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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, a look ahead to earnings from Chip Giant, Nvidio in some of America's biggest retailers. I'm Nathan Hager in Washington.
I'm Carolin headka Hey London. While we're looking ahead to the European Business Summit, I'm.
Doug Prisner looking at an expected pivot in Japan's economic growth.
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, Dad Digital Radio, London, Sirius XM one twenty one, and around the world on Bloomberg Radio dot Com and the Bloomberg Business Own.
Good day to you. I'm Nathan Hager. We begin today's program with earnings. Third quarter reporting seasons coming close to an end, but before it does, we are about to hear from some heavyweights, including the most valuable company of all AI Chip Giant Nvidia wraps up results from the Magnificent seven after the close of trade this Wednesday for more and what we can expect, were joined by Kunjohn Sabani, senior semiconductor analysts for Bloomberg Intelligence. Kunjohn, it's great to
have you with us on the weekend program. And it seems like every quarter the expectation is for Nvidia to more than beat expectations. How high is the bar this time around?
Yeah, So, just to add some context, the last two quarters were the only quarters in which they did not beat and raise significantly, after having beating and raising for almost eight to twin quarters before that consistently in a row. The key factors last two quarters were the head from the China revenues. Also, not all the Street estimates had
China removed, so the consensus was not really clean. However, looking into fiscal three Q, we now believe Street has most of the China revenues removed, so that's out of the way, and now we believe in Media's latest Blackwell three hundred is ramping stronger, so they could return to their normal race cadence of mid single digit beats and races, and anything above that or a low double digit would be a significant upside that could really help the sentiment.
Another point to add here is most of the hyperscalers and cloud providers did raise their second half twenty twenty five CAPEX projections by about a total of twenty billion and their twenty twenty six projections by about one hundred billion. So that combined with the five hundred billion pipeline that Gentien shared during GDC last month for their black vel and Rubin ramps significantly sets it up for a massive upside in twenty six, to.
The point of getting some of that China revenue off the books. We have seen the CEO Jensen Wang making moves like improving ties with Taiwan. He was just there doing the relationship with Taiwan Semiconductor. How do you see Jensen Wang building these relationships and how could that play into the results.
I mean, Taiwan is a key, you know, manufacturing hub, not just for nd media but for most of this the semiconductor semis and media is also leading TSMC's move on shoring and building its products into the US in the Arizona Plan, So that's going to be significantly critical. On the China point, it doesn't seem like there is enough clearance yet of course they're going to try because there's the second largest market for them outside of the US and they would really like to capture that market.
So far, we don't believe this quarter we'll see any material revenues though.
Are those barriers in kinda a continued headwind beyond this quarter for Nvidia?
They will, But on the good side, you know, most of the investors in the street now have sort of baked that in that you know, they're not adding this back anytime soon. Also, since the head wind has come up. You know, China right now is about fifty billion dollars accelerator market right there have been other larger and other large markets that have appeared in terms of SO and
AI spendings. One is the Middle East region, other is Japan, and more and more countries like for example, in Europe are coming in which could easily offset that tam that China, that China had been took out of Invidia.
I wonder what you're expecting to hear from the CEO himself after we heard in recent days from the CEO of Innvidia's maybe closest competitor, Advanced micro Devices, talking about a big revenue outlook for AMD over the next three to five years. What does Jensen Wong need to say in terms of in videos outline.
Yeah, and you know, in his normal way, I think definitely is going to give more updates of how strong the demand is, how strong the use case and performance bench marks of the new Blackwell ramp is what we would like to ask if you know, we as key our investors should know is going to be more clarity on that five hundred billion dollar pipeline that could really set up the models and the estimates to go up.
Another key point is getting clarity on the cross margin trajectory as these new products ramp and if they will be staying close to in twenty six to the mid seventies person gross margin range.
In terms of those newer products. What are you expecting on the pipeline beyond Blackwell.
