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This is Bloomberg day Break Weekend, our global look at the top stories the coming week from our Daybreak anchors all around the world, and straight ahead on the program, what's expected to be the latest confirmation of easing inflation, what it means for the Fed and for investors, Plus earnings from Coca Cola this week.
I'm Tom Busby in New York.
I'm Stephen, Carol and Lundon for We're looking ahead to the major international gathering of defense officials at the Munich Security Conference.
I'm Brian Curtis in Hong Kong. We look ahead to a lot of economic data coming in Japan and what it means for the boj.
That's all straight ahead on Bloomberg Daybreak Weekend, The business news you need to wrap up your week. Available on Apple, Spotify, the Bloomberg Business Appen everywhere you get your podcasts.
Well, good day to you. I'm Tom Busby.
We begin today's program with expectations that inflation continues to ease. That's ahead of the Consumer Price INDEXPERT January coming out this Tuesday, just ahead of Valentine's Day, and to talk.
About whether Wall Street is gonna love what it hears.
We welcome Bloomberg's International Economic and policy correspondent Michael McKee.
Michael, what do we expect.
Hearts and flowers for Valentine's Day? CBI is expected to continue the trend that we have seen of gradually slowing inflation rates. The month of a month number expected to go down from three tenths in December, which had been revised now down to two tenths and then stay at two tenths for the month of January, and that'll push the year over year number down to two point nine percent from three point four percent. Of course, that's the
headline because that's pushed around by energy and food. Of course that we like to look at the core, and the core is expected to be up three tenths, which is basically where we were last month, but because the base effects higher inflation in January last year, the corps will fall to three point seven percent from three point nine percent. Now, those are forecasts, but economists have generally been pretty accurate in forecasting the CPI.
Now let's go back to core consumer prices, because we got a reading last week or confirmation last week three point three percent in Q four of last year. That's year over year, and that matches an earlier reading. Good news though for the Fed, right, I mean, this is what they were hoping to see.
It's what they were hoping to see, because it's not what they saw in twenty twenty two. The BLS every year readjusts its seasonal adjustment factors and revises them, and last year when they did that, it pushed inflation at the end of twenty twenty two up and made it look like a lot of progress that had been made was wiped out. So there was some focus on the revisions this year, worried that we might see something similar,
but we did not. There was virtually no change in the seeds of adjustment factors, so we end up with, as you say, three point three percent as the three month annualized number for the end of the year and no change there. So in that case, we saw a positive market reaction because no news was good news.
Yeah, we've seen a number of all time highs for the S and P five hundred, the Dow, not so much the Nasdaq yet, but things are definitely looking ahead. And for the Fed, I mean, all signs point to the kiwi they've been doing the raid hike schemes. We've avoided a recession, Inflation slowly but surely declining, the labor market, robust, consumer confidence is up. There are challenges, though.
There are challenges. I don't know if you can say the words soft landing on a public you could say it here, stay here, but FED won't say it. But it appears we've basically gotten there. What they need to see now is not dramatic improvements in inflation, but just regular improvements similar to what we're forecast to see this month, with a broad number of categories disinflating, rising at a
slower pace. If we get that for a couple of months, they indicate they'll start thinking about cutting rates now.
Prices outside of core. We know energy, we know food, but one thing in core that has been stubbornly higher is housing. Yeah, the recovery we were all hoping for has been so uneven. Every month we seem to get good news, bad news, you know, troubled news about prices.
How is that effect?
It's just been stubbornly high. And that's not what the FED or economists expected. Because we did see a decline for a while in home prices and rents, part of it is methodological because of the way the BLS attempts to measure home price, because a lot goes into the price of your home. It's not just the monthly mortgage payment, but the monthly mortgage payment adjusted by the interest you have to pay and that sort of thing. So they look at rents and ask people what would your house
rent for? And obviously if you don't sell your house regularly or rent your house regularly, you don't have a good answer for that. So it takes a while for a decline in rent prices to sort of make its way into the CPI. Now, the BLS has started experimenting with a new privately produced sort of data point on rent that measures current rent costs as new apartments and new homes are rented, and they're folding that data in.
So there's some hope that we may see a more rapid decline in housing prices to match what we had been experiencing. Of course, with nobody buying houses, there's been a shortage of inventory and prices have started go back up.
Again.
In that case, if ed wants it to take a long time to.
Get in and if it's not going to happen it's February. I mean, the heart of the season is coming up.
