September 12, 2025 • 38 mins
Bloomberg Daybreak Weekend with Host Tom Busby take a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to the next Fed decision and earnings from FedEx.
- In the UK – a look ahead to President Trump’s visit to the UK.
- In Asia – a look ahead to the next monetary policy decision from the Bank of Japan and what’s next after its ruling Liberal Democratic Party Shigeru Ishiba resigned.
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world. Straight ahead on the program,
and look ahead to this week's long awaited interest rate
decision from the Federal Reserve. I'm Tom Busby in New York.
Speaker 3 (00:24):
I'm Caroline Hetker in London, where we're looking ahead to
President Trump's second state visit to the UK.
Speaker 4 (00:30):
I'm Dot Krisner with a preview of next week's rate
decision from the Bank of Japan.
Speaker 1 (00:36):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three Yeero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, Syria,
XM one twenty one, and around the world on Bloomberg Radio,
dot Com and the Bloomberg Business App.
Speaker 2 (01:00):
Good day to you. I'm Tom Busby, and we begin
today's program with a decision on rates from the Federal
Reserve this Wednesday. All signs point to a twenty five
basis point rate cut, But could the central bankers go
even bigger? And how does the FED sea inflation, the
labor market and other fundamentals of the US economy. For more,
we're joined by Michael McKee, Bloomberg International Economics and Policy correspondent. Well, Michael,
(01:24):
thank you so much for being here. Let's just start
with what you expect the FED to decide this week,
how you think sentiment will be split among the voting
members of the FOMC, and what does the FED sea
as far as inflation they're dual mandates of inflation and
the labor market.
Speaker 5 (01:40):
Well, a lot of interesting questions there, which is something
that I hadn't been able to say going into a
lot of FED meetings in recent months. The Fed is
probably going to do it's twenty five basis point cut.
The data that have come in suggests that the economy
is weakening on the labor mandate side, still an issue
on the the inflation side, which will keep them from
(02:02):
doing fifty basis points. But the question is what do
they do after the September seventeenth meeting, And that's where
we may see some market moving or things that will
cause the markets not to move if you get what
I mean in the sense that if the markets are
expecting something there's a potential for surprise, and that is
(02:26):
what do they think the path is going forward? Is
the inflation that we got this past week enough to
warn them off of saying anything specific about October and
December those FED meetings? And what does the dot plot
say about next year and the path of rates going forward?
Do they lower the terminal rate? Do they say that
(02:49):
rates are going to go even lower than the markets
had anticipated, which they have said is about three percent.
So there are a lot of open questions out there
that people are going to be asking, and the idea
of what they think about inflation is going to be
a good question for J.
Speaker 1 (03:06):
Powell.
Speaker 2 (03:06):
Well, let's talk about inflation, because this last week we
got a couple of reads. We got producer price index
which actually surprised to the upside a little bit, not
much down one tenth of a percent. Consumer prices though
a little bit hotter than forecast, higher costs for housing
and of course food, not good news for this president
who insists the food prices have been plummeting on his watch.
(03:27):
What were your big takeaways from that, CPI read in August.
Speaker 5 (03:30):
Well, there is a political component to it, and the
food and gasoline prices were up significantly, and so that's
not going to be a good look for the president.
But what was really interesting is it wasn't so much
the goods prices that went up as the services prices.
The goods prices we expected to rise because we thought
(03:51):
the tariffs would leak into the data, but things like furnishings.
Household furnishings only up a tenth of a percent, toys
were down eight tenths of a percent. But we saw
service prices, particularly for things like airline fares lodging away
from home, those went up significantly. And if service prices
(04:13):
are going up unrelated to tariffs, that's an inflation problem
that the Fed will have to address in a different
way than the way they would think about it in
terms of tariff driven inflation. So they're going to have
to keep a close eye on this, which is why
I think, to answer my own question that I posed
about what do they do for October in December, I
(04:34):
think they kind of punt on giving serious guidance on
that because they'll want to see more data between now
and then.
Speaker 2 (04:41):
Did you see any other good news as far as inflation.
Speaker 5 (04:44):
Yeah, in some areas of service prices. Medical care services
were down a tenth of a percent, recreation services down
two tents. And people thought that those would be areas
that might rise because they had risen in previous months
service price increases. In this case they did not. So
it's not an easy thing to say what is causing
(05:07):
the service price inflation to rise, and that's something the
FED is going to want to investigate.
Speaker 2 (05:13):
Well, let's talk then about the labor market, which every
sign we're seeing it continues to weaken. And just this
past week we got what a near four year high
on jobless claims. What's your read on that and what
is the FED see?
Speaker 5 (05:28):
You need to take it with a little bit of
caution because the last week before this past week when
the jobless claims were tallied was the week with Labor
Day and a holiday. Is always difficult to seasonally adjust
for the Department of Labor because the holidays move around.
So in this case we can look at it with
a sort of a jaundic sty say this is something
(05:48):
to worry about if it continues.
Speaker 2 (05:50):
The Fed's two day policy meeting kicking off this Tuesday,
a decision Wednesday, followed by a Jerome Powell press conference
our thanks to Michael McKee, Bloomberg International Economy and Policy correspondent.
We move next to corporate earnings from the shipping and
logistics giant FedEx, coming out on Thursday after Wall Street's
closing bell, just ahead of the industry's peak holiday shipping season.
(06:11):
How are rising costs, worries about US consumer spending, and
the end of deminimous exemptions on small package shipments into
the US all impacting the company? For more, we're joined
by Lee Clasgow, Bloomberg Intelligence Senior Transport, Logistics and shipping analysts. Lee,
thank you so much for joining us. You know, FedEx
coming off a very solid earnings beat for the springs
(06:33):
fourth quarter, saying it's successfully slashed four billion in costs.
It plans to cut a billion more this fiscal year.
But FedEx and the whole industry now facing a lot
more headwinds. So what are you expecting to see in
this week's earnings results.
Speaker 6 (06:47):
Yeah, it's gonna be tough. They're facing a lot of headwinds.
A lot of those headwinds are related to the kind
of more protectionist stances from the Trump administration. One of
those which actually had bi partisans support back in the
Biden days was getting rid of demnimous exemptions, which really
allows lower value goods to be imported into the United
(07:07):
States without facing any duties or tarifs. And that that
floor was at eight hundred dollars and so what that
did is allowed a lot of e commerce providers outside
the United States to directly shift to consumers. So you know,
if you bought that thing, that that skirt or T
shirt from Sheen or something off of Team U or
(07:28):
even off of the Amazon marketplace, some of that stuff
might have been originated in China and you know it's
going into the United States and kind of avoiding custom
duties because of that loophole. And you know, they got
rid of that loophole for imports that are going into
the United States from China and Hong Kong in May.
(07:49):
They also got rid of that loophole for everyone else
at the end of last month. So you know, we're
really going to start to see the impact. And you know,
FedEx kind of doesn't report on a calendar basis. They
have on physical basis. And you know we heard from
UPS already and they said, you know, for two months
(08:10):
of their quarter that they reported which this will be
included in FedEx earnings, is that you know, their China
to US business was down pretty significantly and we expect
that read through to apply to FedEx as well. And
then you know, FedEx is also dealing with, you know,
a weaker industrial economy. People don't really think of FedEx
(08:31):
as a trucking company, but they're they're actually the largest
less than truckload provider. That's a business that they're looking
to spin off, but they still operate it and it's
really tied to you know, industrial production is m and
the ism has been you know, contraction territory for I
believe thirty one out of the last thirty three months.
(08:51):
So you know that's going to definitely weigh on tonnage.
So you know, volumes are really facing headwinds, whether it's
their parcel international parcel business or their you know, less
than trucklo business and FedEx freight.
Speaker 2 (09:04):
Now these are big changes, right, I mean, we could
really see a significant hit to earnings, maybe not in
this report, but certainly in the next one.
Speaker 6 (09:13):
Yeah, you know, I think all eyes will be on,
you know, any guidance that the company is able to offer.