Yeah, I mean they have clearly laid out their road maps. So the next product, the Rubin. We don't think they'll announce much details for this three cube, but we will get more clarity in the GDC early part of next year. That's when we'll get a lot more specs. But again, what we have seen from our channel checks is the Blackwell Ultra, the GB three hundred seems to have gotten
much stronger traction when we had anticipated. And so unless we don't run into any transition paines going to Rubhin, we expect a similar stronger traction.
Of course, one of the issues that has long been an issue for in video, something that's tried to meet the challenge of is just keeping up with this robust demand for chips and AI centers. Do you see in Vidia keeping up?
They have been incrementally increasing supply every quarter, but we still think, you know, demand continues to stay ahead of supply, and we don't think supply will exceed demand anytime soon, not at least until twenty twenty six.
En all right, coun John Sabani, thank you for this. That's Bloomberg Intelligence Senior Semiconductor analyst Konjohn Sabani. Again, we get those video results after the close of trading on Wednesday. Now, let's get to earnings from some of America's biggest retailers. Target opens up it's third quarter books before the opening bell on Wednesday. Then about twenty four hours after that, we hear from Walmart. Let's hear now from Jen Bartashis.
She's a Senior analyst for retail staples and package Foods at Bloomberg Intelligence. It's great to have you with us on the program, Jen, And of course we look to both these companies for a read on the consumer. Of course, I'll look ahead to the holidays. What's the setup as we await these results from Target and Walmart.
It's a very interesting time for these retailers because we hear about the disparity in consumer shopping behavior. On one hand, Walmart is pulling more hire income households into its ecosphere than ever before. And on the other hand, we have Target that's going through a huge your reset as it's trying to reconnect with its core customer base, and so it's a it's a very dynamic time for these companies. And it's the back to school season is what's really
in this quarter. So it's a good read on how people are going to be entering into the holiday shopping period.
Okay, so let's start off with Target. Of course, in your latest note, one of your latest notes, you make note of their goal to add fifteen billion dollars in revenue over the next five years. Could this be a quarter where we start to see them on their way there.
I think it's going to be a little bit of a mixed quarter for Target, and that's really because they're still trying to find their footing and what's going to resonate with customers. Target is its best when people are willing to buy apparel and buy discretionary items, and that willingness is still a little bit dampened. They've done some good things this quarter to kind of help reset their business.
If you remember they announced job cuts, if almost eighteen hundred positions that they were cutting, you know, that's the beginning of what should be a turnaround for Target.
And it's interesting we just heard some reports earlier this week that Target is implementing a new greeting policy for those workers who are still on the job, basically telling them to smile more for the customers who come in. What's the balancing act for Target as it tries to navigate this turnaround.
Yeah, I think it's a balance between not losing sight of your own core values that is what makes your customer base love you, and trying to chase other retailers. So you know, they keep doing price cuts. You know they want to stay priced competitive, but at the same time, Target has never been about being the low price leader. So there's a balance there between having the selection and the fun type of you know, offerings that they have while still offering values so that people feel like they're
getting their money's worth. And that's that's what Targets really trying to focus on regaining its footing.
Yeah, on the point of the price cuts, we just recently heard the Targets cut the prices on three thousand essential items. Is that the kind of thing that could eat into its margins?
It could? It depends on what items they are. You know. For the most part, these are going to be more of your day to day household items, you know, and those items don't carry a whole lot of margin on them anyway, So you know, when you cut the prices on those, you become a little bit more competitive. The goal always is that you prompt people to buy greater volume and that makes up for any kind of discrepancy you might have from lowering your prices. But we'll see
if that actually takes hold or not. And so the higher margin areas of the store are things like apparel, it's things like beauty, it's things like home decor, and those are the areas that just aren't selling as well right now.
Of course, Walmart getting ready to report their earnings as well. They made their name on low prices. Is Target potentially eating in to what we could get from Walmart this quarter?