Yeah, you want to see it now, because pretty soon we're going to be having a lot of people rushing out there. And I saw some analysis recently that said it's going to be a seller's market. They're going to be able to set higher prices because a lot of people want to move but haven't been able to afford it. If interest rates start coming down, then mortgage rates will come down and you will see a much busier housing market.
Now, the FED meets again March nineteenth, twentieth. It's about five weeks away. Between that time. We get CPI PPI this week we also get another one for February. If the Fed were to meet right now, what do you think they would say?
They would say, we haven't seen enough data, which is going to be their standard answer for a little while. They'll get one more CPI and one more of course, they look at the PCE index and they'll get one more of those before the March meeting, but they'd like
to have two or three months worth. If they wait till May, they'll have three months worth of those numbers, and that in theory, if we continue to see this kind of improvement will get them to where they want to be and they can start talking about maybe we cut rates.
So a long road to go before that March meeting. Well, our thanks to Bloomberg's International Economic and Policy correspondent Michael McKee.
All Right, Wall.
Street's earning cavalcade continues in the week ahead, including reports from Dow component Coca Cola, one of the best known brands anywhere, and with a lot more on what to expect, we welcome Bloomberg Intelligence Senior industry analyst Ken Shay, who covers consumer products including beverages, tobacco, and cannabis. Now, Ken, what do you expect to see in Coke's fourth quarter results this coming Tuesday?
So Coca Cola on Tuesday is expected to put up pretty good numbers. You know, one of the key metrics that I look for is organic revenue growth because that's the underlying you know, top line, excluding acquisitions things like that. We're expecting a high single digit eight to nine percent
kind of growth and that's pretty strong. Now, it's a little bit lower than the fifteen percent growth last year, so it's a tough comparison, but that's a pretty good number and We think they're going to achieve that to a combination of higher volume of some positive effects from channel mix to the on premise you know, stadiums, restaurants. People are on the go again and some carry over higher pricing from last year, and so that's the kind
of growth that's very positive. However, there's we also expect some negative currency, most notably Argentine peso, you know, a few other things. Dollar has been strong. So a net of all that will look like a mid single digit kind of growth in net revenue, which is pretty strong.
Oh, that's strong, and you wrote in a report that if there's an earning speed, this would be the seventeenth straight one. What does that tell you about Coca Cola?
That's right, Well, the resilience of the product, coach ability to manage operations across you know, geographics that spans up two hundred countries around the world, you know, that kind of revenue growth. We think that the company is also enjoying some falling input costs, and so we think with some margin improvement they can get about ten percent of growth in earnings. And you know, without without that currency weighing on them, they could probably have mid team kind
of growth. I think they're going to cite that as well. And as you say, you know, coca has an ability to exceed expectations, and the Coke comes through, it will be the seventeenth straight And not only do they have a string of beats, but the average beat over that span is about eight percent, so significant beats also. But I think things to look for in this particular quarter, A lot of investors have cited their concerns about you know, what can the impact be on the so called weight
loss drugs? The GLP one drugs could just have an impact on the company's ability to continue to grow if consumers want to shy away from sugary drinks. Another area of concern is the spike in orange juice prices worldwide. We're up about forty percent over last year, and even though minute may it's simply account for only about ten percent of cokes overall sales. Nevertheless, a cost increase that high, one has to wonder what its strategy is to grow that orange juice business.
Would that be the only category that that you see as a real challenge for Coke right now?
A lot of categories, well, coffee is a competitive one, particularly because that's not only a finished product, but also a retail instead of retail operations a cost of coffee. Coca Cola has costs had come down. Now coffee prices
are starting to move higher again. I would say it's problematic, but it's a more volatile business than a typical Coca Cola business, which is basically selling constant and traits to its, you know, bottling partners where you have consistently high margins and a steady demand, So that one's going to be worth taking an eye on. Also, I've also got interesting about some of the innovation Coca is up to. You know, I'm starting to branch out with some alcoholic beverage partners.
Jack and Coke is now a product you can buy off the shelf, Absolute and Sprites another one, and so they have a lot of you know, coals in the fire, so to speak, in terms of what they're doing with alcoholic beverage partners. At this point, it's still a small business, but it's worth keeping an eye on.
And they've got a new coke product coming out just the nineteenth of this month. What do you know about that?
Well, I haven't tried it yet. It sounds interesting mostly it's like a Coke raspberry with some spicy flavors. I'll have to try that when I get a chance, because I do it with sweet tooth.
