December 12, 2025 • 39 mins
Bloomberg Daybreak Weekend with Host Nathan Hager take a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to the November jobs report and quarterly earnings from Nike.
- In the UK – a look ahead to the Conference of Paris.
- In Asia – a look ahead to the next monetary policy decision from the Bank of Japan.
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight Ahead on the program, we'll
look to US non farm payrolls for November and earnings
from sneaker giant Nike. I'm Nathan Hager in Washington.
Speaker 3 (00:25):
I'm Callie hepkea Hey in London, where we discussed at
Europe's business and political challenges in the face of US criticism.
Speaker 4 (00:32):
I've Dot Krisner looking at the likelihood of a rate
increase from the Bank of Japan.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two 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 (01:02):
Good day to you. I'm Nathan Hagar. We begin today's
program with US jobs numbers. Non farm payrolls for the
month of November are due out Tuesday at eight thirty am.
Wall Street Time For more and what to expect. We're
joined by Michael McKee, international economics and policy correspondent for
Bloomberg Radio and Television. First off, Mike, I don't really
(01:23):
remember having a job's Tuesday before the government shutdowns really
changed things, an't it?
Speaker 5 (01:29):
It really has? Somebody said the other day, given the
schedule for the releasing all the data that we didn't
get before, that it's soon going to be twenty twenty six,
except at the Bureau of Labor Statistics, we'll still be
twenty twenty five for quite some time.
Speaker 2 (01:43):
So what are we expecting with the numbers do out
this coming Tuesday on a delayed schedule then.
Speaker 5 (01:51):
Well, to be totally honest, we're expecting a lot of
confusion because what they're doing is trying to put out
as much of the October report in terms of the
Establishment survey, where they count how many jobs as they can,
but they don't have complete data. And then they're going
to put out the November payrolls report with most of
(02:14):
the data that they need, but we're going to have
to parse two months there together, and some of it
won't even the data won't even be there, so we're
going to have to take it with a bit of
a grain of salt, but it will give us a
better view of sort of where we are right now.
The biggest issue is going to come on the other
side the household survey, which gives us the unemployment rate,
(02:36):
because there's no data for October, so they've got to
jump right into November, and they didn't get started questioning
people until the end of November, which creates some statistical
anomalies that are probably too nerdy to talk about. But
it's going to be a rough report to make a
(02:58):
lot out of.
Speaker 2 (02:59):
Okay, So since we have those holes in the household survey,
even with the November numbers coming out, does that raise
some questions in the market about what the reliability even
of the November data.
Speaker 5 (03:11):
It should and J. Powell in his news comforts this
past week said the very same thing, that the FED
is going to have to really analyze this and not
take it at face value because they understand the statistical
issues that are involved.
Speaker 1 (03:26):
Now.
Speaker 5 (03:26):
The good thing is for the FED they don't meet
again until January twenty eighth, and so therefore they will
have the December numbers, which will be a complete report
at least to go on before they have to make
another decision, but we will get more information than we
have had, and in certain categories of jobs, will get
(03:48):
good information because a lot of that stuff comes in
electronically wasn't affected by the government shutdown. But there will
be gaps in the numbers for October November.
Speaker 2 (03:57):
So in terms of the gaps that are meant to
be filled here, what particularly are you looking for that
is going to be filled in and what's your expectation there.
Speaker 5 (04:07):
Big companies, manufacturing companies, people like that, and large retailers.
They have computerized records that they send in to the
Bureau Labor Statistics, so those kinds of numbers will show up.
It's going to be harder for them to count things
that are at small businesses which are surveyed but don't
(04:28):
necessarily send in their stuff electronically, or construction workers because
they're sort of itinerant and can be from job to job.
And home healthcare workers, now that's going to be interesting
because home healthcare has been the biggest job creator in
the last few years, and so we might get a
distorted number there that would kind of throw off the total.
Speaker 2 (04:52):
In terms of the data that we've gotten from the
private sector, so far, we've seen all sorts of ADP figures,
the Challenge Grain, Christmas layoff notices as well. What does
that tell us about what we could see from the
rest of the data that's coming from the BLS.
Speaker 5 (05:09):
I think all that will tell you is that they
sort of confirm the idea that the hiring environment has
slowed a lot. Neither one of them is a particularly
good predictor of what the overall BLS numbers will be.
It's just kind of gives you some data. They give
you a direction, but not necessarily a magnitude. So I
(05:32):
don't think we go into it with a completely clear
expectation for what the numbers are going to be. The
consensus forecast at Bloomberg has absolutely economists is for forty
thousand jobs, but again, you know that's combining two months,
so there might be job losses in one month and
job gains in another month, and it's really hard to
(05:52):
know where we end up. You kind of just have
to take it as it comes.
Speaker 2 (05:56):
And you mentioned that there's going to be kind of
a hole in the unemployment rate with the household survey
on hold due to the shutdown, But what's the trend
when it comes to the unemployment rate. Are we seeing
more people getting into the job market.
Speaker 5 (06:11):
Well, we see the last data we have is from September,
and more people did go into the labor market, and
that's one reason that the unemployment rate went up a
bit in September. We don't know what has happened since.
And one of the issues is of course that the
administration is deporting as many people as they can, deport
as fast as they can, and that's cutting down on
(06:32):
the size of the labor force. But we don't have
exact figures, so that will also be an interesting aspect
of these reports to see whether or not we're losing
workers or losing potential workers because they have been kicked
out of the country. That would raise probably raise the
(06:53):
unemployment rate. So there are some other concerns. One thing
I didn't mention is that a lot of the people
who were fired by DOGE or took early retirement because
they thought they were going to get fired, They were
on the payrolls till the end of the fiscal year,
which was September thirtieth, so we could see a big
(07:14):
drop in government payrolls in the month of October, and
that would have the effect of depressing the whole thing,
and it might increase unemployment numbers some but it looks
like at this point not a whole lot. But it
does complicate even more the whole task of sorting all
(07:35):
this out.
Speaker 2 (07:36):
Now lots to sort out. I had of jobs Tuesday.
Thanks Mike, appreciate this. That's Michael McKee, Bloomberg International Economics
and Policy correspondent. We moved next to corporate earnings from Nike,
the sneaker giant report's second quarter results on Thursday. For
more on what to expect, it's got to be Putam Goyle,
senior US e commerce and retail analysts at Bloomberg Intelligence,
(07:58):
put them thanks for being here. The Swish has kind
of been crushed lightly by the competition, hasn't it. So
what are we expecting this time around from Nike?
Speaker 6 (08:07):
Yeah?
Speaker 7 (08:07):
I think right now we're just holding tight, kind of
waiting for the turnaround to take shape. We think Nike
is making all the right moves to get itself back
on track. That said, earnings will be a little light,
and that's as expected. We do expect sales to fall
turn negative again in fiscal two Q slipping by low
single digits and that's after it posted a slight gain
(08:30):
in the last quarter. I'm not so worried about that.
My main concern is, is Nike moving forward on clearing inventories.
Is Nike innovating to draw full price sales of the
new stuff that it's introducing and it is.
Speaker 2 (08:45):
So you say that Nike is doing the right things
to do that turnaround, talk a little bit more about
what you're seeing. Why you think Nike might be getting
back on the front foot to keep using puns.
Speaker 7 (08:58):
Yeah, I guess you know. The big II guest move
for me that they are making to right size the
brand is right sizing inventories. Inventories have been very elevated
for Nike for a few years now, and just bringing
them down and really getting them to realign with sales
is the number one factor that I'm looking for, to
(09:19):
have them kind of pick out everything that's old, that
they made too much of and that wasn't working, to
really bring in the new stuff more mainstream. The other
thing is innovation. So when you think about what Nike
was doing just you know, three to five years ago,
it was just introducing the same thing with a different
color wave. That's simply I mean they were doing a
(09:40):
lot of other things, but there just wasn't as much
innovation as the customer demanded. I think that's changing. I
think they are adding more performance, more innovation to their
product lineup. I also think that they're going back on
the playing field. So you know, one question that I
get asked often is how did Life let Hoka and
(10:01):
the ads take share from it? And the best answer
I could give is it's because they weren't on the field.