I would say that usually on a price basis, Walmart is a clear winner and a clear leader. And for people who shop based only on price, I don't think you'll see a whole lot of shifting between Walmart and Target in terms of customer visits. It's really more about the overall perception and value perception of what you have.
So for Walmart, it depends a lot of their success is the size of their grocery business because more than fifty percent of their revenue in the US comes from grocery type items, and so they when they keep prices low there, they bring people in, but then they're shopping the rest of the store, and so I think that's one of the tactics that we'll see, and it's it's part of what's bringing higher income households into Walmart as well.
Because if you're going to buy a box of ceurios, you know, why wouldn't you buy that at the lowest price because it's the same box of curios no matter what retailer you go to.
Well, there's certainly a lot to keep an eye on as we get ready for those big box retail earnings later this week. Thank you so much for this, Jen, really great having you on with us. That's Jen Bartashi's Bloomberg Intelligence senior analysts for retail, staples and packaged food, and coming up on Bloomberg day Break weekend, we'll look ahead to the European Business Summit. I'm Nathan Hager, and
this is Bloomberg. This is Bloomberg day Break weekend, our global look ahead of the top stories for investors in the coming week. I'm Nathan Hager in Washington. Up later in our program we look ahead to some key economic data in Japan. But first, the challenges facing Europe are unprecedented but clear of belligerent Russia, frictions with China, and ongoing trade spats with the US. Even if the impact from Trump Tariff's faded faster than expected, the task is
building Europe's resilience and competitiveness. That's the backdrop to the European Business Summit, which gathers Brussels top bureaucrats and policymakers every year. Let's get more from Bloomberg Daybreak Europe anchor Caroline Hepger in London, Nathan.
The European Business Summit in the next few days in Brussels will play host to captains of European industry, Nobel Prize winning economists, and top bureaucrats, including the EU Commission president of Slavondaline. It comes as European firms grapple with high deck costs, energy reliance, strained relations with China and
the US, and criticism ongoing of its regulatory environment. The EASE Justice Commissioner Michael McGrath says that Brussels needs more power to enforce consumer protection standards amid investigators into illegal products being sold by Chinese e commerce platform Shean. He says that relations with China can be challenging.
We have a trading relationship at the moment that is quite unbalanced in favor of China. So that's why issues like market access barriers for European companies within the Chinese market is a key issue for US. China is a partner, but also a systemic rival and indeed a competitor of the European Union.
That was Michael McGraw, EU Commissioner for Democracy, Justice and the rule of Law as well as consumer protection. Speaking there to Bloomberg Radio. Well joining us now as Bloomberg's Brussels bureau chief Susanne Lynch. Susan, great to speak to you. Just give us a sense of this gathering and what business and policy makers are focused on right now in Brussels.
Yeah.
Look, this is a significant moment for business representatives to come into close contact, if you like, with some of the big hitting EU policy makers and Brussels. The reality is the EU, everyone thinks politics in fact, you know, is one of the world's biggest regulators, does have impact
on business. And I think this year in particular, people would be very interested to hear what's coming out of the European Commission because there is such a focus, particularly i'd say over the last year or so on the challenges facing the European economy and the whole issue of EU competitiveness.
Yeah, indeed, and this summit talks about what choices Europe must make today to remain resilient and globally competitive tomorrow. I think that kind of neatly sums up the issues for Europe as well. Over a year since Mario Daghy's report, which exposed Europe's need for greater competitiveness, the discussion around high energy costs and reliance on bank loans, and the
regulatory burden and so many other of the recommendations. But more than a year since since that report, and even his own up some that was quite negative about the progress that Europe had made. Where are we absolutely.
And Mario DRAGLEI was speaking himself recently on the anniversary of this landmark report and made the point that there has been very little progress.
Now.