Yeah, Coca Cola Spiced is the name of it. I think despite the name, it's not spicy, but it is different and unused. Well, I think is they're going to make this a permanent part of their lineup right away.
Well, you know, it speaks the Cochs' willingness to innovate market and be relevant to younger generations. You know, Coke has been around for so long. I think the demographics may have skewed towards older I would say old, but older adult young the young, middle aged adults. I think this is an effort their creations line to tap into younger generation consumers and hopefully they can hang on for their lifestyle, their lifespan.
Well, it's a lot to look forward.
I'm looking forward to trying it and our thanks now to Bloomberg Intelligence Senior industry analyst Ken Shay coming up on Bloomberg Day Break weekend conflicts in the Middle East and in Ukraine raising concerns about security all around the globe, and had a special conference taking place this week in Germany. I'm Tom Busby and this is Bloomberg. This is Bloomberg day Break weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby
in New York. Up later in the program, a big change expected from the Bank of Japan. But first, geopolitical tensions are a risk that's been featured in companies earnings reports this season. With ongoing conflicts in the Middle East, Ukraine and elsewhere. Security issues will be at the heart of the gathering of world leaders for the Munich Security Conference in the coming days. For more, let's go to London and bring in Bloomberg day Break anchor Stephen Carroll.
Tom.
The disruption to shipping through the Red Sea and the implications for inflation have been a topic of discussion for many companies during this earning season. The CEO of Danish shipping Giant Mask telling Bloomberg they haven't seen a peak in the threat level in the Red Sea and they see disruption potentially lasting for up to two year. Now, that's just one issue that's going to be discussed at
the Munich Security Conference in the coming days. It's an event that's been dubbed by some as the Davos of Defense and brings together officials and political leaders in the southern German city. The conversations this year more challenging than ever. Russia's invasion of Ukraine is close to entering its third year, and the Israel Hamas War that began more than four months ago has led to violence in several other parts
of the Middle East. Ukraine's president, Vladimir Zelenski is expected to attend the conference, but Russian and Iranian officials haven't been invited. Geopolitical tensions from these conflicts are a major risk for markets, and we've been discussing that with some of our guests on Bloomberg Radio in recent days. Here are the thoughts of Wayley Global, Chief investment strategist at Blackrock.
Yeah, so it's really quite incredible how fled geopolitical risk premier currently is as been priced by markets. We do think that there is room for that to be priced even more just given the fact that we're in a different geopolitical regime compared to before. Right, so this instinct to just automatically buy the deep across the board indiscriminately whenever something goes wrong on the geopolitical round. It works
until it doesn't work. So we do think that it is very important to be selective in terms of positioning for geopolitical events, looking at, for example, where oil is trading specifically, also energy sector. We talked about earnings maybe not doing as well as some of the other sectors, but we like energy as a sector also as a geopolitical hatch, especially given how little it's responded to geopolitical events so far.
That's black Rocks Wayley talking about how traders are positioning around geopolitical risks. Now, we also talked about this with Skyla Montgomery Coning. She's director of macro Strategy at TS Lombard, and she spoke about the economic risks of ongoing unrest.
Markets really struggle to price geo political risk because the issue is it's an extreme event that's unlikely. And so in twenty twenty we had the extreme unlikely event and we had energy prices skyrocket and that had a big impact on inflation. But it's unlikely to repeat itself, and so because it's very hard to price that risk, markets just kind of ignore it. For policymakers, I think it's background noise. The disruptions we're having right now, we don't
think will feed in significantly to inflation. I think the US in particular understands is a difference between supply side inflation and demand driven inflation, so we don't think it has a large impact on the inflation or it'll cause a reacceleration. I think I'm a bit more worried in Eurerope because they've traditionally looked at supply side inflation shocks not so much as a growth negative, but as an
inflation positive. And for them, they're also looking at January HICP, which has the potential to upside surprise on seasonality effects, and they may use it as a reason to be more hawkish than they really should be given the growth back DRAP.
That's Skyla Montgomery coning from TS Lombard there speaking to us on Bloomberg Radio. So that's the markets and the economic point of view on these security issues. How will government officials be addressing these problems at the Munich Security Conference. I've been discussing this with our EU politics reporter Ellen Milligan, and I started by asking her who's attending the event and what we should expect them to be focusing on.