They weren't where the runners were. They kind of took
a back seat in the sport and they focused on
digital too aggressively. That's all changed. They're back on the field,
they're at the runs, they have shoes that the runners
(10:21):
are wearing, they're showing off and quite honestly, they are
competitive and they are just as good, if not better
than some of what's out there in the competition.
Speaker 2 (10:30):
Well, that's been the thing, right because there has been
so much attention on these upstart sneaker makers. You mentioned
Hoka and On coming out with these more I guess
innovative products compared to what Nike's product line has been
over the last few years. What is it that Nike's doing,
What kind of changes. Is it making to sort of
meet up with that competition.
Speaker 7 (10:50):
It's being where the runners are. It's very simple. It's
back to one on one. It's we need to be
on the running grounds. We need to be at the races.
We need to have the runners wear our shoes and
believe that they are the best shoes or that's for
They're doing all of that now. It's just a matter
of time. I think we'll start to see it in
the results. The other thing I would say is, you know,
(11:12):
we talk about these emerging brands or I guess these
newer brands taking share, but when you think of the
market share that Nike holds given its size, it's still
the number one footwear brand in the world. And we
ran a survey at BI just last month asking consumers,
when you shop for sneakers, especially athletic sneakers, who do
(11:34):
you wear? Nike was still number one, And yes, Toka
and On are definitely gaining traction, but Nike leads still
by a wide margin.
Speaker 2 (11:44):
Is Nike putting out the kind of product that sneaker
heads are still willing to pay top dollar for. I
know some of these models can really drive into pretty
high price points. Is that something that Nike is able
to meet.
Speaker 7 (11:59):
Yeah, I think so. And if you think about the
price points that Nike is launching these new products, that
they're pretty competitive with what's out there in the competition.
So they The nice thing about Nike is that they
have a range of price points, right, So if you
want to buy sneakers starting at seventy eighty dollars, you
can at that one hundred dollars price point, but you
can go as high as up to two forty two
(12:20):
fifty two for like the most premium sneaker that they offer.
And when you think about the competition, I think they
do too. Offer sneakers, you know, in the one hundred
and forty hundred and sixty a north of two hundred
dollars range and depending on the style that you're looking at.
Speaker 2 (12:34):
Really appreciate this, Punum, thanks again for being with us.
That's Punam Goyle, senior US e Commerce and retail analyst
at Bloomberg Intelligence. And coming up on Bloomberg Day Break weekend,
we'll look at Europe's business and political challenges in the
face of US criticism. I'm Nathan Hager, and this is Bloomberg.
(13:03):
This is Bloomberg Daybreak weekend our global look ahead at
the top stories for investors in the coming week. I'm
Nathan Hager in Washington. Up later in the program, we'll
look at whether the Bank of Japan will raise interest rates.
But first, in the coming days, global leaders convene in
France at the Conference of Paris. It is an annual
gathering in the City of Light which encourages knowledge sharing
(13:24):
on economic, social and environmental issues in the hope of
collaboration to overcome the world's challenges. I Meanwhile, political leaders
are gearing up for the European Council meetings, where priorities
will be on Ukraine and its security. For more, Let's
go to London and bring in Bloomberg Daybreak europe Anker Caroline.
Speaker 3 (13:41):
Hepger Nathan Europe is facing complicated times a week economy,
the war in Ukraine, and a strained relationship with the
Trump White House, three persistent and intertwined challenges the continent
has grappled with throughout twenty twenty five. The region's leaders
are deeply concerned by US efforts to end the nearly
(14:02):
four years long conflict in Ukraine by cutting a deal
with the aggressor Russia. But what action can European leaders take?
From JD Vance's speech at the Munich Security Conference in
February through to the thirty three page national Security strategy
signed by President Trump that claims Europe risks civilizational erasure,
(14:25):
the issue for Europe, according to JP Morgan CEO Jamie Darmon,
is anti business, bureaucracy, internal fragmentation, and a lack of innovation.
He told Bloomberg's Caroline Hyde that Europe needs to make
serious changes to survive.
Speaker 8 (14:42):
I think Europe has a real problem. You know, it's
very hard to look at the world and you know,
have we have movie tectonic plays you've seen, you've heard
spoken about AI, the enemies in the satellite up above
and in your computer systems right now, you know, and
the world change, the other tectonic plays, a rise of China,
huge global deficits, social network programs that probably can't be
(15:05):
maintained over a long period of time. So Europe has
a problem. I think they accomplished an unbelievable thing with
when they put the euro got together the EC and
they said, you know, let's live in peace and not war.
You know, they had World War One and World War two,
but they had them. They frankop Preussian Wars, the Napoleonic Wars,
the One Hundred Years of War, the War the Roses,
you know, and so living in piece is a good thing,
(15:26):
but it got bogged down. They never finished the Common Market.
It takes twenty seven nations, you know, to make a decision.
They let their military drop dramatically. It's very bureaucratically wide.
Part of the reason that, you know, they lost Britain
to the EU, which I think makes it bad for
both of them, by the way, And so you got
to be honest about this. So in those tectonic plays
(15:48):
may move over twenty years, but if we ever write
a book about how the West was lost, it will
be because of the following. It will because of we
didn't get her act together here, and we go through
all the policies here, that we didn't have the strongest
military in the world, and that we allowed Europe to
fall apart.
Speaker 3 (16:05):
That was JP Morgan CEO Jamie Dimond speaking there to
Bloomberg's Caroline Hyde. At the Reagan National Defense Forum, questions
of European security and collaboration with the US will be
major points of discussion at the Conference of Paris in
the next few days. Speakers include Bruno Lemaire, the former
(16:25):
French Economy and Finance Minister, and Ken Griffin, CEO and
founder of Citadel. It's also an issue that will be
on the minds of leaders at the upcoming EU Leader's
Summit in Brussels. Well, joining me now for more is
Ben Sils, Bloomberg's managing editor for European Government and Economy. Ben,
good to speak to you. Firstly, I'd just like your
(16:46):
reaction to what Jamie Diamond had to say. Really, his
comments have dominated news in Europe over the past few days,
saying that Europe has a big problem. What do you
think the response and the thinking is in Brussels and
across Europe.
Speaker 6 (17:02):
Well, I think he's right. For starters, I think most people,
most European officials will recognize that he's right. He's not
the first person to say this, but when somebody as
influential as Jamie Dammon makes that sort of comment so publicly,
it has to sting. I think that will it will
(17:25):
it lead to a bit more soul searching. I'm not
really sure. To be honest, I think that the Draggy
report last year was arguably a more substantial and more
kind of conspicuous call to arms for European officials, and
the progress on the back of that has been limited,
(17:46):
and the progress on so many of the critical files
for the European Union has has continued to be kind
of plagued by the same old problems of the need
for consensus, like the divisions over the sort of kind
(18:06):
of vision of the sort of European economy that people
want to build and that just kind of constantly holds
the European Union back.
Speaker 3 (18:14):
Do you think that it is something that European leaders
are going to think about at this EU Council meeting
or at the conference of Paris, where we're going to
see again a number of leading US CEOs speaking to Bloomberg,
speaking to the investor community. We know that the drug
(18:34):
report has has not perhaps had the galvanizing impact that maybe,
you know, the former ECV president might have wanted to see.
