have that debate,
Speaker 11: because don't forget that everybody who spoke so far in
Speaker 11: the past couple of days essentially said it's too soon
Speaker 11: to have that discussion now. But there were a few outliers,
Speaker 11: You're right. One that stood out was Robert Holtzmann from
Speaker 11: Austria who basically said, don't count on raid cuts at
Speaker 11: all this year because we don't know what wages will
Speaker 11: be doing, we don't know what geopolitics will be doing.
Speaker 11: So he's concerned about energy prices, about supply chain disruptions
Speaker 11: once again because of conflicts in the Middle East, and
Speaker 11: you know, attacks on chips in the Red Sea, and
Speaker 11: of course that you know, those concerns happen or you know,
Speaker 11: you find them with every policy maker, of course, but
Speaker 11: by the way you weigh them that differs.
Speaker 3: And yeah, It's that sort of detail that we love
Speaker 3: to get from you ahead of these sorts of events.
Speaker 3: Our ECB reporter Jana Randau, thank you very much. I'm
Speaker 3: Stephen Caroll in London. You can catch us every weekday
Speaker 3: morning here for Bloomberg Daybreak. You're beginning at six am
Speaker 3: in London and one am on Wall Street.
Speaker 1: Tom our thanks to Bloomberg day Break Europe. Banker Stephen Carroll,
Speaker 1: and coming up on Bloomberg day Break weekend, we head
Speaker 1: to Asia and preview another policy meeting, this one from
Speaker 1: the Bank of Japan' Tom Busby, And this is Bloomberg.
Speaker 1: I'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week. Now,
Speaker 1: sometime in the next few months, Japan Central Bank is
Speaker 1: expected to end the world's last negative interest rate for markets.
Speaker 1: The question is whether the BOJ might hint at the
Speaker 1: timing of that. On Tuesday, when officials wrap up a
Speaker 1: two day policy meeting, Bloomberg's Doug Krisner, co host of
Speaker 1: Daybreak Asia, takes a closer look Tom.
Speaker 2: The BOJ has kept short term interest rates anchored near
Speaker 2: zero for the past three decades, but now after thirty
Speaker 2: plus years of humdrum predictability, things may be about to change.
Speaker 2: The Japanese bond market, the world's third largest, is sensing
Speaker 2: a shift in policy. We've got the benchmark nie K
Speaker 2: two twenty five stock index trading right around a thirty
Speaker 2: four year high, and brokerages across Tokyo are staffing up,
Speaker 2: often seeking out older traders who remember when Japan had
Speaker 2: positive interest rates. The question have markets become overly optimistic
Speaker 2: about imminent tightening? We're joined now by Bloomberg's Paul Jackson,
Speaker 2: our economy editor in Tokyo. Paul, thanks for being with us.
Speaker 2: So let me ask you that question. Our market's too
Speaker 2: optimistic about an immediate turn from the boj Well.
Speaker 12: I think markets are right to be presuming that a
Speaker 12: rate hike is in the pipeline early this year. It's
Speaker 12: the timing that's the critical question. I think at next
Speaker 12: week's meeting it's going to be too early to go.
Speaker 5: Yet.
Speaker 12: We've had a bad start to the year. Outside the markets.
Speaker 12: We had this major earthquake in northwestern Japan, over two
Speaker 12: hundred people dead and still thousands in evacuation centers, followed
Speaker 12: by the plane disaster at Hanada Airport, So I think
Speaker 12: under these circumstances, BOJ would not be wanting to raise
Speaker 12: interest rates in a way that's going to affect a
Speaker 12: why much wider range of people than kind of tweaks
Speaker 12: to its yield curve control or something that affects fewer people.
Speaker 12: So really, I think from this meeting, what we're looking
Speaker 12: for is signals from Governor Uwaida about when he's going
Speaker 12: to pull the trigger.
Speaker 2: So we know that Japanese economy has been dealing with
Speaker 2: inflation for about a year and a half that's been
Speaker 2: above the boj's two percent target. I'm wondering whether we
Speaker 2: need to distinguish between the effects of cost push inflation
Speaker 2: versus demand Paul, is that an important distinction for the BOJ.
Speaker 12: I think that's a very important distinction for the BOJ,
Speaker 12: and I think you've hit the nail on the head.