Well, this conference will be centered on maintaining both financial and military support for Ukraine. Often you get, as you said, world leaders attending foreign and defense secretaries, but also tons of defense officials, the real experts on both Ukraine, the Middle East, the Red Sea. They're likely to discuss the difficulties for Ukraine as this war drags on, in particular the industrial production challenges. Ukraine's grappling right now with depleting
ammunition stocks. So we may hear more about joint procurement of military equipment between countries. There may well be some deals announced as well as perhaps more bilateral security commitments that each ally is designing for Ukraine. The UK has already announced theirs earlier this year. We might get more countries announce their security commitments to the Ukraine.
Also, it'd be interesting to watch the discussions from an EU point of view, Ellen, because after we've had Hungary's wavering over the euaid package, how much support is there in Europe for Ukraine Now? Of course, we're still waiting for Hungary to approve Sweden as a new NATO member as well.
Well. That moment last week when the EU agreed on its fifty billion package for Ukraine was a big sigh of relief, both in Europe but also in the US and around the world. The main focus now actually is on US Congress and whether they will pass that sixty billion in age there. This week, actually, US National Security Advisor Jake Sullivan came to Brussels and discussed at NATOGE.
He said he was confident the Biden administration would get it passed, but at just hour's latest Senate Republicans blocked a package tied to that funding, and Polish Premier Donald Tusk has tweeted that they should be ashamed of themselves.
So you're seeing those tensions emerged now that the EU's passed their package between the US and saying kind of you know, we've got our package pass now it's time for you to And as I said, Ukraine is facing some serious ammunition shortages which Russia is going to try and take advantage on. So it's a really critical point for that aid to come through.
Of course, the Middle East is going to be a huge topic of discussion there as well. The latest proposals for a cease far deal reportedly being rejected by Benjaminetta and yah who how will countries who are going to be represented at the conference be talking about their approach to achieving peace in the region. And I suppose more broadly, how has the Israel hamas wore affected security ties?
Yeah, I mean the EU continues to struggle to come to a unified stance on how to approach the situation in the Middle East. Some countries of reticent pressure Israel over its bombing of Gaza. They don't want to restrict what Israel views as a self defense of the following the harmass tax in October. Some are more keen to push them and pressure them to impose a ceasefire, for example. But I think there are some emerging conversations that will be a topic at Munich. So for example, recognizing a
Palestinian state. I thought it was interesting that Foreign Secretary David Cameron in the UK said this week that it's something he'd like to explore. Countries like Ireland to Spain are also considering that. And there's also discussion of the sanctions against violent Israeli settlers, something the US has announced this week and many EU member states want to introduce also. So those are the points of discussion. I think we'll see next week.
Those are also of course going to be focused more broadly from that too on the relationship between the United States and Europe on security issues. We know they haven't always seen io I, particularly when it's come to spending commitments. Where are we now in that balance of relationships, given the pressures that we have from both the conflicts in Ukraine and in the Middle East.
We've had some quite strong language coming out of Charles Michelle Underline in the EU, as I said, Donald Tusk in Poland, kind of ramping up pressure on the US to pass this a package. So I think you're going to see more of that language, more lobbying from the EU, the UK, other allies at the Munich Security Conference. There's also been some concern in Europe about recent US strikes on Iranian backed groups in the Red Sea. There's worry
it could provoke an escalation of the conflict. So I think we'll hear more about the differences in approach between the EU, who wants to take a more defensive mission to the Red See than an offensive one, and the different approaches to the who season dealing with that conflict in the Red Sea. So those are the areas of contention between the EU and the US. But I also think that they're incredibly keen to stress how united they are, and I think they'll be more kind of joint press conferences.
For example. We saw that with Sullivan and Stoltenberg in Brussels this week, and I think they'll want to put on a unified position as well.
It is, of course, Allen two, a year of big elections, notably the EU elections coming up in June, then the US presidential election in November as well. When attending to the conference, be thinking about this in their conversations, about what effects that might have on the international security landscape, particularly with Donald Trump in the frame in the United States.
Yeah, I mean the potential win for Trump, which is looking increasingly likely when you look at US polls, is what is looming over European leaders. I mean, whether it comes to international security, but also in relation to trade between the blocks. We've had some great scoops this week from Bloomberg about Trump planning, you know, potential a potential trade standard with the EU if he enters office, and that you mapping out how they want to prepare for that.
But when it comes to international security, the thing that's causing real concern in Europe is whether they're ready to defend itself if there's a Trump come back and if Putin could target NATO next. Trump has threatened to pull the US out of NATO when he was previously in the White House. He probably wouldn't be able to do that if he's president, but it is raising questions about whether Europe is capable of defending itself without the US.