Companies in my world have been less apt to provide
guidance at least longer, longer term guidance, just because of
the uncertainty tied around the trade policies out of Washington,
which has created a significant amount of volatility and uncertainty.
(09:34):
We'll see kind of where management thinks they're going to be.
My guess is though they probably will provide, if any insight,
maybe into their second quarter. Just again, given that, you know,
everyone's crystal ball is quite foggy and correct right now.
Speaker 2 (09:53):
Yeah, yeah, Well, well let's talk about something you brought
up is the possibility of spinning off FedEx Freight. But
FedEx had a couple of initiatives Drive and Network two
point zero. How have the company cut costs and shed businesses?
How has that impacted the business? And what is there
left besides FedEx Freight to cut?
Speaker 6 (10:14):
Yeah, so, you know, looking at FedEx as a whole,
you know, they're doing a number of initiatives you mentioned
Driver Network two point zero that are trying to take
out costs of the network. Is what they really need
to do, is they really need to restructure their networks
to the new reality. You know, the old reality would
be you know, one hundred envelopes go to a lawyer's office,
(10:35):
and that FedEx driver would pick up another one hundred
envelopes to be delivered. And that kind of density really
helps with margins. And you know, fast forward to today,
we're all buying things from Amazon or wherever, and we
get one package per day, and those deliveries are extremely expensive,
and that's been really weighing on margins. So you know,
we're not going backwards, we're going forwards. Is probably just
(10:58):
going to be more B two C UH traffic relative
to B two B traffic UH. And and so they're
they're making changes in Those changes include increasing automation, UH,
reducing overlaps, and networks they're combining uh, you know, slowly
combining their ground and air networks, something they've been really
(11:18):
you know, they push back for a number of years
about doing and then they're finally now leading into that.
And what I would say is that some of the
benefits that they're generating from these changes were probably not
going to really see them that much, because to really
see them, you need you need good volume growth, You
need that that that that operational leverage that you're going
to get. So I suspect, you know, when things do
(11:41):
turn around. You know. Again, the big question is when
you are going to see that flywheel start operating in
that that operating leverage, generating better margins than they are today.
But the but the problem is is that you know
FedEx and and you know it's competitor ups kind of
a show me stories because they're both undergoing these kind
(12:02):
of restructurings. And we really have to see a how
these companies look coming out of these restructurings and from
an operational standpoint when I'm talking about restructurings. And then
also you know, b what does that new network from
a profitability standpoint look like when volumes are back on
track for growth.
Speaker 2 (12:22):
Hello, a lot to look forward to. FedEx fiscal first
quarter earnings out this Thursday after Wall Street's closing bell
Our thanks to Lee Klascal, Bloomberg Intelligence senior Transport, Logistics
and Chipping analysts and coming up on Bloomberg Day Break weekend,
President Trump heads to the UK. I'm Tom Busby, and
this is Bloomberg. This is Bloomberg Day Break Weekend, our
(12:53):
global look ahead at the top stories for investors in
the coming week. I'm Tom Busby in New York. Up
later in our program and look ahead to a monetary
policy decision from the Bank of Japan. But first, just
a few weeks after President Trump's personal visit to Scotland,
He's headed back to the UK, where he's expected to
mix royal mingling with important geopolitical discussions on a three
(13:15):
day trip. But the visit takes place under the shadow
of the sacking of Peter Mandelssohn as the UK's US
ambassador for previous links to disgrace financier Jeffrey Epstein for more,
Let's go to London and bring in Bloomberg day Break
euro banker Caroline Hepger.
Speaker 3 (13:31):
Tom Britton's ambassador to Washington, Peter Mandelsson, has recently been
removed from his post after further revelations about the extent
of his relationship to the late p Dephar financier Jeffrey Epstein.
That decision comes only days before President Donald Trumps state
visit to Britain, the UK ambassador to Washington usually playing
(13:54):
a key role in those events, and it complicates what
is an already careful, fully choreographed few days. It's an
event that will be important to UK Prime Minister Kirs Starmer,
who has prioritized good relations with Donald Trump since taking
office just over a year ago, stressing the importance of
Britain's defense and security alliance with America and taking care
(14:18):
not to openly criticize Trump's tariff policies. When Stalmer visited
the Oval Office back in February, he brandished the King's
invitation to Trump, which the U S President called an honor,
describing King Charles as a beautiful and wonderful man. Those
overtures appear to be paying off, at least in part.
(14:39):
The UK became the first country to sign a tariff
reduction deal with the US in May, with some of
it already implemented. However, some tensions remain. For example, steel
is an area of issue. UK officials are still working
to secure a deal that would remove the twenty five
percent US tariffs on the sector, as to a drag
(15:00):
on for months after Prime Minister Starmer and President Trump
agreed a broader tariff cutting plan. There are also geopolitical
issues too, with the potential to spark turbulence in the
so called special relationship. The US Ambassador to Israel said
last month that the UK and France have handed victory
to hamas by announcing intentions to recognize a Palestinian state.
(15:26):
The visit also takes place during a testing time at
home for Starmer. He's facing scandal within his own party
and he's battling challenges from the right wing party Reform UK,
who have proven popular in the polls. The group's leader,
Nigel Faragh, recently visited the White House at the invitation
of Donald Trump. Bloomberg's London bureau chief Ruth David explains
(15:50):
why that trip spoke volumes.
Speaker 7 (15:53):
That photograph of him standing with President Trump. I mean
a photo speaks more than all of the real of
coverage right to have that kind of backing and to
have that kind of support globally. We saw Tony Blair
going to the US, We're seeing Nigel Farad and the
question is where is Gastamo? And I know Donald Trump
(16:14):
is coming to the UK later, but it definitely seems
to be like for urges riding on a hype.
Speaker 3 (16:20):
That was Bloomberg's, with David speaking there to Bloomberg's Tom
McKenzie and Guy Johnson. So will the honor of a
royal banquet be enough to curry the favor of President Trump?
Is something I've been discussing with Bloomberg's political correspondent Ellen Milligan. Ellen, just, firstly,
what are we expecting to see President Trump do on
this second state visit that he's paying to the UK.
Speaker 8 (16:43):
Yes, I mean this has never happened before that. Only
other US presidents who have had a state visit were
Barack Obama and George Bush. But no other president has
had two state visits. This one will be a bit
different from the last. First of all, what will be
hosted by King Charles. The last one in twenty nineteen
was obviously hosted by the Late Queen. The other big
(17:06):
change is that it will be primarily hosted at Windsor
Castle because Buckingham Palace is undergoing renovations. So there will
be the usual traditional state banquet, the exchange of gifts
between the King and Queen and the President and the
First Lady. Usually they have some kind of private meeting,
either over lunch or tea when the President first greets them.
(17:31):
Then they'll have this banquet where we're expecting a lot
of famous businessmen and celebrities, as well as the border
royal family to be there, like Prince William, who Trump
has also met before. And then after all that pageantry,
there'll be the political portion where Trump goes to visit
Prime Minister in his countryside estate at Chequers for a
(17:55):
bilateral meeting.
Speaker 3 (17:57):
Huge opportunity then for the UK to be front of
the you know, to show off what they want to offer.
I'm sure in terms of business ties, Kis Starmer will
surely be trying to use this as kind of bargaining power.
What do you think is going to be his main message?
Speaker 8 (18:14):
Yeah, I mean the Prime Minister is effectively using the
King as his chief diplomat and it's already paid off
for the UK. I mean, you'll remember the moment where
Kis Starmer visited the White House in February and brandished
this letter hand signed by the King himself inviting the
President over to the UK again. That I think, in
(18:38):
large part has been why Trump and Starma have managed
to establish a close relationship despite their political differences. And
you know, the UK was the first country to sign
a trade agreement where they avoided the same level severe
tariffs that other allies did. He Trump was also hosted
(18:58):
by the UK in Scotland couple of months ago. That
was a private visit but had very much a political
element where he was mostly promoting his golf courses but
also had a meeting with Starma and with the EU's
Wonder Lion while there as well. So it's already paid
off for Starma. I think he's hoping that other deals
(19:20):
could be struck, potentially on tech, potentially on AI, although
this state visit will will mostly be about the royal
element rather than the political one.