One reason is because the EU is this very unique institution. It includes twenty seven countries. It's not a sovereign body that can make decisions. It means that decision making is very laborious. You have to have people on board. You can't just plow through on different issues. And what the European Commission, which is the main executive arm of the EU, what you're hearing a bit from them is, look, we want to, for example, advance more cross border mergers, we
want to develop the banking union. But when it comes to it and the negotiations starts, EU members says, EU countries sometimes just don't want to play the game. They are worried about their own national industries, their own national companies, and they are reluctant to take that step forward for more integration. So this has always been a bind for the EU. How do you advance, how do you integrate more when you've got all these different countries with different priorities.
But I do think there is a real awareness that the Draggy Report is something that did impact, that did break through. I think a lot of the listeners may have been at Davos this year. I remember myself being there and hearing it. This report by a former ECB president had everyone talking and realizing that now something needs to be done. That the reality is that Europe has been diverging from the United States since the Great Financial Crisis.
You can see that in the banking sector, you can see that in terms of innovation, you can see that in the number of startups, and in fact the real problem, which is scaling up European businesses, that is really an issue, and it does look like it continuing to lag behind on that.
Do you get any sense that things are speeding up when there are so many pressures, namely, let's look to China first, managing that relationship supply chains and rare earths, which is from years and years of me movement by Beijing, has suddenly become so essential everywhere else.
Yeah, I mean, I think the issue facing Europe now is that on the one hand, you've got this increasingly isolationist United States, and on the other hand you've got an increasingly belligerent some would say, China, and the EU is belatedly waking up to the fact that not only has it built up a dependency on the United States, particularly in terms of the defense sector, but it also has built up a dependency on China, particularly for the
rare earth's material. Now this isn't just a europe wide problem, but you now can see the European Commission realizing this. So a couple of weeks ago at the Berlin Global Dialogue, we were there for Bloomberg and European Commission President earthl Of Underline gave a very strong speech where she directly addressed this issue about coming from Beijing, about the rare earth and she, you know, said that EU has has
got options. But the reality is, you know how much leverages the EU have here, It really has more than ninety percent of these magnets that are going into everything from electric vehicles to the defense are coming from China. It's now scrambling elsewhere to try and find like minded partners. But so is the United States and everyone else. So will the EU have that urgency Like the EU does not move quick as an institution, that that's for sure.
So you know, will it be able to garner its resources and make sure it's there at the table when countries across the world are trying to negotiate and trying to look at different alliances and different relationships. That's that's one of the key challenges.
Yeah, indeed, and we know that kind of lack of minds that there are actually in Europe for those where earth in and of itself, and it takes years to kind of to deliver those sorts of minds. And then they're also quite polluting as well. So it's very very difficult challenges.
And I mean we saw in the last few weeks that you know, German particularly German factories you know, were slowing down their production because they had these supply chain issues. But really what's worrying I think for the EU. We were reporting last week that there were some Chinese officials in Brussels for negotiations, but really the EU wasn't making that much progress, it seems. Now let's see how how
this works out in the next few weeks. But with the big focus being on Trump and g where did the EU sit, it's kind of difficult for it to make its own voice heard.
Yeah, indeed, and it's not just China, obviously the European businesses have to keep an eye on. It's also the White House's stance towards Europe and there too, there are lots of challenges. I mean, you mentioned Ivondeline and has
strong speech a couple of weeks ago. But it was that meeting, wasn't it, between Trump and Vondeline, I mean, forgive me, I just remember the flowers that were between Trump and Vonderline that seemed to speak volumes of the kind of gap between the two and maybe the fact that they didn't want Vondallion and Trump to be right next to each other. And it was also a moment where there was some criticism for Vondalatin and how she handled it.