Speaker 6 (18:44):
I would imagine it's likely to be a topic for
discussion on the sidelines. I would imagine that Emmanuel Macran,
who is always one for articulating his grand vision, might
be talking about those sorts of issues. But what we've
seen some after some is that Macran's rhetoric is not
(19:04):
successful in persuading the rest of the European leadership to
kind of come along and to take decisions. And we've
got we've got the very kind of concrete, tangible decision
on the table of what they're going to do about Ukraine,
what are they going to do about the frozen Russian assets.
And that's the real test if the if the Europeans
(19:25):
want to prove at this moment, when the White House
is really stepping up its push for a settlement of
the of the war in Ukraine, the single most important
thing that Europeans can do is find a way to
supply for substantial amounts of additional financing to Kiev with
this mechanism based on the frozen Russian assets. And they've
(19:46):
been going around around in circles on that for months,
so now it's really time for them to deliver on
that one.
Speaker 3 (19:54):
And that again is the issue that President Trump rays
also just in the past few days, sizing the talk
the lack of action as he sees it, also again
using this very strong, very critical language about Europe. It
really does seem that the Trump White House has the
(20:14):
EU in its sights and he's talking about European nations,
decaying this also must have an impact on leaders in
Europe too. I mean, I just note that the former
EU diplomaut Joseph Burrell saying European leaders must stop pretending
that Trump is not our adversary. Are we at that
(20:37):
point yet?
Speaker 6 (20:38):
The Trump administration, I mean, their rhetoric flips back and
forth a little bit, but we heard. I was at
the Munich Security Conference in February where j. D Rans
delivered that really shocking speech attacking the European Union, attacking
(20:58):
the kind of the democratic norms on which European societies
are based. And it was pretty clear then that any support,
any kind of legacy support that the Europeans were going
to be getting from the US was going to be
(21:20):
kind of limited, qualified and certainly not something that you
could count on. And we've seen that come back with
a vengeance with the US National Security Strategy, which came
out last week with that really quite shocking language about
civilizational Erasia, and you know, following up with those with
(21:44):
Trump's comments in his interview this week about the weakness
of European leaders. I have to say I've lived in
Europe for more than twenty years, and I don't see
much sign of civilizational Erasia. But I do think he's
right when he says that the European leaders a week
and I think that they've been demonstrating that with their
failure to must have proper support for Ukraine despite all
(22:06):
of their talk.
Speaker 3 (22:07):
H Yes, I suppose you know to that that raises
issues around migration anti immigration within Europe. But also, as
you say, the litmus test is Ukraine in the next
few days, what do you think is going to change
who is maybe best to engage with President Trump on
(22:29):
the European side. The European has been trying to get
into that negotiation, that process of the US wanting to
get to a deal with Moscow, but it's about speed
and who engages.
Speaker 6 (22:43):
Yeah, I think that it's pretty clear by this stage
in the process that if the Europeans want to have
a seat at the table, they need to earn that
by putting down some either some serious support, whether that's money,
(23:04):
whether that's weapons, whether that's political commitment, whether that's boots
on the ground in Ukraine. They need to be making
a real kind of concrete commitment to Ukraine, which will
demonstrate to the US to Russia, to the Ukrainians that
the Europeans are serious and serious about taking unilateral measures
(23:29):
outside of the kind of US umbrella to defend and
promote their own interests. And so far we haven't seen that.
Speaker 3 (23:39):
I think. I don't know for sure, but I think
it would have flown a little bit more under the radar.
Again in recent days the address that the Chance of Germany,
Friedrich Mertz, made on TV to German voters in the
last few days, where actually he was, you know, kind
of count entering what was happening in the US and
(24:02):
was a little bit critical, i'd say, even fairly critical
of the United States. And I think again, there are
moves in Europe to spend a lot more on defense,
and just in the last few few days that has
been commitment by Germany to build out its conventional armed forces.
(24:24):
So there is a response that is happening, isn't there
in Europe?
Speaker 6 (24:29):
Yeah, that's right actually, and I think German defense spending.
If you're looking for arguments to support the idea that
the Europeans are getting serious, then German defense spending is
that should be top of the list. The increase in
German defense spending is significant, it's real, it's happening, and
it's going to have a meaningful impact on European security
(24:56):
in the next decade. And that's, you know, without doubt,
Matt's biggest achievement. I would say, be in a difficult
first year in office.
Speaker 3 (25:11):
Ben, thank you so much for being with us. There'll
be plenty then for both Europe's political and business and
finance leaders to think about in the next few days,
with a couple of big events in Europe. Ben Sils
is Bloomberg's Managing editor for European Politics and Economy. Thank you.
We will have full coverage in the next few days
(25:32):
of the Conference of Paris with our own franc In
Laqua and Danny Berger and the EU Leader's summit right
here on Bloomberg Radio. I'm Caroline Hepget in London. You
can catch us every weekday morning for Bloomberg Daybreak Europe,
beginning at six am in London. That's one am on
Wall Street.
Speaker 2 (25:48):
Nathan, Thanks Caroline, and coming up on Bloomberg Daybreak weekend,
we look ahead to a monetary policy decision from the
Bank of Japan. I'm Nathan Hagger and this is Bloomberg.
(26:10):
This is Bloomberg day Break weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Nathan Hagger in Washington. In the coming days, the
Bank of Japan is expected to raise its policy interest rate.
For a closer look, let's bring in the host of
the Daybreak Asia podcast, Doug Krisner, Nathan.
Speaker 4 (26:27):
Over the last month, we have seen more bets placed
on a BOJ rate hike in the coming week. Right now,
the swaps market has assigned a ninety one percent probability
of a twenty five basis point increase. Now, if that
comes to pass, it would take the boj's policy rate
to seventy five basis points, and that would be a
thirty year high. Just a month ago, the probability of
(26:50):
a rate hike was less than fifty percent. Let's take
a closer look now at the dynamics surrounding the boj's
decision with Bloomberg's Paul Jackson. Paul cover the economies of
Japan and South Korea, and he joins us from our
studios in Tokyo. Thank you for making time. Can you
help me understand how we got to a ninety one
percent probability when a short while ago, the probability was
(27:13):
less than fifty percent.
Speaker 9 (27:14):
Well, it all relates really to a speech at the
beginning of December by a Bank of Japan governor Kazuo Uida,
in which he said the central Bank would consider the
pros and cons of raising interest rates at its next meeting.
Now that is seen as key language hinting at a
(27:36):
rate hike. Subsequently, Bloomberg reported that key government officials would
not try to block a rate hike, and also separately
we reported that officials at the bank were ready to
raise the rate, and so that has had a dramatic
effect on expectations for a rate hike at the upcoming meeting.
Speaker 4 (27:59):
Is there any conversation around the possibility that the BOJ
may have fallen a bit behind the curve.
Speaker 9 (28:05):
Absolutely, Obviously, We've seen comments from American officials, including Scott Pssant,
about the risk of falling behind and whether the BOJ
is acting fast enough. We have inflation at three percent.
I don't know about you, Doug, but to me that
seems to be higher than the Bank of Japan's two
(28:27):
percent target. And you know what, he's been there for
more than three and a half years, so in terms
of conventional policy making, you would want to raise rates
to cool inflation. And you know, just another perspective on
this is that with inflation at three percent, if your inflation,
(28:50):
if you're a central bank rate, even if you raise
it to zero point seventy five percent, you're still way
below the inflation rate. That means real interest rates are
deeply zero. And to extend that model a bit further,
if you think in terms of where inflation was in
(29:10):
April twenty twenty one, it was actually falling. Prices were
falling by zero point nine percent, So at that time
a negative interest rate at the Bank of Japan of
minus zero point one was actually positive zero point eight
percent positive at that time, whereas now we're deeply, deeply negative. So,
I mean, to all intents and purposes, it seems crazy
(29:33):
that we're still solow.