Speaker 3 (19:29):
Absolutely, it seems I think to many observers in the
UK a bit like a Netflix movie Letter to the
King could have been the title. And it was also
seen as quite a savvy move by the British Prime
Minister by some voters because President Trumps still deeply unpopular,
isn't he amongst a lot of voters? And yet there's
also an edge to voters in the UK that they
(19:51):
understand the UK has to try to do well by
obviously its biggest ally in the world in terms of
how we should expect then the negotiations to go. Do
you think that there are going to be specific things
that Starma can perhaps gain from this, maybe on steel,
(20:11):
as you say, which is still got levees from the US.
I mean, Britain managed to get what has been seen
as a better trade deal than a lot of other countries.
Speaker 8 (20:22):
Yes, that was the big element on steel that was
missing from the trade deal that they signed back at
the G seven in Canada in a couple of months ago,
and that still hasn't been resolved. We've now got a
new Business and Trade Secretary in the UK and I
know that the government is pretty desperate to get that sorted.
(20:45):
Whether that will happen at next week's state visit, I
think that, you know, I'm not hearing much optimism on that.
The briefings are more around a kind of agreement on
quantum or AI or tech, some kind of deal in
those areas, and there's been reports that various tech billionaires
(21:05):
are coming over with Trump to join him in the
state banquet as well. So I think the focus will
be on that dangers.
Speaker 3 (21:13):
What are the dangers in this state visit? It lasts
several days. I mean we're expecting some level of protest
by some groups in the UK and also there it's
a double edged sword, the relationship, a close relationship with
President Trump. We've seen some global leaders humiliated. I suppose
(21:34):
one of the pitfalls people are thinking about.
Speaker 8 (21:36):
There are actually a lot of dangers, and the government
officials I've been speaking to who have been involved in
the planning for the state visit are really really worried
about it. The primary thing is that just days after
Trump departs, the government is expected to recognize the state
of Palestine at the United Nations Assembly. Apro the the
(22:00):
UK US approach to Israel is one of the big
opposing differences, and the US administration, including Marco Rubio, have
very much condemned the UK and France's and Canada's plan
to recognize Palestine. So that will be you know, a
moment of peril potentially if that's brought up. I mean.
(22:25):
The other thing is Trump Trump isn't afraid to insult
various political allies of the Prime Minister. I mean even
in Scotland he was asked about London Mercedy Khan and
made very disparaging remarks which Kis Starma had to interrupt
and remind the President that he was a friend and
political ally of Kastarmer's. And there are other elements as well,
(22:50):
on free speech, for example, this is something that jd
Vance has has lectured and tried to score the UK
on Trump's vice president also, So there are these political differences.
And the Prime Minister and the President will be giving
a joint press conference at the end where they'll be
probed on some of those issues as well.
Speaker 3 (23:09):
And do you expect Nigel Farage or Reform UK to
feature at all?
Speaker 8 (23:14):
You know Farage he might get brought up in that
press conference. For example, Forage to go over to the
over Office and get and meet President Trump just a
couple of weeks ago and got his picture standing next
to the President at his desk. You know they are
close political allies and Trump isn't you know? It is
(23:37):
an embarrassed or about the lack of diplomacy that comes
with saying that in front of the Prime Minister sometimes.
So I would be surprised if he doesn't know.
Speaker 3 (23:48):
And so what do you think is the best outcome
for the UK? Just as we think about this opportunity,
I suppose what do you think will be the images
that emerge? I mean, could it be from let's say
the first Lady Milania Trump, who's got her own visit
with the Queen Camilla. I wonder what you think will
emerge out of the next few days.
Speaker 8 (24:10):
I think this state visit is going to be one
of images they want to emerge in one of images
they very much don't want to emerge. They are intentionally
avoiding the President giving an address to the UK Parliament
as typically happens. Mccrong gave his own address to the
(24:30):
Parliament when he did his state visit earlier this year.
I think that's to avoid the President trying to school
politicians on their political differences, but also to avoid a
major protest outside outside Parliament. They're still expecting protests, there's talks,
there's lots of reports about the heightened security in Windsor,
(24:53):
so it will be one Kisdama will want to avoid
any of those kind of era clashes that are at risk,
and he'll want to get those deals, as I said,
potentially on steal, on tech and also to just the
King will want to give Trump a really good time,
charm him, shower him with the pageantry that comes with
(25:15):
spending time with the royal family.
Speaker 3 (25:17):
That was Bloomberg's political correspondent Ellen Milligan looking at this
second state visit from President Trump. In the coming few days,
we'll have full coverage of this historic event, the visit
to Windsor and more across Bloomberg platforms. I'm Caroline Hepkee
here in London. You can catch us every weekday morning
(25:38):
for Bloomberg Daybreak Europe, beginning at six am in London.
That's one am on Wall Street. Tom.
Speaker 2 (25:44):
Thank you, Caroline, And coming up on Bloomberg day Break
weekend and meeting this week at the Bank of Japan.
We'll discuss what that means from monetary policy there. That's
up next. I'm Tom Busby, and this is Bloomberg. This
(26:06):
is Bloomberg day Break Weekend, our global look ahead at
the top stories for investors in the coming week. I'm
Tom Busby in New York. Policymakers at the Bank of
Japan convening this week, and most BOJ watchers expect a
lift to the benchmark interest rate by January, though some
surveyed by Bloomberg se October as the most likely time
given amplified political uncertainty. For more, let's get to the
(26:28):
host of the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (26:32):
Tom Japan is now confronting a major shift in the
outlook for politics and government policy. The country will soon
get a new prime minister following the resignation of Shiguru Ishiba.
For a closer look at the terrain in Japan four markets.
I'm joined by Mia Glass. She is Japan FX and
rates reporter for Bloomberg News. Mia joins us from our
(26:53):
studios in Tokyo. Mia, thank you so much for joining me.
I think it's fair to say that the BOJ is
known for being an especially cautious central bank, and I'm
wondering whether you think it's likely that we're going to
get any change in monetary policy in the coming week, right.
Speaker 9 (27:09):
Thank you so much for having me. So for the
BOJ meeting next week, I don't think there's any chance
of a great hike. I think it's pretty widely expected
that there will be no hike at this meeting. But
just to set the stage, the Bank of Japan hasn't
hiked since January. There was a lot of tariff uncertainty
since April, and now there's a lot of political uncertainty
after Prime Minister Ishiba announced that he's going to step down.
(27:32):
So we have meetings in September, October, and December still
of this year, and although there won't be a hike
next week, there's still a possibility that the BOJ could
hike this year. And we actually had a Bloomberg story
this week saying that Bank of Japan officials have the
view that it might be possible to raise the interest
rate again this year, regardless of the domestic political instability,
(27:55):
and that really has to do with the fact that
economic data has been really in line with xpectations. So
although there is still that uncertainty from the US trade
deal and the political uncertainty in Japan, BOJ officials do
think that there could still be a hike this year.
And we had a survey as well that came out
that said that most BOJ watchers expect a hike by January,
(28:19):
and October is still the most popular timing. It's the
proportion of people who expect October tick down a little
bit because of the political uncertainty, but October is definitely
still a possibility.
Speaker 4 (28:30):
So we know Japan will have a new prime minister
soon now that Chiguru Ishiba has resigned. It seems as
though high inflation on a relative basis was a big
factor in this. Give me a sense of how inflation
in Japan has been behaving.
Speaker 9 (28:45):
Yeah, so, Japan's inflation has stayed at or above the
boj's two percent target for more than three years now,
and we even had US Treasury Secretary Scott Bessen said
that the BOJ is kind of falling behind the curve
and tackling inflation, and that has also been a lot
of the reason why JGB yields, particularly on the longer end,
are rising so much recently. So that was definitely a
(29:08):
part of why Ishiba had such a terrible election in
July and another reason why we had he had to
step down, And so that will definitely be part of
the Bank of Japan's mission to tackle inflation and to
bring those JGB yields down. So it'll definitely be important
to watch to see how the Bank of Japan is
going to signal next week about their great hike path.