There certainly was I myself actually was at term Breef for that event during the summer, Yes, because it happened very quickly. You know, we forget this with international diplomacy, that no one really expected this meeting to happen, and then it did. And even the optics of earthly vonder lynd flying to Donald Trump's golf course in Scotland and part of not in the EU and making that trip over especially to see him. So yes, the EU came under a lot of criticism from EU countries, in particular,
saying it could have got a better deal. It locked in a fifteen percent tariff rate. It also not everything, but it also got some exemptions. For example, there were lots of worries about the pharmaceutical sector, a lot of exporters in Germany, Ireland, etc. GenMark, how would they be affected? They did get a deal on that, but again this is where the different bits of the EU kind of
blame each other. Vanderline and the Commission we're saying privately, really well, hang on, you know, we did these negotiations with the backing of the EU countries and if they
had an issue, they could a shouted stop. But I do think there is a kind of a wider statement to be made about this, and that is the fact that the EU has always prided itself on being, you know, this global trading power, that the single market, that market of four hundred and fifty million people, that integrated market is its big power, that it's a big caughting card. And yet when it came to it, it didn't have a stronghand with Trump, it felt like it had to
really compromise there. And I think that's been a real worry for the EU already. As we know, there's been so much inward looking about the lack of strategic autonomy of the phrase goals when it comes to defense, spending. Your trade was something that thought this is what the EU does well, and yet it still had to kind of some people would say capitulate, others would say be pragmatic, but negotiate with Trump, where it did end up with extra terrists.
And so where do you think that leaves the regulatory environment, because that, as you say, is what businesses are also focused on. Is there a watering down? Is there adjustment that is being made in the face of some quite pointed demands from the US.
Yes, so I think there has been a change here. Actually, I mean it's one of the ironies of bregxush Britain was always one of the strongest voices criticizing over EU regulation and in fact that really did feed into the breaks of debate in London in the UK. But actually since they've left, since Britain has left the EU, actually in the last year or two, there has been an awareness and acceptance by the EU that it does need
to do something about regulation. They're cutting it better regulation or simplification, but really what it means is changing some of the rules, watering down some of these regulations to be more business friendly. So the second Underline Commission she put this simplification at the top of her agenda. So we had again Brussels to is a great place for acronyms. But these omnibus builds that were brought in earlier in the year, now these things take time, They go through
the EU system, difficult through the Parliament. There are changes in tweaks, but really they are about making sure that some of the reporting requirements are less ownerous. So we are going to see some kind of watering down of these, but it still has to be really negotiated, the fine tuning, and we are getting pushback from some of the more left cleaning groups in the European Parliament and MEPs who for example, feels strong about climate change and they're saying,
hang on, we can't water down too much. So I think we are going to see this simplification agenda coming through.
Thank you so much, is on Lynch for being with us. I'm Caroline Hepkee here in London. You can catch us every weekday morning for Bloomberg Daybak here at beginning at six am in London. That's one am on Wall Street. Nathan.
Thanks Caroline, and coming up on Bloomberg day Break weekend, we'll take a look at Japan's economy and some key data ahead. I'm Nathan Hager, and this is Bloomberg. This is Bloomberg day Break Weekend, our global look ahead of the top stories for investors in the coming week. I'm Nathan Hager in Washington. We go to Japan next, where the economy likely shrink in the latest quarter. For more, let's get to the host of the Daybreak Gasia podcast, Doug Grisner Nathan.
On Monday, in Japan, the government will report on third quarter economic growth. A contraction in GDP is expected for the first time in six quarters. Yes, there have been signs of positivity recently to suggest that Japan may have been able to shake off its lost decades. The stock market very near record highs. Inflation is firmly in place, and that will allow the Bank of Japan at some
point to continue normalizing policy. But clearly something has gone missing, and now Japan's new Prime Minister is pushing for aggressive physical stimulus. To help us understand more about the state of the Japanese economy, I'm joined by Bloomberg's Paul Jackson. He covers the economies of both Japan and South Korea. He joins us from Tokyo. If you had to identify a single culprit responsible for this weakness, as difficult as it may be, where would you point.