Speaker 4 (29:35):
So Paul, when we consider the rates environment in Japan
and we look at the Japanese bond market, what becomes apparent.
Speaker 9 (29:41):
Well, I think in the bond market among investors, there
are concerns on the one hand about how much spending
Sanattakichi's government is going to conduct. We've seen this hefty
economic package unveiled last month, and you know there could
be more spending down the line, So that raises some
(30:02):
concerns about what's going to happen with bondishents and so on. Also,
I mean, if interest rates at the shorter end are
going to be going up, then that's going to affect
things across the curve when you think about it. I mean,
just getting back to the earlier point. You know, if
inflation is at a much higher level, then interest rates
(30:23):
also naturally would be expected to go up.
Speaker 4 (30:27):
What do we know about the path of radio increases
in the new year? Might we see any I'm wondering
if Governor Uwada has dropped any hints. What do we know?
Speaker 9 (30:36):
Well, I think this is going to be the key
point of interest that this meeting, given that the raid
increases is largely expected by everyone. So what is mister
Awada going to say about the future course? I mean,
I think he's going to stick to some formulaic language
on if our outlook is realized, we will continue to
(30:59):
raise interest rates. But the key point is how fast
are they going to do that and how far will
they go? And I think before we had Donald Trump's tariffs,
before Takaichi took over as prime minister. The understanding was
that the Bank of Japan wanted to raise interest rates
at a pace of about every six months, once every
(31:19):
six months, and then with those tariffs and the arrival
of Takichi's Prime minister, that understanding kind of changed to, oh, well,
maybe it's more like once every year, once a year. Now.
I think that's what investors are going to be looking
at at this meeting. You know which one is it?
Is it once every six months or once every year.
Speaker 4 (31:40):
We know the Japanese economy has struggled a bit in
the face of those US tariffs. Is there the sense
now that Japan by and large has been able to
absorb the initial shock without too much difficulty.
Speaker 9 (31:53):
Well, the Ladies' GDP figures showed a contraction of two
point three percent in the quarter, so that's not a
great number. Part of that was a tariff effect, but
that was kind of a reflected a pulling back of
exports over the summer after some front loading ahead of
(32:13):
what people were fearing would come from the tariff barrage
from Donald Trump. So I think the takeaway is okay,
bad GDP figures for the summer, but we're probably going
to return to growth now, and the hit from the
tariffs is, you know, surprisingly mild compared from what expectations
(32:34):
were in the darkest moments earlier this year.
Speaker 4 (32:36):
So when you say growth, is that based on the
notion that Prime Minister at taki Ichi is going to
deliver the sort of stimulus to reinvigorate the economy in
a meaningful way.
Speaker 9 (32:47):
Yeah, I think we're going to have rebound from the summer.
There were some technical factors in the housing market that
also contributed to the contraction. So I think we're going
to return to growth now. We're not talking gangbus the growth.
We're talking like, you know, moderate growth. But in the
environment of tariffs, is that can take place. That is
a positive. And in terms of whether the Japanese consumer
(33:11):
is adjusting to the reality, the new reality for many
Japanese of inflation of prices going up, we are seeing
consumption very very slowly on an upward path. It's not
a hugely strong, but it is pointing in the right direction.
Speaker 4 (33:28):
I'd like to get your sense of this skirmish, if
I can use that term between Tokyo and Beijing. Maybe
it's a little more than that. After Prime Minister taki
ICHI's comments on Taiwan. I'm trying to get a sense
of the risk of stress in the trade relationship between
China and Japan, and if China were to create some
difficulty here, how that might impact the overall Japanese economy.
Speaker 9 (33:52):
I think the spat between China and Japan can have
an observable effect on Japan's economy. Coming up this week,
we will be seeing the latest tourist information data and
we expect to see a drop in the number of
Chinese tourists to Japan in the month of November. Now,
(34:14):
the Chinese tourists are the biggest spenders in among foreign
visitors to Japan, so that will have an effect. But
this kind of impact on GDP is that enough to
move the needle and change the Japanese government's thoughts on
how it should respond to China. I don't think so.
I think it's going to be an observable impact, but
(34:35):
not big enough to really move the needle. However, China
does have some other possibilities, and of those the scariest
probably would be cutting off rare earth supplies. Now, that
might give policymakers in Tokyo food for.
Speaker 4 (34:52):
Thought so, Paul, we know in the last week the
FED cut its policy rate by twenty five basis points. Now,
that move was widely expected, and at the same time,
officials maintained the outlook for just one rate cut in
the new year, and if you look at the FED statement,
it was rewarded in a very subtle way to suggest
greater uncertainty now about when the FED might cut again. Nonetheless,
(35:17):
we did see some dollar weakness, and of course the
flip side of that was a stronger Japanese currency. When
you look at what's happening with the Fed vis a
VI the Bank of Japan. Does FED policy right now
take much pressure off the Bank of Japan, particularly going
back to this notion of a stronger currency, what it
would do in fighting inflationary pressure.
Speaker 9 (35:38):
Well, the currency dynamics are very interesting. I mean, a
large factor in yen weakness is the difference in real
interest rates between Japan and the US. Now, I think
what we've seen since the whole tariff war started was
that differential element. That aspect has had less of a
(36:03):
you know, the correlation between the difference in interest rates
and where the Japanese yen is against the dollar is
kind of out of sync quite a bit from where
you'd expect it to be. In other words, what I'm
saying is the yen would actually be quite a bit
stronger than where it is at the moment. So that
kind of speaks to the uncertainty factor out there.
Speaker 4 (36:27):
We know inflation in Japan has been persistently above the
boj's two percent target for quite a number of months. Now,
I think that may be an understatement. I'm curious about
the inputs that have been the primary drivers.
Speaker 6 (36:40):
Well.
Speaker 9 (36:40):
I think in terms of the inflation at the moment,
the main culprit is food food inflation, and I think
it's the movements there that will be one of the
key drivers to the inflation trend over the coming months.
Another factor that we need to be a cognizant of
(37:00):
is that in Prime Minister Tack HG's package for the economy,
there are some more subsidy measures for households to deal
with electricity bills and gas bills, and some of these
measures are already forecast by the government to shave off
about zero point seven percentage point off inflation. So I
(37:21):
think we are going to see much lower figures coming
in over the coming months. And you know, you could
argue that that's why the BOJ also wants to get
a rate hike out of the way, because you want
to go wile the figures still looking hot.
Speaker 4 (37:36):
What about the story on wages that was such a
focal point for such a long time, waiting for wages
to have a meaningful uptick. Has wage inflation improved?
Speaker 9 (37:45):
We're seeing a pretty solid trend. If you look at
the figure for wages for full time employees in regular jobs,
it's around the two point two percent mark for a
stable sample. There's lots of out there, but I think
that's one of the ones to really focus on. It
gives a much more stable view of the trend now
(38:07):
compared with previous years, that's a very very solid figure.
But compared with three percent inflation, that is not a
great number because that means your purchasing power is getting
weaker in real terms all the time. And I think
that's the big thing that needs to change, is we
need to get the wage increases ahead of where the
(38:29):
inflation rate is to really turn around the consumption figures
in the economy and drive growth.
Speaker 4 (38:35):
Paul, it's always a pleasure. Thank you so much for
helping US preview this week's boj decision. Paul Jackson there
from Bloomberg News. He covers the economies of Japan and
South Korea. I'm Doug Krisner. You can catch us weekdays
for the Daybreak Asia podcast. It's available wherever you get
your podcast.
Speaker 2 (38:52):
Nathan, Thanks Doug, and that does it for this edition
of Bloomberg Daybreak Weekend. Join us again Monday morning at
five am Wall Street Time for the latest don markets,
overseas and the news you need to start your day.