Speaker 4 (29:31):
You mentioned jgb's a moment ago, and I know we
have an auction of twenty year jgb's coming up in
the week ahead. I'm curious, is there a way to
gauge right now what the market appetite may be.
Speaker 9 (29:43):
Yeah, So recently we've been having better auctions than we
have in the past. So a lot of this attention
on auctions really started back in May when we had
a really bad twenty year auction, the worst Aman in
more than a decade, and it really sent global yields higher.
So basically since then, there's been a lot of attention
on these auctions, and particularly in the longer end. This
(30:05):
is going to be the first super long bond auction
since Prime Minister Ishiba announced his plan to step down,
and with all a concern in the bond market about
fiscal policy and political uncertainty, it's going to be really
important to watch that twenty year auction and see if
there is demand there to gauge how the bond market
is feeling about the political situation.
Speaker 4 (30:25):
Talk to me a little bit about this new chapter
in Japanese politics and what it may mean for the
way in which the Bank of Japan operates going forward.
Speaker 9 (30:35):
Yeah, So the leadership election for the LDP is set
for October fourth, which is kind of a tricky timing
for the BOJ. I mean, they have their next after September.
Their next meeting is going to be in October, so
it's really tricky timing for the BOJ and it really
depends on who becomes the new prime minister. So we're
looking at a couple leading contenders. So we have Sanai
(30:57):
a Takaichi, who favors stimulus measures and would also likely
prefer the BOJ to take a more cautious view on
rate hikes. And then Shinjio Koizumi, he's another potential candidate,
but he would most likely just continue with the current
administration's views and he would support raising interest rates. So
depending on who comes into office, we could have a
drastic change. And you know how the BOJ operates. So
(31:20):
I think the political situation would be really important to watch.
And as you mentioned, globally, this is a really important
time to be watching politics for the bomb market. We
have political turmoil in France, and then in the US
we also have concerns about the Fed's independence. We also
have the tax cut and spending your bill, so that's
sending globally Longa Mountains higher. So it's not really just
(31:42):
a problem in Japan. It's happening all around the world.
Speaker 4 (31:45):
Okay, Miya, Before I let you go, talk to me
a little bit about how tariffs that were put in
place by the Trump administration, how they have been impacting
the Japanese economy.
Speaker 9 (31:55):
Right, So President Trump signed an executive order implementing the
trade agreement with Pan and that's a maximum fifteen percent
tariff on most of its products that includes automobiles parts,
and so the deal also includes this promise that Japan
will create a five hundred and fifty billion dollar US
investment fund. But there's a bit of a disconnect between
(32:17):
what Trump thinks of that investment fund versus what Japan
thinks of it. So Trump has previously said that that
five hundred and fifty billion dollar investment fund will be
money that his administration could invest as they like, with
ninety percent of the profits being given to the US
by Japan versus Japan kind of sees it as more
of a combination of investments and loans and loan guarantees.
(32:41):
So there's a bit of a disconnect there, and the
market is really uncertain uncertain about how that's going to
play out. And of course, if that really is how
Trump's saying it's going to be, then that's going to
impact the economy, that's going to weaken the yen. So
it'll be really important still to watch how that plays out.
There's a lot of uncertainty there. The trade deal obviously
also matters because Japan is really an export driven economy,
(33:05):
so we've seen export value decline but volume has risen,
which shows that a lot of carmakers have been cutting
prices while maintaining the volume of their exports to the US,
so they're sacrificing those profit margins. And the impact of
the terraffs has been limited a bit on the GDP
of Japan. So Japan's economy is still growing. But I
(33:27):
think a lot of economists are saying that we could
still see the impact from Terra's play out on Japan.
So that'll be an important area to watch for the
BOJ as well.
Speaker 4 (33:36):
Okay, Mia, thank you so much. We'll leave it there
as we look ahead to the BOJ meeting next week.
She is Mia Glass, Japan FX and rates reporter for
Bloomberg News, joining us from our studios in Tokyo. Staying
in Japan. We turn next to politics and the resignation
of Shigeru Ishiba. This came after back to back losses
that cost his Liberal Democratic Party it's parliamentary majority. Now
(34:00):
in a column published last week Bloomberg Opinions, Garode ready
characterized Ishiba's assent as a gamble. I had the chance
to speak with Garod and began by asking him whether
Ishiba's resignation came as a surprise.
Speaker 10 (34:14):
I think the only thing that was surprising about it
was how long it took. Its seven or eight weeks
since the upper House election defeat that, as you say,
is the second majors we indeed the third major defeat
that Ishiba had as LDP leader, in addition to the
lower house defeat last year and the Tokyo a smble
(34:35):
the election earlier this year. As you know, as you say,
Ishiba was Ishiba was brought in to fix a problem,
and the problem was the LDP's declining popularity that was
under the previous Prime Minister of Fumio Kishida. Ishiba was
(34:56):
brought in as a new face, new lick of paint
on the party. He wasn't tainted by any of the scandals,
nor should I say, actually it was Kishidabakishida was the
one who was sort of like handling them, so he
kind of became associated with them. Ishiba was quite scandal free,
clean politician, believed to be popular. But when he came in,
(35:18):
he did not see the actual bounce in approval ratings
that we would associate with a new leader coming in,
and ultimately, you know, the LDP is a large organization,
and what they are there to do is to is
to win elections, and what the leader is there to
do is to win elections. Ishiba proved that he couldn't
(35:39):
do that, and as I say, the only surprising thing
is that he didn't go earlier. He dragged it out
a little bit longer than frankly I think it needed to.
Speaker 4 (35:47):
Maybe you can help me understand the possible successors to Ishiba?
Are there any obvious candidates?
Speaker 10 (35:54):
The two leading candidates at the moment, I should say
it's very early in the day. We had in memory
serves nine candidates last year in the race that eventually
was won by Ishiba. The two leading candidates would be
the people who came second and third in that election
last year. That's sanai A Takaichi and Shinjiro Koizumi Takeichi first.
(36:17):
If she became the leader and then was elected prime minister,
it's you know, no quite likely, but no longer guarantee
because the oldp is no longer the largest party in
the lower house. She would become the first female prime
minister in Japan. She is a self declared heir of
(36:39):
Shinzo Abbe and his politics and his you know, Abinomics policies.
She is we should say, yeah, she's definitely very popular
with the right wing and especially with people who did
not like Ishiba. They really represent two polls on either
side of the party, so she's definitely a leading candidate.
(37:04):
I would say. She finished second in the runoff election
against Ishiba last year, and what you saw was basically
concerned that she might have rather similar flaws to what
Ishiba turned out to have in that she only appeals
maybe to one section of the party, and that in
her case is the right wing. The other candidate, as
(37:24):
I mentioned, is Shinjiro Koizumi. He's the son of the
former Prime Minister Janichiro Koizumi, who listeners might remember was
Prime minister in the early to mid two thousands while
George W. Bush was the president in the US. He's
very young, he's a little inexperienced, but he has had
quite an impressive year. He came in as Agriculture minister
(37:47):
early on this year to deal with the rice prices
that I mentioned earlier, and very immediately and effectively was
able to generate a downturn in rice prices by chaining
how the country was releasing its reserves of rice that
will have certainly one of some plaudits. He's believed to
(38:08):
be quite popular with the public. He's young, he's good looking,
he's charismatic. He has a celebrity wife and a young family,
so he has a lot of things going for him.
Those would be the two leading candidates I think at
the moment.
Speaker 4 (38:23):
That is Bloomberg opinion columnist Gerode Ready and I'm Doug Chrisner.
Catch us weekdays for the Daybreak Asia podcast. It's available
wherever you get your podcast.