Speaker 12: That is what they're waiting for. They're waiting for the
Speaker 12: cost push elements of inflation to cool down, and they
Speaker 12: want to see evidence that there is a demand pull inflation,
Speaker 12: something that will make this inflation last. Remember, Japan's been
Speaker 12: looking for good inflation for decades now, and what it's
Speaker 12: keying in on is a positive growth cycle that sees
Speaker 12: wages helping to drive prices, because if wages are going
Speaker 12: up as well as prices, then consumption can also increase.
Speaker 12: If wages aren't going up and you've got inflation, then
Speaker 12: you've got bad inflation and you've got a problem for
Speaker 12: the economy.
Speaker 2: Well, I'm glad you touched on wages there, because I
Speaker 2: think the BOJ would be a little encouraged by what
Speaker 2: appears to be a stronger annual wage negotiation result. Do
Speaker 2: you think that's a market positive if you're making the
Speaker 2: bet that the pivot is sometime maybe if it's not
Speaker 2: this month, it's in the month of April, and it's
Speaker 2: due largely because we're seeing movement in terms of wage increases.
Speaker 12: Yeah, I think we've got some good anecdotal evidence of
Speaker 12: wage increases. We've got Eon with a seven percent gain
Speaker 12: for part timers, Namura offering sixteen percent for younger employees,
Speaker 12: a Tokyo Electron a forty percent for starters at the company.
Speaker 12: These are big figures, but these are also big companies.
Speaker 12: What the BOJ wants to see is there a wider
Speaker 12: range of companies pushing up wages too, especially smaller companies. Now,
Speaker 12: there's an annual spring negotiation between companies and unions and
Speaker 12: this is known as the Shunto, and the result is
Speaker 12: due on March fifteenth. The initial result of these annual
Speaker 12: wage negotiations, and some former BOJ executives are expecting the
Speaker 12: figure to be as high as four percent this year
Speaker 12: compared with three point five eight percent last year. And
Speaker 12: if we have that kind of figure that I think
Speaker 12: the BOJ is going to be in a position to move.
Speaker 12: So then the question is would they move in March
Speaker 12: or in a April. I think the result comes out
Speaker 12: just a couple of days before the March meeting, so
Speaker 12: it's maybe a little bit tight on the time. I
Speaker 12: think the Bank of Japan will want to assess the
Speaker 12: information and any updates showing gains for smaller companies and
Speaker 12: make the decision in April, which is the start of
Speaker 12: a new financial year. They'll also have new price forecasts.
Speaker 12: The timing looks good for them.
Speaker 2: So I'm wondering what the first step would be other
Speaker 2: than preparing the market rhetorically and giving ample warning of
Speaker 2: a move. I'm wondering whether or not it's yield curve
Speaker 2: control again and a modest adjustment and leaving the negative
Speaker 2: rate intact for a while longer, or maybe as early
Speaker 2: as April. We're dealing with the removal of the negative rate.
Speaker 2: Which do you think it is well.
Speaker 12: I think this is another key question. I think there's
Speaker 12: a lot of thought. They're trying to do everything at
Speaker 12: the same time. I think this meeting in January, what
Speaker 12: we're looking for is kind of verbal signaling from the
Speaker 12: governor that we're getting closer to the target, not a
Speaker 12: little bit closer, but closer to the target. I think
Speaker 12: that would be a key steer. When we get to April,
Speaker 12: would they get rid of all these yield curve control
Speaker 12: this yield curve control formulation. Then there's a good chance
Speaker 12: of that, But I think the main focus really is
Speaker 12: on the negative rate, and I think that's likely to
Speaker 12: go zero in April. And there is an argument that
Speaker 12: the boj might want to wait to see those wage
Speaker 12: increases feed in to an optick into inflation and then
Speaker 12: make the decision in July. But don't forget, we've got
Speaker 12: the FED, the ECB, you know, considering possible rate cuts.
Speaker 12: I think the effect on markets would be larger if
Speaker 12: they wait until then. So again it's another sign that
Speaker 12: April maybe is the month.
Speaker 2: Well, I'm glad you brought up that point, because one
Speaker 2: of the things I think markets have been struggling with
Speaker 2: globally right now is perhaps the idea that maybe they
Speaker 2: were a little too optimistic that the FED was going
Speaker 2: to be aggressive in cutting rates. So we've had the
Speaker 2: market kind of dialing back a bit from that notion,
Speaker 2: and as a result, it's engendered a little bit of
Speaker 2: strength here for the dollar. In the flip side of
Speaker 2: that has created a tremendous weakness in the Japanese How
Speaker 2: do you think that yen weakness will impact the boj's thinking.