I'm Nathan Hager. 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 Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight Ahead on the program, we'll
look to US non farm payrolls for November and earnings
from sneaker giant Nike. I'm Nathan Hager in Washington.
Speaker 3 (00:25):
I'm Callie hepkea Hey in London, where we discussed at
Europe's business and political challenges in the face of US criticism.
Speaker 4 (00:32):
I've Dot Krisner looking at the likelihood of a rate
increase from the Bank of Japan.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two 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 (01:02):
Good day to you. I'm Nathan Hagar. We begin today's
program with US jobs numbers. Non farm payrolls for the
month of November are due out Tuesday at eight thirty am.
Wall Street Time For more and what to expect. We're
joined by Michael McKee, international economics and policy correspondent for
Bloomberg Radio and Television. First off, Mike, I don't really
(01:23):
remember having a job's Tuesday before the government shutdowns really
changed things, an't it?
Speaker 5 (01:29):
It really has? Somebody said the other day, given the
schedule for the releasing all the data that we didn't
get before, that it's soon going to be twenty twenty six,
except at the Bureau of Labor Statistics, we'll still be
twenty twenty five for quite some time.
Speaker 2 (01:43):
So what are we expecting with the numbers do out
this coming Tuesday on a delayed schedule then.
Speaker 5 (01:51):
Well, to be totally honest, we're expecting a lot of
confusion because what they're doing is trying to put out
as much of the October report in terms of the
Establishment survey, where they count how many jobs as they can,
but they don't have complete data. And then they're going
to put out the November payrolls report with most of
(02:14):
the data that they need, but we're going to have
to parse two months there together, and some of it
won't even the data won't even be there, so we're
going to have to take it with a bit of
a grain of salt, but it will give us a
better view of sort of where we are right now.
The biggest issue is going to come on the other
side the household survey, which gives us the unemployment rate,
(02:36):
because there's no data for October, so they've got to
jump right into November, and they didn't get started questioning
people until the end of November, which creates some statistical
anomalies that are probably too nerdy to talk about. But
it's going to be a rough report to make a
(02:58):
lot out of.
Speaker 2 (02:59):
Okay, So since we have those holes in the household survey,
even with the November numbers coming out, does that raise
some questions in the market about what the reliability even
of the November data.
Speaker 5 (03:11):
It should and J. Powell in his news comforts this
past week said the very same thing, that the FED
is going to have to really analyze this and not
take it at face value because they understand the statistical
issues that are involved.
Speaker 1 (03:26):
Now.
Speaker 5 (03:26):
The good thing is for the FED they don't meet
again until January twenty eighth, and so therefore they will
have the December numbers, which will be a complete report
at least to go on before they have to make
another decision, but we will get more information than we
have had, and in certain categories of jobs, will get
(03:48):
good information because a lot of that stuff comes in
electronically wasn't affected by the government shutdown. But there will
be gaps in the numbers for October November.
Speaker 2 (03:57):
So in terms of the gaps that are meant to
be filled here, what particularly are you looking for that
is going to be filled in and what's your expectation there.
Speaker 5 (04:07):
Big companies, manufacturing companies, people like that, and large retailers.
They have computerized records that they send in to the
Bureau Labor Statistics, so those kinds of numbers will show up.
It's going to be harder for them to count things
that are at small businesses which are surveyed but don't
(04:28):
necessarily send in their stuff electronically, or construction workers because
they're sort of itinerant and can be from job to job.
And home healthcare workers, now that's going to be interesting
because home healthcare has been the biggest job creator in
the last few years, and so we might get a
distorted number there that would kind of throw off the total.
Speaker 2 (04:52):
In terms of the data that we've gotten from the
private sector, so far, we've seen all sorts of ADP figures,
the Challenge Grain, Christmas layoff notices as well. What does
that tell us about what we could see from the
rest of the data that's coming from the BLS.
Speaker 5 (05:09):
I think all that will tell you is that they
sort of confirm the idea that the hiring environment has
slowed a lot. Neither one of them is a particularly
good predictor of what the overall BLS numbers will be.
It's just kind of gives you some data. They give
you a direction, but not necessarily a magnitude. So I
(05:32):
don't think we go into it with a completely clear
expectation for what the numbers are going to be. The
consensus forecast at Bloomberg has absolutely economists is for forty
thousand jobs, but again, you know that's combining two months,
so there might be job losses in one month and
job gains in another month, and it's really hard to
(05:52):
know where we end up. You kind of just have
to take it as it comes.
Speaker 2 (05:56):
And you mentioned that there's going to be kind of
a hole in the unemployment rate with the household survey
on hold due to the shutdown, But what's the trend
when it comes to the unemployment rate. Are we seeing
more people getting into the job market.
Speaker 5 (06:11):
Well, we see the last data we have is from September,
and more people did go into the labor market, and
that's one reason that the unemployment rate went up a
bit in September. We don't know what has happened since.
And one of the issues is of course that the
administration is deporting as many people as they can, deport
as fast as they can, and that's cutting down on
(06:32):
the size of the labor force. But we don't have
exact figures, so that will also be an interesting aspect
of these reports to see whether or not we're losing
workers or losing potential workers because they have been kicked
out of the country. That would raise probably raise the
(06:53):
unemployment rate. So there are some other concerns. One thing
I didn't mention is that a lot of the people
who were fired by DOGE or took early retirement because
they thought they were going to get fired, They were
on the payrolls till the end of the fiscal year,
which was September thirtieth, so we could see a big
(07:14):
drop in government payrolls in the month of October, and
that would have the effect of depressing the whole thing,
and it might increase unemployment numbers some but it looks
like at this point not a whole lot. But it
does complicate even more the whole task of sorting all
(07:35):
this out.
Speaker 2 (07:36):
Now lots to sort out. I had of jobs Tuesday.
Thanks Mike, appreciate this. That's Michael McKee, Bloomberg International Economics
and Policy correspondent. We moved next to corporate earnings from Nike,
the sneaker giant report's second quarter results on Thursday. For
more on what to expect, it's got to be Putam Goyle,
senior US e commerce and retail analysts at Bloomberg Intelligence,
(07:58):
put them thanks for being here. The Swish has kind
of been crushed lightly by the competition, hasn't it. So
what are we expecting this time around from Nike?
Speaker 6 (08:07):
Yeah?
Speaker 7 (08:07):
I think right now we're just holding tight, kind of
waiting for the turnaround to take shape. We think Nike
is making all the right moves to get itself back
on track. That said, earnings will be a little light,
and that's as expected. We do expect sales to fall
turn negative again in fiscal two Q slipping by low
single digits and that's after it posted a slight gain
(08:30):
in the last quarter. I'm not so worried about that.
My main concern is, is Nike moving forward on clearing inventories.
Is Nike innovating to draw full price sales of the
new stuff that it's introducing and it is.
Speaker 2 (08:45):
So you say that Nike is doing the right things
to do that turnaround, talk a little bit more about
what you're seeing. Why you think Nike might be getting
back on the front foot to keep using puns.
Speaker 7 (08:58):
Yeah, I guess you know. The big II guest move
for me that they are making to right size the
brand is right sizing inventories. Inventories have been very elevated
for Nike for a few years now, and just bringing
them down and really getting them to realign with sales
is the number one factor that I'm looking for, to
(09:19):
have them kind of pick out everything that's old, that
they made too much of and that wasn't working, to
really bring in the new stuff more mainstream. The other
thing is innovation. So when you think about what Nike
was doing just you know, three to five years ago,
it was just introducing the same thing with a different
color wave. That's simply I mean they were doing a
(09:40):
lot of other things, but there just wasn't as much
innovation as the customer demanded. I think that's changing. I
think they are adding more performance, more innovation to their
product lineup. I also think that they're going back on
the playing field. So you know, one question that I
get asked often is how did Life let Hoka and
(10:01):
the ads take share from it? And the best answer
I could give is it's because they weren't on the field.