Speaker 2 (38:32):
Tom, Thank you Doug. And that does it for this
edition of Bloomberg day Break Weekend. Join us again Monday
morning at five am Wall Street Time for the latest
on markets overseas, in the news you need to start
your day. I'm Tom Busby. Stay with us. Top stories
and global business headlines are coming up right now.
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world. Straight ahead on the program,
and look ahead to this week's long awaited interest rate
decision from the Federal Reserve. I'm Tom Busby in New York.
Speaker 3 (00:24):
I'm Caroline Hetker in London, where we're looking ahead to
President Trump's second state visit to the UK.
Speaker 4 (00:30):
I'm Dot Krisner with a preview of next week's rate
decision from the Bank of Japan.
Speaker 1 (00:36):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three Yeero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, Syria,
XM one twenty one, and around the world on Bloomberg Radio,
dot Com and the Bloomberg Business App.
Speaker 2 (01:00):
Good day to you. I'm Tom Busby, and we begin
today's program with a decision on rates from the Federal
Reserve this Wednesday. All signs point to a twenty five
basis point rate cut, But could the central bankers go
even bigger? And how does the FED sea inflation, the
labor market and other fundamentals of the US economy. For more,
we're joined by Michael McKee, Bloomberg International Economics and Policy correspondent. Well, Michael,
(01:24):
thank you so much for being here. Let's just start
with what you expect the FED to decide this week,
how you think sentiment will be split among the voting
members of the FOMC, and what does the FED sea
as far as inflation they're dual mandates of inflation and
the labor market.
Speaker 5 (01:40):
Well, a lot of interesting questions there, which is something
that I hadn't been able to say going into a
lot of FED meetings in recent months. The Fed is
probably going to do it's twenty five basis point cut.
The data that have come in suggests that the economy
is weakening on the labor mandate side, still an issue
on the the inflation side, which will keep them from
(02:02):
doing fifty basis points. But the question is what do
they do after the September seventeenth meeting, And that's where
we may see some market moving or things that will
cause the markets not to move if you get what
I mean in the sense that if the markets are
expecting something there's a potential for surprise, and that is
(02:26):
what do they think the path is going forward? Is
the inflation that we got this past week enough to
warn them off of saying anything specific about October and
December those FED meetings? And what does the dot plot
say about next year and the path of rates going forward?
Do they lower the terminal rate? Do they say that
(02:49):
rates are going to go even lower than the markets
had anticipated, which they have said is about three percent.
So there are a lot of open questions out there
that people are going to be asking, and the idea
of what they think about inflation is going to be
a good question for J.
Speaker 1 (03:06):
Powell.
Speaker 2 (03:06):
Well, let's talk about inflation, because this last week we
got a couple of reads. We got producer price index
which actually surprised to the upside a little bit, not
much down one tenth of a percent. Consumer prices though
a little bit hotter than forecast, higher costs for housing
and of course food, not good news for this president
who insists the food prices have been plummeting on his watch.
(03:27):
What were your big takeaways from that, CPI read in August.
Speaker 5 (03:30):
Well, there is a political component to it, and the
food and gasoline prices were up significantly, and so that's
not going to be a good look for the president.
But what was really interesting is it wasn't so much
the goods prices that went up as the services prices.
The goods prices we expected to rise because we thought
(03:51):
the tariffs would leak into the data, but things like furnishings.
Household furnishings only up a tenth of a percent, toys
were down eight tenths of a percent. But we saw
service prices, particularly for things like airline fares lodging away
from home, those went up significantly. And if service prices
(04:13):
are going up unrelated to tariffs, that's an inflation problem
that the Fed will have to address in a different
way than the way they would think about it in
terms of tariff driven inflation. So they're going to have
to keep a close eye on this, which is why
I think, to answer my own question that I posed
about what do they do for October in December, I
(04:34):
think they kind of punt on giving serious guidance on
that because they'll want to see more data between now
and then.
Speaker 2 (04:41):
Did you see any other good news as far as inflation.
Speaker 5 (04:44):
Yeah, in some areas of service prices. Medical care services
were down a tenth of a percent, recreation services down
two tents. And people thought that those would be areas
that might rise because they had risen in previous months
service price increases. In this case they did not. So
it's not an easy thing to say what is causing
(05:07):
the service price inflation to rise, and that's something the
FED is going to want to investigate.
Speaker 2 (05:13):
Well, let's talk then about the labor market, which every
sign we're seeing it continues to weaken. And just this
past week we got what a near four year high
on jobless claims. What's your read on that and what
is the FED see?
Speaker 5 (05:28):
You need to take it with a little bit of
caution because the last week before this past week when
the jobless claims were tallied was the week with Labor
Day and a holiday. Is always difficult to seasonally adjust
for the Department of Labor because the holidays move around.
So in this case we can look at it with
a sort of a jaundic sty say this is something
(05:48):
to worry about if it continues.
Speaker 2 (05:50):
The Fed's two day policy meeting kicking off this Tuesday,
a decision Wednesday, followed by a Jerome Powell press conference
our thanks to Michael McKee, Bloomberg International Economy and Policy correspondent.
We move next to corporate earnings from the shipping and
logistics giant FedEx, coming out on Thursday after Wall Street's
closing bell, just ahead of the industry's peak holiday shipping season.
(06:11):
How are rising costs, worries about US consumer spending, and
the end of deminimous exemptions on small package shipments into
the US all impacting the company? For more, we're joined
by Lee Clasgow, Bloomberg Intelligence Senior Transport, Logistics and shipping analysts. Lee,
thank you so much for joining us. You know, FedEx
coming off a very solid earnings beat for the springs
(06:33):
fourth quarter, saying it's successfully slashed four billion in costs.
It plans to cut a billion more this fiscal year.
But FedEx and the whole industry now facing a lot
more headwinds. So what are you expecting to see in
this week's earnings results.
Speaker 6 (06:47):
Yeah, it's gonna be tough. They're facing a lot of headwinds.
A lot of those headwinds are related to the kind
of more protectionist stances from the Trump administration. One of
those which actually had bi partisans support back in the
Biden days was getting rid of demnimous exemptions, which really
allows lower value goods to be imported into the United
(07:07):
States without facing any duties or tarifs. And that that
floor was at eight hundred dollars and so what that
did is allowed a lot of e commerce providers outside
the United States to directly shift to consumers. So you know,
if you bought that thing, that that skirt or T
shirt from Sheen or something off of Team U or
(07:28):
even off of the Amazon marketplace, some of that stuff
might have been originated in China and you know it's
going into the United States and kind of avoiding custom
duties because of that loophole. And you know, they got
rid of that loophole for imports that are going into
the United States from China and Hong Kong in May.
(07:49):
They also got rid of that loophole for everyone else
at the end of last month. So you know, we're
really going to start to see the impact. And you know,
FedEx kind of doesn't report on a calendar basis. They
have on physical basis. And you know we heard from
UPS already and they said, you know, for two months
(08:10):
of their quarter that they reported which this will be
included in FedEx earnings, is that you know, their China
to US business was down pretty significantly and we expect
that read through to apply to FedEx as well. And
then you know, FedEx is also dealing with, you know,
a weaker industrial economy. People don't really think of FedEx
(08:31):
as a trucking company, but they're they're actually the largest
less than truckload provider. That's a business that they're looking
to spin off, but they still operate it and it's
really tied to you know, industrial production is m and
the ism has been you know, contraction territory for I
believe thirty one out of the last thirty three months.
(08:51):
So you know that's going to definitely weigh on tonnage.
So you know, volumes are really facing headwinds, whether it's
their parcel international parcel business or their you know, less
than trucklo business and FedEx freight.
Speaker 2 (09:04):
Now these are big changes, right, I mean, we could
really see a significant hit to earnings, maybe not in
this report, but certainly in the next one.
Speaker 6 (09:13):
Yeah, you know, I think all eyes will be on,
you know, any guidance that the company is able to offer.
Companies in my world have been less apt to provide
guidance at least longer, longer term guidance, just because of
the uncertainty tied around the trade policies out of Washington,
which has created a significant amount of volatility and uncertainty.