I think this is going to be a hefty fall in this third quarter. Of it is to do with Donald Trump and his tariffs. Now why is that. It's because in the previous quarter there was a lot of front loading of exports to try and beat the rising tariffs. Now we get into the following quarter, you know you've already used up some of that export power in the previous quarter. So that's going to be one of the key factors that explains this big drop that we're expecting
in third quarter GDP. There are some other factors, though, Doug. We did have a technical element to do with housing. There was some environmental regulations brought in earlier in the year that's going to make a new housing more expensive. So there was a bit of a rush on house buying, and so that's also kind of stolen some of the later demand pulled the earlier in the year.
Certain areas of the economy. I'm thinking of the manufacturers that do a lot of exporting to not only the United States but other parts of the world. Cars, automobile parts, steal other industries that have been severely impacted by these tariffs that are providing more of a drag on the export side.
Well, I think you've mentioned the key ones there. Of course, with these reciprocal tariffs are affecting exports right across the board. The cars, obviously, that was the key part of the negotiations. They're down to fifteen percent, and what's interesting is that the car exporters are absorbing a lot of that tariff. Now, normally you would expect about a third from the exporters, a third from the importers, and then maybe a third
from the consumers. But what we're seeing in the figures is that the japan car makers are lowering their prices by more than a third of what the tariff side would be. So that's you know, eating into their profits. But I don't think we need to quite sound the alarm bells now because of those those technical factors. So it's one of those contractions that maybe looks worse than it is. That's not to say there aren't ongoing problems
with the economy. I think obviously we need to see how trade, you know, responds to these higher levels of tariffs, and also whether the US economy can can keep expanding. Obviously it's a huge engine for global growth, you know. Looking at Japan's economy more domestically, it's a case of, you know, whether consumption can can keep holding up in this new environment of inflation, which households haven't been used to.
Indeed, this has been a remarkable shift after multiple decades of deflation. How a generation in Japan has not known upward pressure on prices. There's also been, as you know, Paul, a bit of skepticism that inflation will prove to be durable. Now you mentioned the upcoming meeting of the BOJ in December. A number of economists surveyed by Bloomberg have said the Bank of Japan should hike rate. So let me ask you, Paul, about the likelihood of an interest rate hike at the next meeting.
Well, Doug, I mean, the usual response is, you've got inflation above target for more than three and a half years, I mean, you'd be raising interest rates. It'd be a bit of a no brainer But because of this kind of national goal of trying to generate inflation, they've been going very, very slowly. Given that the consumers are still kind of getting used to the idea of inflation and wrestling with rising prices, there's a bit of a fear that going too fast on raising the interest rates could
upend the economy. Now we have a new prime minister in Sanai Takeichi. She's very much of the kind of abonomics reflationist mold. She wants to ramp up fiscal spending and provide support to consumers. So, in a sense, this contraction in GDP, although it might be slightly overstating, you know, the weakness in Japan's economy, it's very useful for a politician to have that figure come out just before you want to unleash your economic package as the new prime minister.
And of course an economic package is a very tried and tested approach for new prime ministers to bump up their support when they come in.
So there are a couple of things that I want to consider. One is the currency, because we know the yen, particularly weighted against the dollar, has been weak. I think right now we're trading around one fifty four. Obviously, in a scenario where you have a weak currency, you're importing inflation and energy I know is a big component of that where Japan is concerned. But the other thing that I'm curious about wages. Why do we deal with the
yen portion first? Though? Help me understand if that is kind of getting a lot of the blame for this stubborn inflation story.
It is getting a lot of the blame. Again, you could argue that if the BOJ raised interest rates, that would help lift the yen against the dollar and ease some of that pressure. The thing is is Takeichi being from the kind of ebinomics mold, she kind of wants the BOJ to go slow because she wants to emphasize growth in the economy before anything that might constrain growth, such as interest rate to hank. So really the difficulty here is wanting to expand growth, push on it, using
a weekend to help those exporters. But you've got to rain it in at some point because if you have too much currency weakness, then you're going to have to intervene to prop up the end. And you mentioned that currency rate around you know, one five four, one five five. I mean, I think once we get into the one five five to one sixty range, then we really are stretching the limits of what's acceptable in terms of the weakness of the currency.