They weren't where the runners were. They kind of took
a back seat in the sport and they focused on
digital too aggressively. That's all changed. They're back on the field,
they're at the runs, they have shoes that the runners
(10:21):
are wearing, they're showing off and quite honestly, they are
competitive and they are just as good, if not better
than some of what's out there in the competition.
Speaker 2 (10:30):
Well, that's been the thing, right because there has been
so much attention on these upstart sneaker makers. You mentioned
Hoka and On coming out with these more I guess
innovative products compared to what Nike's product line has been
over the last few years. What is it that Nike's doing,
What kind of changes. Is it making to sort of
meet up with that competition.
Speaker 7 (10:50):
It's being where the runners are. It's very simple. It's
back to one on one. It's we need to be
on the running grounds. We need to be at the races.
We need to have the runners wear our shoes and
believe that they are the best shoes or that's for
They're doing all of that now. It's just a matter
of time. I think we'll start to see it in
the results. The other thing I would say is, you know,
(11:12):
we talk about these emerging brands or I guess these
newer brands taking share, but when you think of the
market share that Nike holds given its size, it's still
the number one footwear brand in the world. And we
ran a survey at BI just last month asking consumers,
when you shop for sneakers, especially athletic sneakers, who do
(11:34):
you wear? Nike was still number one, And yes, Toka
and On are definitely gaining traction, but Nike leads still
by a wide margin.
Speaker 2 (11:44):
Is Nike putting out the kind of product that sneaker
heads are still willing to pay top dollar for. I
know some of these models can really drive into pretty
high price points. Is that something that Nike is able
to meet.
Speaker 7 (11:59):
Yeah, I think so. And if you think about the
price points that Nike is launching these new products, that
they're pretty competitive with what's out there in the competition.
So they The nice thing about Nike is that they
have a range of price points, right, So if you
want to buy sneakers starting at seventy eighty dollars, you
can at that one hundred dollars price point, but you
can go as high as up to two forty two
(12:20):
fifty two for like the most premium sneaker that they offer.
And when you think about the competition, I think they
do too. Offer sneakers, you know, in the one hundred
and forty hundred and sixty a north of two hundred
dollars range and depending on the style that you're looking at.
Speaker 2 (12:34):
Really appreciate this, Punum, thanks again for being with us.
That's Punam Goyle, senior US e Commerce and retail analyst
at Bloomberg Intelligence. And coming up on Bloomberg Day Break weekend,
we'll look at Europe's business and political challenges in the
face of US criticism. I'm Nathan Hager, and this is Bloomberg.
(13:03):
This is Bloomberg Daybreak weekend our global look ahead at
the top stories for investors in the coming week. I'm
Nathan Hager in Washington. Up later in the program, we'll
look at whether the Bank of Japan will raise interest rates.
But first, in the coming days, global leaders convene in
France at the Conference of Paris. It is an annual
gathering in the City of Light which encourages knowledge sharing
(13:24):
on economic, social and environmental issues in the hope of
collaboration to overcome the world's challenges. I Meanwhile, political leaders
are gearing up for the European Council meetings, where priorities
will be on Ukraine and its security. For more, Let's
go to London and bring in Bloomberg Daybreak europe Anker Caroline.
Speaker 3 (13:41):
Hepger Nathan Europe is facing complicated times a week economy,
the war in Ukraine, and a strained relationship with the
Trump White House, three persistent and intertwined challenges the continent
has grappled with throughout twenty twenty five. The region's leaders
are deeply concerned by US efforts to end the nearly
(14:02):
four years long conflict in Ukraine by cutting a deal
with the aggressor Russia. But what action can European leaders take?
From JD Vance's speech at the Munich Security Conference in
February through to the thirty three page national Security strategy
signed by President Trump that claims Europe risks civilizational erasure,
(14:25):
the issue for Europe, according to JP Morgan CEO Jamie Darmon,
is anti business, bureaucracy, internal fragmentation, and a lack of innovation.
He told Bloomberg's Caroline Hyde that Europe needs to make
serious changes to survive.
Speaker 8 (14:42):
I think Europe has a real problem. You know, it's
very hard to look at the world and you know,
have we have movie tectonic plays you've seen, you've heard
spoken about AI, the enemies in the satellite up above
and in your computer systems right now, you know, and
the world change, the other tectonic plays, a rise of China,
huge global deficits, social network programs that probably can't be
(15:05):
maintained over a long period of time. So Europe has
a problem. I think they accomplished an unbelievable thing with
when they put the euro got together the EC and
they said, you know, let's live in peace and not war.
You know, they had World War One and World War two,
but they had them. They frankop Preussian Wars, the Napoleonic Wars,
the One Hundred Years of War, the War the Roses,
you know, and so living in piece is a good thing,
(15:26):
but it got bogged down. They never finished the Common Market.
It takes twenty seven nations, you know, to make a decision.
They let their military drop dramatically. It's very bureaucratically wide.
Part of the reason that, you know, they lost Britain
to the EU, which I think makes it bad for
both of them, by the way, And so you got
to be honest about this. So in those tectonic plays
(15:48):
may move over twenty years, but if we ever write
a book about how the West was lost, it will
be because of the following. It will because of we
didn't get her act together here, and we go through
all the policies here, that we didn't have the strongest
military in the world, and that we allowed Europe to
fall apart.
Speaker 3 (16:05):
That was JP Morgan CEO Jamie Dimond speaking there to
Bloomberg's Caroline Hyde. At the Reagan National Defense Forum, questions
of European security and collaboration with the US will be
major points of discussion at the Conference of Paris in
the next few days. Speakers include Bruno Lemaire, the former
(16:25):
French Economy and Finance Minister, and Ken Griffin, CEO and
founder of Citadel. It's also an issue that will be
on the minds of leaders at the upcoming EU Leader's
Summit in Brussels. Well, joining me now for more is
Ben Sils, Bloomberg's managing editor for European Government and Economy. Ben,
good to speak to you. Firstly, I'd just like your
(16:46):
reaction to what Jamie Diamond had to say. Really, his
comments have dominated news in Europe over the past few days,
saying that Europe has a big problem. What do you
think the response and the thinking is in Brussels and
across Europe.
Speaker 6 (17:02):
Well, I think he's right. For starters, I think most people,
most European officials will recognize that he's right. He's not
the first person to say this, but when somebody as
influential as Jamie Dammon makes that sort of comment so publicly,
it has to sting. I think that will it will
(17:25):
it lead to a bit more soul searching. I'm not
really sure. To be honest, I think that the Draggy
report last year was arguably a more substantial and more
kind of conspicuous call to arms for European officials, and
the progress on the back of that has been limited,
(17:46):
and the progress on so many of the critical files
for the European Union has has continued to be kind
of plagued by the same old problems of the need
for consensus, like the divisions over the sort of kind
(18:06):
of vision of the sort of European economy that people
want to build and that just kind of constantly holds
the European Union back.
Speaker 3 (18:14):
Do you think that it is something that European leaders
are going to think about at this EU Council meeting
or at the conference of Paris, where we're going to
see again a number of leading US CEOs speaking to Bloomberg,
speaking to the investor community. We know that the drug
(18:34):
report has has not perhaps had the galvanizing impact that maybe,
you know, the former ECV president might have wanted to see.