(09:34):
We'll see kind of where management thinks they're going to be.
My guess is though they probably will provide, if any insight,
maybe into their second quarter. Just again, given that, you know,
everyone's crystal ball is quite foggy and correct right now.
Speaker 2 (09:53):
Yeah, yeah, Well, well let's talk about something you brought
up is the possibility of spinning off FedEx Freight. But
FedEx had a couple of initiatives Drive and Network two
point zero. How have the company cut costs and shed businesses?
How has that impacted the business? And what is there
left besides FedEx Freight to cut?
Speaker 6 (10:14):
Yeah, so, you know, looking at FedEx as a whole,
you know, they're doing a number of initiatives you mentioned
Driver Network two point zero that are trying to take
out costs of the network. Is what they really need
to do, is they really need to restructure their networks
to the new reality. You know, the old reality would
be you know, one hundred envelopes go to a lawyer's office,
(10:35):
and that FedEx driver would pick up another one hundred
envelopes to be delivered. And that kind of density really
helps with margins. And you know, fast forward to today,
we're all buying things from Amazon or wherever, and we
get one package per day, and those deliveries are extremely expensive,
and that's been really weighing on margins. So you know,
we're not going backwards, we're going forwards. Is probably just
(10:58):
going to be more B two C UH traffic relative
to B two B traffic UH. And and so they're
they're making changes in Those changes include increasing automation, UH,
reducing overlaps, and networks they're combining uh, you know, slowly
combining their ground and air networks, something they've been really
(11:18):
you know, they push back for a number of years
about doing and then they're finally now leading into that.
And what I would say is that some of the
benefits that they're generating from these changes were probably not
going to really see them that much, because to really
see them, you need you need good volume growth, You
need that that that that operational leverage that you're going
to get. So I suspect, you know, when things do
(11:41):
turn around. You know. Again, the big question is when
you are going to see that flywheel start operating in
that that operating leverage, generating better margins than they are today.
But the but the problem is is that you know
FedEx and and you know it's competitor ups kind of
a show me stories because they're both undergoing these kind
(12:02):
of restructurings. And we really have to see a how
these companies look coming out of these restructurings and from
an operational standpoint when I'm talking about restructurings. And then
also you know, b what does that new network from
a profitability standpoint look like when volumes are back on
track for growth.
Speaker 2 (12:22):
Hello, a lot to look forward to. FedEx fiscal first
quarter earnings out this Thursday after Wall Street's closing bell
Our thanks to Lee Klascal, Bloomberg Intelligence senior Transport, Logistics
and Chipping analysts and coming up on Bloomberg Day Break weekend,
President Trump heads to the UK. I'm Tom Busby, and
this is Bloomberg. This is Bloomberg Day Break Weekend, our
(12:53):
global look ahead at the top stories for investors in
the coming week. I'm Tom Busby in New York. Up
later in our program and look ahead to a monetary
policy decision from the Bank of Japan. But first, just
a few weeks after President Trump's personal visit to Scotland,
He's headed back to the UK, where he's expected to
mix royal mingling with important geopolitical discussions on a three
(13:15):
day trip. But the visit takes place under the shadow
of the sacking of Peter Mandelssohn as the UK's US
ambassador for previous links to disgrace financier Jeffrey Epstein for more,
Let's go to London and bring in Bloomberg day Break
euro banker Caroline Hepger.
Speaker 3 (13:31):
Tom Britton's ambassador to Washington, Peter Mandelsson, has recently been
removed from his post after further revelations about the extent
of his relationship to the late p Dephar financier Jeffrey Epstein.
That decision comes only days before President Donald Trumps state
visit to Britain, the UK ambassador to Washington usually playing
(13:54):
a key role in those events, and it complicates what
is an already careful, fully choreographed few days. It's an
event that will be important to UK Prime Minister Kirs Starmer,
who has prioritized good relations with Donald Trump since taking
office just over a year ago, stressing the importance of
Britain's defense and security alliance with America and taking care
(14:18):
not to openly criticize Trump's tariff policies. When Stalmer visited
the Oval Office back in February, he brandished the King's
invitation to Trump, which the U S President called an honor,
describing King Charles as a beautiful and wonderful man. Those
overtures appear to be paying off, at least in part.
(14:39):
The UK became the first country to sign a tariff
reduction deal with the US in May, with some of
it already implemented. However, some tensions remain. For example, steel
is an area of issue. UK officials are still working
to secure a deal that would remove the twenty five
percent US tariffs on the sector, as to a drag
(15:00):
on for months after Prime Minister Starmer and President Trump
agreed a broader tariff cutting plan. There are also geopolitical
issues too, with the potential to spark turbulence in the
so called special relationship. The US Ambassador to Israel said
last month that the UK and France have handed victory
to hamas by announcing intentions to recognize a Palestinian state.
(15:26):
The visit also takes place during a testing time at
home for Starmer. He's facing scandal within his own party
and he's battling challenges from the right wing party Reform UK,
who have proven popular in the polls. The group's leader,
Nigel Faragh, recently visited the White House at the invitation
of Donald Trump. Bloomberg's London bureau chief Ruth David explains
(15:50):
why that trip spoke volumes.
Speaker 7 (15:53):
That photograph of him standing with President Trump. I mean
a photo speaks more than all of the real of
coverage right to have that kind of backing and to
have that kind of support globally. We saw Tony Blair
going to the US, We're seeing Nigel Farad and the
question is where is Gastamo? And I know Donald Trump
(16:14):
is coming to the UK later, but it definitely seems
to be like for urges riding on a hype.
Speaker 3 (16:20):
That was Bloomberg's, with David speaking there to Bloomberg's Tom
McKenzie and Guy Johnson. So will the honor of a
royal banquet be enough to curry the favor of President Trump?
Is something I've been discussing with Bloomberg's political correspondent Ellen Milligan. Ellen, just, firstly,
what are we expecting to see President Trump do on
this second state visit that he's paying to the UK.
Speaker 8 (16:43):
Yes, I mean this has never happened before that. Only
other US presidents who have had a state visit were
Barack Obama and George Bush. But no other president has
had two state visits. This one will be a bit
different from the last. First of all, what will be
hosted by King Charles. The last one in twenty nineteen
was obviously hosted by the Late Queen. The other big
(17:06):
change is that it will be primarily hosted at Windsor
Castle because Buckingham Palace is undergoing renovations. So there will
be the usual traditional state banquet, the exchange of gifts
between the King and Queen and the President and the
First Lady. Usually they have some kind of private meeting,
either over lunch or tea when the President first greets them.
(17:31):
Then they'll have this banquet where we're expecting a lot
of famous businessmen and celebrities, as well as the border
royal family to be there, like Prince William, who Trump
has also met before. And then after all that pageantry,
there'll be the political portion where Trump goes to visit
Prime Minister in his countryside estate at Chequers for a
(17:55):
bilateral meeting.
Speaker 3 (17:57):
Huge opportunity then for the UK to be front of
the you know, to show off what they want to offer.
I'm sure in terms of business ties, Kis Starmer will
surely be trying to use this as kind of bargaining power.
What do you think is going to be his main message?
Speaker 8 (18:14):
Yeah, I mean the Prime Minister is effectively using the
King as his chief diplomat and it's already paid off
for the UK. I mean, you'll remember the moment where
Kis Starmer visited the White House in February and brandished
this letter hand signed by the King himself inviting the
President over to the UK again. That I think, in
(18:38):
large part has been why Trump and Starma have managed
to establish a close relationship despite their political differences. And
you know, the UK was the first country to sign
a trade agreement where they avoided the same level severe
tariffs that other allies did. He Trump was also hosted
(18:58):
by the UK in Scotland couple of months ago. That
was a private visit but had very much a political
element where he was mostly promoting his golf courses but
also had a meeting with Starma and with the EU's
Wonder Lion while there as well. So it's already paid
off for Starma. I think he's hoping that other deals
(19:20):
could be struck, potentially on tech, potentially on AI, although
this state visit will will mostly be about the royal
element rather than the political one.