Okay, so let's talk about the wage component right now, as it feeds into the inflation narrative there. How are wages right now relative, let's say, to where they were five years ago. I'm much appreciated.
I think in terms of your full time worker in a regular job, discounting kind of all bonuses and over time, wages are going up around two point two two point three percent year on year.
Now.
That is actually pretty solid growth for Japan compared with the past. Don't forget in Japan there's been this kind of this social compact between workers and companies to sacrifice wage hikes in favor of job security, and unemployment is very low in Japan compared with other G seven economies. But obviously if you've got inflation, then people start to realize, hey, wait a minute, or two point two percent sounds pretty good.
But if your inflation is higher than that which it is, then essentially your purchasing power is getting weaker and weaker and weaker. One of the factors that certainly is very important for the Bank of Japan and other policymakers is can these wage gains go above the inflation rates. If they do, then it's a no brainer for the Bank of Japan to keep going ahead with normalization and raising interest rates.
Let's talk a little bit about what Prime Minister taka Ichu wants to do in terms of stimulating the economy. Has there been any discussion around the areas of focus positions that she would obviously take to try to stimulate activity.
This feeds into this point. If she's got a player kind of careful line between providing helps so that consumers and voters think that she's listening to them about their cost of living crunch concerns, So that means probably she's going to be helping subsidize electricity bills, subsidizing natural gas bills, reducing taxes on gasoline, doing things that consumers can immediately recognize.
There's also a talk of including in the package kind of shopping tokens that you can spend, which will help region economies of regional governments will be given quite a bit of leeway, by the looks of things to offer kind of incentives spending, spending tokens to consumers in their areas. So those are the things she can do. But you kind of offer too much stimulus to the economy, what are you going to get? What are you going to get?
More inflation, which creates more of the more of the problems. So there's a fine balancing act she's got to do. There other things that we're expecting out of this package. She's wanting to spur long term growth, and she's identified seventeen areas that require more investment. So she's trying to give tax breaks to companies that invest in these areas. And these are kind of areas that you would expect
are important for economic security. Chips, chip making, anything that goes into rare eers, this this kind of stuff Paul.
I'm curious to get your take on the level of public debt in Japan and whether it's a concern. I mean, we know it remains more than twice the size of the economy. I'm curious as to how it's being viewed or perhaps there is a tendency now to ignore it entirely.
Well, what I think we're seeing here, Doug, is a bit of a sea change in the way that Japan's fiscal policy needs to be weighed up against fiscal discipline. In recent days, the Prime Minister has essentially said that balancing the budget on an annual basis, this is after debt servicing sorted out, is no longer going to be
their prime yardstick for a kind of fiscal discipline. And what she's saying is, we need to support the economy, we need to provide growth, we need an expensive policy, but we do need to be responsible on the fiscal side. But our yard stick should not be balancing the budget. Our yardsticks should be debt measured against GDP. Now, those figures do not look good, Dougging. You know, two hundred and thirty percent or more the size of the economy
in terms of Japan's national debts. And so what she's doing is she's saying, no, no, no, don't look at the gross debt against GDP figure, look at the net debt against GDP figure. Because if you look at those, Japan's got a lot of assets, then the figures look a lot better. I mean, they're still not great. We're still talking like one hundred and thirty net debt against GDP, but you back much closer to the other G seven nations. If you use that yardstick.
Paul will leave it there. Thank you so very much, Paul Jackson. He covers the economies of Japan and South Korea from our bureau in Tokyo. I'm Doug Prisner. You can catch us weekdays here for the Daybreak Asia podcast. It's available wherever you get your podcast. 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.