Speaker 6 (18:44):
I would imagine it's likely to be a topic for
discussion on the sidelines. I would imagine that Emmanuel Macran,
who is always one for articulating his grand vision, might
be talking about those sorts of issues. But what we've
seen some after some is that Macran's rhetoric is not
(19:04):
successful in persuading the rest of the European leadership to
kind of come along and to take decisions. And we've
got we've got the very kind of concrete, tangible decision
on the table of what they're going to do about Ukraine,
what are they going to do about the frozen Russian assets.
And that's the real test if the if the Europeans
(19:25):
want to prove at this moment, when the White House
is really stepping up its push for a settlement of
the of the war in Ukraine, the single most important
thing that Europeans can do is find a way to
supply for substantial amounts of additional financing to Kiev with
this mechanism based on the frozen Russian assets. And they've
(19:46):
been going around around in circles on that for months,
so now it's really time for them to deliver on
that one.
Speaker 3 (19:54):
And that again is the issue that President Trump rays
also just in the past few days, sizing the talk
the lack of action as he sees it, also again
using this very strong, very critical language about Europe. It
really does seem that the Trump White House has the
(20:14):
EU in its sights and he's talking about European nations,
decaying this also must have an impact on leaders in
Europe too. I mean, I just note that the former
EU diplomaut Joseph Burrell saying European leaders must stop pretending
that Trump is not our adversary. Are we at that
(20:37):
point yet?
Speaker 6 (20:38):
The Trump administration, I mean, their rhetoric flips back and
forth a little bit, but we heard. I was at
the Munich Security Conference in February where j. D Rans
delivered that really shocking speech attacking the European Union, attacking
(20:58):
the kind of the democratic norms on which European societies
are based. And it was pretty clear then that any support,
any kind of legacy support that the Europeans were going
to be getting from the US was going to be
(21:20):
kind of limited, qualified and certainly not something that you
could count on. And we've seen that come back with
a vengeance with the US National Security Strategy, which came
out last week with that really quite shocking language about
civilizational Erasia, and you know, following up with those with
(21:44):
Trump's comments in his interview this week about the weakness
of European leaders. I have to say I've lived in
Europe for more than twenty years, and I don't see
much sign of civilizational Erasia. But I do think he's
right when he says that the European leaders a week
and I think that they've been demonstrating that with their
failure to must have proper support for Ukraine despite all
(22:06):
of their talk.
Speaker 3 (22:07):
H Yes, I suppose you know to that that raises
issues around migration anti immigration within Europe. But also, as
you say, the litmus test is Ukraine in the next
few days, what do you think is going to change
who is maybe best to engage with President Trump on
(22:29):
the European side. The European has been trying to get
into that negotiation, that process of the US wanting to
get to a deal with Moscow, but it's about speed
and who engages.
Speaker 6 (22:43):
Yeah, I think that it's pretty clear by this stage
in the process that if the Europeans want to have
a seat at the table, they need to earn that
by putting down some either some serious support, whether that's money,
(23:04):
whether that's weapons, whether that's political commitment, whether that's boots
on the ground in Ukraine. They need to be making
a real kind of concrete commitment to Ukraine, which will
demonstrate to the US to Russia, to the Ukrainians that
the Europeans are serious and serious about taking unilateral measures
(23:29):
outside of the kind of US umbrella to defend and
promote their own interests. And so far we haven't seen that.
Speaker 3 (23:39):
I think. I don't know for sure, but I think
it would have flown a little bit more under the radar.
Again in recent days the address that the Chance of Germany,
Friedrich Mertz, made on TV to German voters in the
last few days, where actually he was, you know, kind
of count entering what was happening in the US and
(24:02):
was a little bit critical, i'd say, even fairly critical
of the United States. And I think again, there are
moves in Europe to spend a lot more on defense,
and just in the last few few days that has
been commitment by Germany to build out its conventional armed forces.
(24:24):
So there is a response that is happening, isn't there
in Europe?
Speaker 6 (24:29):
Yeah, that's right actually, and I think German defense spending.
If you're looking for arguments to support the idea that
the Europeans are getting serious, then German defense spending is
that should be top of the list. The increase in
German defense spending is significant, it's real, it's happening, and
it's going to have a meaningful impact on European security
(24:56):
in the next decade. And that's, you know, without doubt,
Matt's biggest achievement. I would say, be in a difficult
first year in office.
Speaker 3 (25:11):
Ben, thank you so much for being with us. There'll
be plenty then for both Europe's political and business and
finance leaders to think about in the next few days,
with a couple of big events in Europe. Ben Sils
is Bloomberg's Managing editor for European Politics and Economy. Thank you.
We will have full coverage in the next few days
(25:32):
of the Conference of Paris with our own franc In
Laqua and Danny Berger and the EU Leader's summit right
here on Bloomberg Radio. I'm Caroline Hepget in London. You
can catch us every weekday morning for Bloomberg Daybreak Europe,
beginning at six am in London. That's one am on
Wall Street.
Speaker 2 (25:48):
Nathan, Thanks Caroline, and coming up on Bloomberg Daybreak weekend,
we look ahead to a monetary policy decision from the
Bank of Japan. I'm Nathan Hagger and this is Bloomberg.
(26:10):
This is Bloomberg day Break weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Nathan Hagger in Washington. In the coming days, the
Bank of Japan is expected to raise its policy interest rate.
For a closer look, let's bring in the host of
the Daybreak Asia podcast, Doug Krisner, Nathan.
Speaker 4 (26:27):
Over the last month, we have seen more bets placed
on a BOJ rate hike in the coming week. Right now,
the swaps market has assigned a ninety one percent probability
of a twenty five basis point increase. Now, if that
comes to pass, it would take the boj's policy rate
to seventy five basis points, and that would be a
thirty year high. Just a month ago, the probability of
(26:50):
a rate hike was less than fifty percent. Let's take
a closer look now at the dynamics surrounding the boj's
decision with Bloomberg's Paul Jackson. Paul cover the economies of
Japan and South Korea, and he joins us from our
studios in Tokyo. Thank you for making time. Can you
help me understand how we got to a ninety one
percent probability when a short while ago, the probability was
(27:13):
less than fifty percent.
Speaker 9 (27:14):
Well, it all relates really to a speech at the
beginning of December by a Bank of Japan governor Kazuo Uida,
in which he said the central Bank would consider the
pros and cons of raising interest rates at its next meeting.
Now that is seen as key language hinting at a
(27:36):
rate hike. Subsequently, Bloomberg reported that key government officials would
not try to block a rate hike, and also separately
we reported that officials at the bank were ready to
raise the rate, and so that has had a dramatic
effect on expectations for a rate hike at the upcoming meeting.
Speaker 4 (27:59):
Is there any conversation around the possibility that the BOJ
may have fallen a bit behind the curve.
Speaker 9 (28:05):
Absolutely, Obviously, We've seen comments from American officials, including Scott Pssant,
about the risk of falling behind and whether the BOJ
is acting fast enough. We have inflation at three percent.
I don't know about you, Doug, but to me that
seems to be higher than the Bank of Japan's two
(28:27):
percent target. And you know what, he's been there for
more than three and a half years, so in terms
of conventional policy making, you would want to raise rates
to cool inflation. And you know, just another perspective on
this is that with inflation at three percent, if your inflation,
(28:50):
if you're a central bank rate, even if you raise
it to zero point seventy five percent, you're still way
below the inflation rate. That means real interest rates are
deeply zero. And to extend that model a bit further,
if you think in terms of where inflation was in
(29:10):
April twenty twenty one, it was actually falling. Prices were
falling by zero point nine percent, So at that time
a negative interest rate at the Bank of Japan of
minus zero point one was actually positive zero point eight
percent positive at that time, whereas now we're deeply, deeply negative. So,
I mean, to all intents and purposes, it seems crazy
(29:33):
that we're still solow.
Speaker 4 (29:35):
So Paul, when we consider the rates environment in Japan
and we look at the Japanese bond market, what becomes apparent.