Speaker 3 (19:29):
Absolutely, it seems I think to many observers in the
UK a bit like a Netflix movie Letter to the
King could have been the title. And it was also
seen as quite a savvy move by the British Prime
Minister by some voters because President Trumps still deeply unpopular,
isn't he amongst a lot of voters? And yet there's
also an edge to voters in the UK that they
(19:51):
understand the UK has to try to do well by
obviously its biggest ally in the world in terms of
how we should expect then the negotiations to go. Do
you think that there are going to be specific things
that Starma can perhaps gain from this, maybe on steel,
(20:11):
as you say, which is still got levees from the US.
I mean, Britain managed to get what has been seen
as a better trade deal than a lot of other countries.
Speaker 8 (20:22):
Yes, that was the big element on steel that was
missing from the trade deal that they signed back at
the G seven in Canada in a couple of months ago,
and that still hasn't been resolved. We've now got a
new Business and Trade Secretary in the UK and I
know that the government is pretty desperate to get that sorted.
(20:45):
Whether that will happen at next week's state visit, I
think that, you know, I'm not hearing much optimism on that.
The briefings are more around a kind of agreement on
quantum or AI or tech, some kind of deal in
those areas, and there's been reports that various tech billionaires
(21:05):
are coming over with Trump to join him in the
state banquet as well. So I think the focus will
be on that dangers.
Speaker 3 (21:13):
What are the dangers in this state visit? It lasts
several days. I mean we're expecting some level of protest
by some groups in the UK and also there it's
a double edged sword, the relationship, a close relationship with
President Trump. We've seen some global leaders humiliated. I suppose
(21:34):
one of the pitfalls people are thinking about.
Speaker 8 (21:36):
There are actually a lot of dangers, and the government
officials I've been speaking to who have been involved in
the planning for the state visit are really really worried
about it. The primary thing is that just days after
Trump departs, the government is expected to recognize the state
of Palestine at the United Nations Assembly. Apro the the
(22:00):
UK US approach to Israel is one of the big
opposing differences, and the US administration, including Marco Rubio, have
very much condemned the UK and France's and Canada's plan
to recognize Palestine. So that will be you know, a
moment of peril potentially if that's brought up. I mean.
(22:25):
The other thing is Trump Trump isn't afraid to insult
various political allies of the Prime Minister. I mean even
in Scotland he was asked about London Mercedy Khan and
made very disparaging remarks which Kis Starma had to interrupt
and remind the President that he was a friend and
political ally of Kastarmer's. And there are other elements as well,
(22:50):
on free speech, for example, this is something that jd
Vance has has lectured and tried to score the UK
on Trump's vice president also, So there are these political differences.
And the Prime Minister and the President will be giving
a joint press conference at the end where they'll be
probed on some of those issues as well.
Speaker 3 (23:09):
And do you expect Nigel Farage or Reform UK to
feature at all?
Speaker 8 (23:14):
You know Farage he might get brought up in that
press conference. For example, Forage to go over to the
over Office and get and meet President Trump just a
couple of weeks ago and got his picture standing next
to the President at his desk. You know they are
close political allies and Trump isn't you know? It is
(23:37):
an embarrassed or about the lack of diplomacy that comes
with saying that in front of the Prime Minister sometimes.
So I would be surprised if he doesn't know.
Speaker 3 (23:48):
And so what do you think is the best outcome
for the UK? Just as we think about this opportunity,
I suppose what do you think will be the images
that emerge? I mean, could it be from let's say
the first Lady Milania Trump, who's got her own visit
with the Queen Camilla. I wonder what you think will
emerge out of the next few days.
Speaker 8 (24:10):
I think this state visit is going to be one
of images they want to emerge in one of images
they very much don't want to emerge. They are intentionally
avoiding the President giving an address to the UK Parliament
as typically happens. Mccrong gave his own address to the
(24:30):
Parliament when he did his state visit earlier this year.
I think that's to avoid the President trying to school
politicians on their political differences, but also to avoid a
major protest outside outside Parliament. They're still expecting protests, there's talks,
there's lots of reports about the heightened security in Windsor,
(24:53):
so it will be one Kisdama will want to avoid
any of those kind of era clashes that are at risk,
and he'll want to get those deals, as I said,
potentially on steal, on tech and also to just the
King will want to give Trump a really good time,
charm him, shower him with the pageantry that comes with
(25:15):
spending time with the royal family.
Speaker 3 (25:17):
That was Bloomberg's political correspondent Ellen Milligan looking at this
second state visit from President Trump. In the coming few days,
we'll have full coverage of this historic event, the visit
to Windsor and more across Bloomberg platforms. I'm Caroline Hepkee
here in London. You can catch us every weekday morning
(25:38):
for Bloomberg Daybreak Europe, beginning at six am in London.
That's one am on Wall Street. Tom.
Speaker 2 (25:44):
Thank you, Caroline, And coming up on Bloomberg day Break
weekend and meeting this week at the Bank of Japan.
We'll discuss what that means from monetary policy there. That's
up next. I'm Tom Busby, and this is Bloomberg. This
(26:06):
is Bloomberg day Break Weekend, our global look ahead at
the top stories for investors in the coming week. I'm
Tom Busby in New York. Policymakers at the Bank of
Japan convening this week, and most BOJ watchers expect a
lift to the benchmark interest rate by January, though some
surveyed by Bloomberg se October as the most likely time
given amplified political uncertainty. For more, let's get to the
(26:28):
host of the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (26:32):
Tom Japan is now confronting a major shift in the
outlook for politics and government policy. The country will soon
get a new prime minister following the resignation of Shiguru Ishiba.
For a closer look at the terrain in Japan four markets.
I'm joined by Mia Glass. She is Japan FX and
rates reporter for Bloomberg News. Mia joins us from our
(26:53):
studios in Tokyo. Mia, thank you so much for joining me.
I think it's fair to say that the BOJ is
known for being an especially cautious central bank, and I'm
wondering whether you think it's likely that we're going to
get any change in monetary policy in the coming week, right.
Speaker 9 (27:09):
Thank you so much for having me. So for the
BOJ meeting next week, I don't think there's any chance
of a great hike. I think it's pretty widely expected
that there will be no hike at this meeting. But
just to set the stage, the Bank of Japan hasn't
hiked since January. There was a lot of tariff uncertainty
since April, and now there's a lot of political uncertainty
after Prime Minister Ishiba announced that he's going to step down.
(27:32):
So we have meetings in September, October, and December still
of this year, and although there won't be a hike
next week, there's still a possibility that the BOJ could
hike this year. And we actually had a Bloomberg story
this week saying that Bank of Japan officials have the
view that it might be possible to raise the interest
rate again this year, regardless of the domestic political instability,
(27:55):
and that really has to do with the fact that
economic data has been really in line with xpectations. So
although there is still that uncertainty from the US trade
deal and the political uncertainty in Japan, BOJ officials do
think that there could still be a hike this year.
And we had a survey as well that came out
that said that most BOJ watchers expect a hike by January,
(28:19):
and October is still the most popular timing. It's the
proportion of people who expect October tick down a little
bit because of the political uncertainty, but October is definitely
still a possibility.
Speaker 4 (28:30):
So we know Japan will have a new prime minister
soon now that Chiguru Ishiba has resigned. It seems as
though high inflation on a relative basis was a big
factor in this. Give me a sense of how inflation
in Japan has been behaving.
Speaker 9 (28:45):
Yeah, so, Japan's inflation has stayed at or above the
boj's two percent target for more than three years now,
and we even had US Treasury Secretary Scott Bessen said
that the BOJ is kind of falling behind the curve
and tackling inflation, and that has also been a lot
of the reason why JGB yields, particularly on the longer end,
are rising so much recently. So that was definitely a
(29:08):
part of why Ishiba had such a terrible election in
July and another reason why we had he had to
step down, And so that will definitely be part of
the Bank of Japan's mission to tackle inflation and to
bring those JGB yields down. So it'll definitely be important
to watch to see how the Bank of Japan is
going to signal next week about their great hike path.