Speaker 12: Well, I think it needs to get a little bit weaker. Yet,
Speaker 12: if you remember, in the latter part of last year,
Speaker 12: we're getting very close to levels over one fifty to
Speaker 12: close to one five to two, and I think that's
Speaker 12: the kind of level we need to get to again
Speaker 12: before the BOJ starts worrying about the yen levels. So
Speaker 12: I think at the moment that isn't going to be
Speaker 12: a key consideration, but if it continues in that direction,
Speaker 12: sure that will become part of the calculus.
Speaker 2: So you're in Tokyo I'm curious. We had the Tokyo
Speaker 2: CPI reading a little while back. What is life like
Speaker 2: in Tokyo right now? As consumers kind of moved through
Speaker 2: the economy, are they concerned about inflation? Is it registering
Speaker 2: high in people's minds?
Speaker 12: Yes, it certainly is. I mean it's a novel concept
Speaker 12: for many people who've never seen price rises like this before.
Speaker 12: There's a lot of confusion about it, bewilderment, surprise, and
Speaker 12: so I think in terms of the expectations of Hey,
Speaker 12: I want my job. I don't want to be risking
Speaker 12: a job, so I don't mind having not much of
Speaker 12: a pay raise too. No, no, no, I want my
Speaker 12: job and I want a decent pay raise this year.
Speaker 2: We'll have to see what happens this week when the
Speaker 2: BOJ conducts its meeting. Paul, thanks so much for being
Speaker 2: with us, Paul Jackson, Bloomberg Economy editor in Tokyo, helping
Speaker 2: us preview the BOJ meeting. I'm Doug Krisner. You can
Speaker 2: join Brian Curtison myself weekdays here for Bloomberg Day Acasia,
Speaker 2: beginning at nine am in Hong Kong eight pm on
Speaker 2: Wall Street. Tom.
Speaker 1: Thank you, Doug and coming up here on Bloomberg day
Speaker 1: Break weekend. The Iowa caucuses are over. Now it's on
Speaker 1: to New Hampshire for the Republican presidential hopefuls. Who's in
Speaker 1: the lead will the granted states independent voters change the
Speaker 1: trajectory of the race. I'm Tom Busby, and this is Bloomberg.
Speaker 1: This is Bloomberg day Break Weekend, our global look ahead
Speaker 1: at the top stories for investors in the coming week.
Speaker 1: I'm Tom Busby in New York. The New Hampshire GOP primary,
Speaker 1: the first in the nation, is this Tuesday, and it
Speaker 1: could be a make or break contest for Nicky Haley
Speaker 1: or Ron DeSantis.
Speaker 7: For more.
Speaker 1: Let's head to our Bloomberg ninety nine one news room
Speaker 1: in Washington and Bloomberg Balance of Power co host Kaylee Lines.
Speaker 4: That's right, Tom, Iowa brought us the first real contest
Speaker 4: in the race for the twenty twenty four Republican presidential
Speaker 4: nomination and to blow out victory for former President Donald Trump.
Speaker 4: But that was a caucus. New Hampshire brings us the
Speaker 4: first in the nation primary, and it also maybe could
Speaker 4: bring former UN Ambassador Nicki Haley's last real chance to
Speaker 4: eat into the front runner's domination. Bloomberg senior national politics
Speaker 4: reporter Nancy Cooke will be making the trip up to
Speaker 4: Manchester with me to cover it, and she's joining me now,
Speaker 4: So Nancy first, Nicki Haley is framing this as essentially
Speaker 4: a two person race between her and Trump. There's a
Speaker 4: lot of buzz out there about her ability to potentially
Speaker 4: upset Trump in the state of New Hampshire, but the
Speaker 4: polling we have seen over this past week suggests she's
Speaker 4: still lagging behind him by a not insignificant margin. So
Speaker 4: how hard is this really going to be for her
Speaker 4: to pull off?
Speaker 13: It's going to be hard to pull off, honestly. I
Speaker 13: mean the polling is a little bit all over the place,
Speaker 13: So the margin between them is anywhere from seven percentage
Speaker 13: points to like sixteen percentage points, depend on which recent
Speaker 13: poll you look at. But the takeaway is she's still
Speaker 13: behind in all of these polls and Trump is leading her.