Speaker 9 (29:41):
Well, I think in the bond market among investors, there
are concerns on the one hand about how much spending
Sanattakichi's government is going to conduct. We've seen this hefty
economic package unveiled last month, and you know there could
be more spending down the line, So that raises some
(30:02):
concerns about what's going to happen with bondishents and so on. Also,
I mean, if interest rates at the shorter end are
going to be going up, then that's going to affect
things across the curve when you think about it. I mean,
just getting back to the earlier point. You know, if
inflation is at a much higher level, then interest rates
(30:23):
also naturally would be expected to go up.
Speaker 4 (30:27):
What do we know about the path of radio increases
in the new year? Might we see any I'm wondering
if Governor Uwada has dropped any hints. What do we know?
Speaker 9 (30:36):
Well, I think this is going to be the key
point of interest that this meeting, given that the raid
increases is largely expected by everyone. So what is mister
Awada going to say about the future course? I mean,
I think he's going to stick to some formulaic language
on if our outlook is realized, we will continue to
(30:59):
raise interest rates. But the key point is how fast
are they going to do that and how far will
they go? And I think before we had Donald Trump's tariffs,
before Takaichi took over as prime minister. The understanding was
that the Bank of Japan wanted to raise interest rates
at a pace of about every six months, once every
(31:19):
six months, and then with those tariffs and the arrival
of Takichi's Prime minister, that understanding kind of changed to, oh, well,
maybe it's more like once every year, once a year. Now.
I think that's what investors are going to be looking
at at this meeting. You know which one is it?
Is it once every six months or once every year.
Speaker 4 (31:40):
We know the Japanese economy has struggled a bit in
the face of those US tariffs. Is there the sense
now that Japan by and large has been able to
absorb the initial shock without too much difficulty.
Speaker 9 (31:53):
Well, the Ladies' GDP figures showed a contraction of two
point three percent in the quarter, so that's not a
great number. Part of that was a tariff effect, but
that was kind of a reflected a pulling back of
exports over the summer after some front loading ahead of
(32:13):
what people were fearing would come from the tariff barrage
from Donald Trump. So I think the takeaway is okay,
bad GDP figures for the summer, but we're probably going
to return to growth now, and the hit from the
tariffs is, you know, surprisingly mild compared from what expectations
(32:34):
were in the darkest moments earlier this year.
Speaker 4 (32:36):
So when you say growth, is that based on the
notion that Prime Minister at taki Ichi is going to
deliver the sort of stimulus to reinvigorate the economy in
a meaningful way.
Speaker 9 (32:47):
Yeah, I think we're going to have rebound from the summer.
There were some technical factors in the housing market that
also contributed to the contraction. So I think we're going
to return to growth now. We're not talking gangbus the growth.
We're talking like, you know, moderate growth. But in the
environment of tariffs, is that can take place. That is
a positive. And in terms of whether the Japanese consumer
(33:11):
is adjusting to the reality, the new reality for many
Japanese of inflation of prices going up, we are seeing
consumption very very slowly on an upward path. It's not
a hugely strong, but it is pointing in the right direction.
Speaker 4 (33:28):
I'd like to get your sense of this skirmish, if
I can use that term between Tokyo and Beijing. Maybe
it's a little more than that. After Prime Minister taki
ICHI's comments on Taiwan. I'm trying to get a sense
of the risk of stress in the trade relationship between
China and Japan, and if China were to create some
difficulty here, how that might impact the overall Japanese economy.
Speaker 9 (33:52):
I think the spat between China and Japan can have
an observable effect on Japan's economy. Coming up this week,
we will be seeing the latest tourist information data and
we expect to see a drop in the number of
Chinese tourists to Japan in the month of November. Now,
(34:14):
the Chinese tourists are the biggest spenders in among foreign
visitors to Japan, so that will have an effect. But
this kind of impact on GDP is that enough to
move the needle and change the Japanese government's thoughts on
how it should respond to China. I don't think so.
I think it's going to be an observable impact, but
(34:35):
not big enough to really move the needle. However, China
does have some other possibilities, and of those the scariest
probably would be cutting off rare earth supplies. Now, that
might give policymakers in Tokyo food for.
Speaker 4 (34:52):
Thought so, Paul, we know in the last week the
FED cut its policy rate by twenty five basis points. Now,
that move was widely expected, and at the same time,
officials maintained the outlook for just one rate cut in
the new year, and if you look at the FED statement,
it was rewarded in a very subtle way to suggest
greater uncertainty now about when the FED might cut again. Nonetheless,
(35:17):
we did see some dollar weakness, and of course the
flip side of that was a stronger Japanese currency. When
you look at what's happening with the Fed vis a
VI the Bank of Japan. Does FED policy right now
take much pressure off the Bank of Japan, particularly going
back to this notion of a stronger currency, what it
would do in fighting inflationary pressure.
Speaker 9 (35:38):
Well, the currency dynamics are very interesting. I mean, a
large factor in yen weakness is the difference in real
interest rates between Japan and the US. Now, I think
what we've seen since the whole tariff war started was
that differential element. That aspect has had less of a
(36:03):
you know, the correlation between the difference in interest rates
and where the Japanese yen is against the dollar is
kind of out of sync quite a bit from where
you'd expect it to be. In other words, what I'm
saying is the yen would actually be quite a bit
stronger than where it is at the moment. So that
kind of speaks to the uncertainty factor out there.
Speaker 4 (36:27):
We know inflation in Japan has been persistently above the
boj's two percent target for quite a number of months. Now,
I think that may be an understatement. I'm curious about
the inputs that have been the primary drivers.
Speaker 6 (36:40):
Well.
Speaker 9 (36:40):
I think in terms of the inflation at the moment,
the main culprit is food food inflation, and I think
it's the movements there that will be one of the
key drivers to the inflation trend over the coming months.
Another factor that we need to be a cognizant of
(37:00):
is that in Prime Minister Tack HG's package for the economy,
there are some more subsidy measures for households to deal
with electricity bills and gas bills, and some of these
measures are already forecast by the government to shave off
about zero point seven percentage point off inflation. So I
(37:21):
think we are going to see much lower figures coming
in over the coming months. And you know, you could
argue that that's why the BOJ also wants to get
a rate hike out of the way, because you want
to go wile the figures still looking hot.
Speaker 4 (37:36):
What about the story on wages that was such a
focal point for such a long time, waiting for wages
to have a meaningful uptick. Has wage inflation improved?
Speaker 9 (37:45):
We're seeing a pretty solid trend. If you look at
the figure for wages for full time employees in regular jobs,
it's around the two point two percent mark for a
stable sample. There's lots of out there, but I think
that's one of the ones to really focus on. It
gives a much more stable view of the trend now
(38:07):
compared with previous years, that's a very very solid figure.
But compared with three percent inflation, that is not a
great number because that means your purchasing power is getting
weaker in real terms all the time. And I think
that's the big thing that needs to change, is we
need to get the wage increases ahead of where the
(38:29):
inflation rate is to really turn around the consumption figures
in the economy and drive growth.
Speaker 4 (38:35):
Paul, it's always a pleasure. Thank you so much for
helping US preview this week's boj decision. Paul Jackson there
from Bloomberg News. He covers the economies of Japan and
South Korea. I'm Doug Krisner. You can catch us weekdays
for the Daybreak Asia podcast. It's available wherever you get
your podcast.
Speaker 2 (38:52):
Nathan, Thanks Doug, and that does it for this edition
of Bloomberg Daybreak Weekend. Join us again Monday morning at
five am Wall Street Time for the latest don markets,
overseas and the news you need to start your day.
I'm Nathan Hager. Stay with us. Top stories and global
business headlines are coming up right now.
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