Speaker 4 (29:31):
You mentioned jgb's a moment ago, and I know we
have an auction of twenty year jgb's coming up in
the week ahead. I'm curious, is there a way to
gauge right now what the market appetite may be.
Speaker 9 (29:43):
Yeah, So recently we've been having better auctions than we
have in the past. So a lot of this attention
on auctions really started back in May when we had
a really bad twenty year auction, the worst Aman in
more than a decade, and it really sent global yields higher.
So basically since then, there's been a lot of attention
on these auctions, and particularly in the longer end. This
(30:05):
is going to be the first super long bond auction
since Prime Minister Ishiba announced his plan to step down,
and with all a concern in the bond market about
fiscal policy and political uncertainty, it's going to be really
important to watch that twenty year auction and see if
there is demand there to gauge how the bond market
is feeling about the political situation.
Speaker 4 (30:25):
Talk to me a little bit about this new chapter
in Japanese politics and what it may mean for the
way in which the Bank of Japan operates going forward.
Speaker 9 (30:35):
Yeah, So the leadership election for the LDP is set
for October fourth, which is kind of a tricky timing
for the BOJ. I mean, they have their next after September.
Their next meeting is going to be in October, so
it's really tricky timing for the BOJ and it really
depends on who becomes the new prime minister. So we're
looking at a couple leading contenders. So we have Sanai
(30:57):
a Takaichi, who favors stimulus measures and would also likely
prefer the BOJ to take a more cautious view on
rate hikes. And then Shinjio Koizumi, he's another potential candidate,
but he would most likely just continue with the current
administration's views and he would support raising interest rates. So
depending on who comes into office, we could have a
drastic change. And you know how the BOJ operates. So
(31:20):
I think the political situation would be really important to watch.
And as you mentioned, globally, this is a really important
time to be watching politics for the bomb market. We
have political turmoil in France, and then in the US
we also have concerns about the Fed's independence. We also
have the tax cut and spending your bill, so that's
sending globally Longa Mountains higher. So it's not really just
(31:42):
a problem in Japan. It's happening all around the world.
Speaker 4 (31:45):
Okay, Miya, Before I let you go, talk to me
a little bit about how tariffs that were put in
place by the Trump administration, how they have been impacting
the Japanese economy.
Speaker 9 (31:55):
Right, So President Trump signed an executive order implementing the
trade agreement with Pan and that's a maximum fifteen percent
tariff on most of its products that includes automobiles parts,
and so the deal also includes this promise that Japan
will create a five hundred and fifty billion dollar US
investment fund. But there's a bit of a disconnect between
(32:17):
what Trump thinks of that investment fund versus what Japan
thinks of it. So Trump has previously said that that
five hundred and fifty billion dollar investment fund will be
money that his administration could invest as they like, with
ninety percent of the profits being given to the US
by Japan versus Japan kind of sees it as more
of a combination of investments and loans and loan guarantees.
(32:41):
So there's a bit of a disconnect there, and the
market is really uncertain uncertain about how that's going to
play out. And of course, if that really is how
Trump's saying it's going to be, then that's going to
impact the economy, that's going to weaken the yen. So
it'll be really important still to watch how that plays out.
There's a lot of uncertainty there. The trade deal obviously
also matters because Japan is really an export driven economy,
(33:05):
so we've seen export value decline but volume has risen,
which shows that a lot of carmakers have been cutting
prices while maintaining the volume of their exports to the US,
so they're sacrificing those profit margins. And the impact of
the terraffs has been limited a bit on the GDP
of Japan. So Japan's economy is still growing. But I
(33:27):
think a lot of economists are saying that we could
still see the impact from Terra's play out on Japan.
So that'll be an important area to watch for the
BOJ as well.
Speaker 4 (33:36):
Okay, Mia, thank you so much. We'll leave it there
as we look ahead to the BOJ meeting next week.
She is Mia Glass, Japan FX and rates reporter for
Bloomberg News, joining us from our studios in Tokyo. Staying
in Japan. We turn next to politics and the resignation
of Shigeru Ishiba. This came after back to back losses
that cost his Liberal Democratic Party it's parliamentary majority. Now
(34:00):
in a column published last week Bloomberg Opinions, Garode ready
characterized Ishiba's assent as a gamble. I had the chance
to speak with Garod and began by asking him whether
Ishiba's resignation came as a surprise.
Speaker 10 (34:14):
I think the only thing that was surprising about it
was how long it took. Its seven or eight weeks
since the upper House election defeat that, as you say,
is the second majors we indeed the third major defeat
that Ishiba had as LDP leader, in addition to the
lower house defeat last year and the Tokyo a smble
(34:35):
the election earlier this year. As you know, as you say,
Ishiba was Ishiba was brought in to fix a problem,
and the problem was the LDP's declining popularity that was
under the previous Prime Minister of Fumio Kishida. Ishiba was
(34:56):
brought in as a new face, new lick of paint
on the party. He wasn't tainted by any of the scandals,
nor should I say, actually it was Kishidabakishida was the
one who was sort of like handling them, so he
kind of became associated with them. Ishiba was quite scandal free,
clean politician, believed to be popular. But when he came in,
(35:18):
he did not see the actual bounce in approval ratings
that we would associate with a new leader coming in,
and ultimately, you know, the LDP is a large organization,
and what they are there to do is to is
to win elections, and what the leader is there to
do is to win elections. Ishiba proved that he couldn't
(35:39):
do that, and as I say, the only surprising thing
is that he didn't go earlier. He dragged it out
a little bit longer than frankly I think it needed to.
Speaker 4 (35:47):
Maybe you can help me understand the possible successors to Ishiba?
Are there any obvious candidates?
Speaker 10 (35:54):
The two leading candidates at the moment, I should say
it's very early in the day. We had in memory
serves nine candidates last year in the race that eventually
was won by Ishiba. The two leading candidates would be
the people who came second and third in that election
last year. That's sanai A Takaichi and Shinjiro Koizumi Takeichi first.
(36:17):
If she became the leader and then was elected prime minister,
it's you know, no quite likely, but no longer guarantee
because the oldp is no longer the largest party in
the lower house. She would become the first female prime
minister in Japan. She is a self declared heir of
(36:39):
Shinzo Abbe and his politics and his you know, Abinomics policies.
She is we should say, yeah, she's definitely very popular
with the right wing and especially with people who did
not like Ishiba. They really represent two polls on either
side of the party, so she's definitely a leading candidate.
(37:04):
I would say. She finished second in the runoff election
against Ishiba last year, and what you saw was basically
concerned that she might have rather similar flaws to what
Ishiba turned out to have in that she only appeals
maybe to one section of the party, and that in
her case is the right wing. The other candidate, as
(37:24):
I mentioned, is Shinjiro Koizumi. He's the son of the
former Prime Minister Janichiro Koizumi, who listeners might remember was
Prime minister in the early to mid two thousands while
George W. Bush was the president in the US. He's
very young, he's a little inexperienced, but he has had
quite an impressive year. He came in as Agriculture minister
(37:47):
early on this year to deal with the rice prices
that I mentioned earlier, and very immediately and effectively was
able to generate a downturn in rice prices by chaining
how the country was releasing its reserves of rice that
will have certainly one of some plaudits. He's believed to
(38:08):
be quite popular with the public. He's young, he's good looking,
he's charismatic. He has a celebrity wife and a young family,
so he has a lot of things going for him.
Those would be the two leading candidates I think at
the moment.
Speaker 4 (38:23):
That is Bloomberg opinion columnist Gerode Ready and I'm Doug Chrisner.
Catch us weekdays for the Daybreak Asia podcast. It's available
wherever you get your podcast.
Speaker 2 (38:32):
Tom, Thank you Doug. And that does it for this
edition of Bloomberg day Break Weekend. Join us again Monday
morning at five am Wall Street Time for the latest
on markets overseas, in the news you need to start
your day. I'm Tom Busby. Stay with us. Top stories
and global business headlines are coming up right now.
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