Speaker 13: The New Hampshire electorate does favor her because you know,
Speaker 13: it's moderates, it's centrist Republicans, it's independents and Democrats who
Speaker 13: can switch party affiliation to vote. They would have already
Speaker 13: had to have done that in the primary, and that's
Speaker 13: a group that she has really targeted with her candidacy.
Speaker 13: But similar to Iowa, Trump's grip on GOP, the Republicans
Speaker 13: in New Hampshire is still really really strong and Haley
Speaker 13: just hasn't sort of been able to chip into that.
Speaker 13: So what she's doing is she's bringing new voters into
Speaker 13: the Republican primary, like the Independence and the Democrats, but
Speaker 13: she's having a hard time sort of making inroads into
Speaker 13: his base of support. And that's what she will need
Speaker 13: to do to actually win.
Speaker 4: If she doesn't win in New Hampshire, could Trump essentially
Speaker 4: have the nomination in the bag by Wednesday morning, Well,
Speaker 4: I mean.
Speaker 13: That's really what they're hoping, you know. So they are
Speaker 13: hoping to have, you know, they had a blowout victory
Speaker 13: in Iowa, They're hoping to have a blowout victory in
Speaker 13: New Hampshire. He pulling shows that he is completely dominant
Speaker 13: in South Carolina, her home state where she was governor,
Speaker 13: and so they just want to sort of kick off
Speaker 13: these first four contests including Nevada, and just showed that
Speaker 13: they're totally dominant and basically have the nomination wrapped up
Speaker 13: by mid March after Super Tuesday, and that would mean
Speaker 13: sort of him earning enough delegates along the way from
Speaker 13: all these garist contests to win it.
Speaker 4: Ron DeSantis technically is still in the race as well,
Speaker 4: after he came in number two in Iowa, but it
Speaker 4: seems like he's kind of writing off New Hampshire since
Speaker 4: he's pulling so low. They're diverting resources to South Carolina.
Speaker 4: Are we even really going to be talking about him
Speaker 4: in the Kranit state?
Speaker 13: Well, so he is having events. One of the super
Speaker 13: PACs supporting his candidacy called Never Back Down, is having
Speaker 13: events in New Hampshire. I think they're having some today,
Speaker 13: they're having some over the weekend. But New Hampshire is
Speaker 13: not really Ronda Santa's fistine, and it hasn't been for months.
Speaker 13: You know, he's never really advertise there. He doesn't have
Speaker 13: a big contingent there. You know, after he won the
Speaker 13: i after he came in third or second excuse me,
Speaker 13: in the Iowa caucuses, he went directly to South Carolina.
Speaker 13: You know, it's just not an electorate that really goes
Speaker 13: with his ideology. You have to remember in Florida he
Speaker 13: signed a six peek abortion van and that's not something
Speaker 13: that New Hampshire voters the majority of them like or
Speaker 13: are interested in and so policy wise, he doesn't really
Speaker 13: match up there. And one of the most recent polls
Speaker 13: I saw had him pulling at like six percent with it,
Speaker 13: whereas Trump is over fifty. So you can just tell,
Speaker 13: I mean, he just doesn't have a lot of juice there.
Speaker 4: Well, I certainly am looking forward to hopefully not having
Speaker 4: to break out my heated gloves like I did in Iowa.
Speaker 4: Nancy Gug Bloomberg Senior national politics reporter, thank you so much,
Speaker 4: and Tom, keep your eye on the Granite State.
Speaker 1: Thank you.
Speaker 2: Kaylee.
Speaker 1: That was Bloomberg Balance of Power co host Kaylee Lines
Speaker 1: reporting from our Bloomberg ninety nine to one newsroom in Washington.
Speaker 1: And you can hear Balance of Power weaked noon to
Speaker 1: two pm on Bloomberg Radio. And that does it for
Speaker 1: this edition of Bloomberg Day Break Weekend. Join us again
Speaker 1: Monday morning at five am Wall Street Time for the
Speaker 1: latest on the markets, overseas and the news you need
Speaker 1: to start your day. I'm Tom Busby. Stay with us.
Speaker 1: Top stories and global business headlines are coming up right now.