So You're going to have a lot of conversations next week about Europe's own defense industry.
And I'm wondering too about the relationship between the UK and EU countries on the defense front. You, as someone who's reported extensively from Westminster and now based in Brussels, are very well placed to answer this question for US.
Is that a.
Relationship that has remained strong despite the other tensions that we've seen post Braxit.
Yes, I mean something that I've had a lot since I've since I've come to Brussels is that the Ukraine War has actually united the UK and the EU a lot more. National security is one of their strongest areas in terms of allegiances and their relationship. We've obviously seen the UK take a leadership role when it comes to Ukraine, when it comes to the Middle East also, and they announced their two billion package earlier this year. That was
followed by Germany's eight billion package. So you're seeing that that relationship kind of blossom in this sense, and I think I think you will see that a lot next week. I think the UK and the EU will jointly lobby the US over It's a package. You saw David Cameron go to Washington before Christmas. I think you'll see a lot more of that and them teaming up to get that passed.
That's our Eupolitics reporter Ellen Melligan, and we will have coverage of the Munich Security Conference. I'm Bloomberg next week. I'm Stephen Caroll in London. You can catch us every weekday morning here for Bloomberg Daybreak here at beginning at six am in London and one am on Wall Street.
Tom, Thank you, Stephen, And coming up on Bloomberg day Break weekend, are the world's only remaining negative interest rates about to go away? I'm Tom Busby and this is Bloomberg. This is Bloomberg day Break weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Japan getting close to terminating it's interest rate policy, so the country's GDP and economic data will be the focus for the Bank of Japan.
Let's get to Bloomberg Daybreak Asia co host Brian Curtis for more.
Tom, we look ahead to a slew of Japanese data in the coming week to tease out what to expect next from the Bank of Japan. Among the numbers will get GDP for the fourth quarter and industrial production and capacity utilization for December. Now, Japanese wage growth strengthened less than expected in the month of December, but it still showed signs of momentum, and it's thought that that will keep the Bank of Japan on track to end its negative rate regime in the coming months. Joining us for
some discussion now is Paul Jackson, Bloomberg Economy Editor. Well, first, let's talk a little bit about GDP before we get to that wholesome discussion about the BOJ and what it does next. Paul, thanks very much for joining us. So GDB numbers out next week. A return to growth? Is that expected?
Yeah, we're expecting king a return to growth, And you mentioned the Bank of Japan. Well, look, which central bank in the world wants to be raising interest rates when the economy is contracting, And that was the situation over the summer. That was the biggest contraction since the summer
of the pandemic. So you know, this GDP figure next week is a big checkbox for the Bank of Japan to firmly tick next week and say, right, okay, that's another hurdle out of the way on our March towards raising interest rates for the first time since two thousand and seven.
And let's just talk a little bit about the wage negotiations, because we understand that they're key here for the BOJ in perhaps taking a more hawk as shift. What are we expecting there.
Well, the wage negotiations between companies and unions is underway. I think all the expectations are that the de that they're going to reach are going to be higher than last year, which is about three point six percent last year, so a little bit harder than that. And as long as we get that kind of result in March, then that's seen as kind of the final thing that BLJ needs in place to have everything ready to scrap its
negative interest rates. Now if you look at the GDP figures that are coming out next week, one important element in them is the consumption. Now, if you look at the private consumption in Japan, it fell in the summer and it's only expected to be around zero in the fourth quarter. So you know, it's kind of trade that's helping business investment to get this kind of one point three percent growth, which is what we're expecting in the
fourth quarter. So that points there's something that consumers are not really spending that why aren't they spending much in real terms, it's because of inflation. And if you don't have the wages going up enough to counteract or be above inflation, and the consumption is going to be weak and you're not going to have this positive growth cycle
that the BOJ needs. So these wage figures are really key, and we need this kind of growth to really give the BOJA confidence that it can go ahead with rate increases.
Yeah, so the BOJ wants those wages to go up. The economy is not particularly hot, as you say, and we note that one of the deputy governors at the BOJ said that it's really kind of hard to imagine the bank raising its policy rate continuously and rapidly going forward. That deputy Governor's Shinichi Uchida, what is he getting at?
Well, I think it's a simple idea really that you know, inflation at its peak in the US was well over eight percent, whereas in Japan, you know, we're to two point three something like that, depending on which measure you look at. So in terms of the aggressive moves that the FARED had to undertake to keep like expectations anchored about where prices would go, totally different to the dynamics
in Japan, where we've had decades of falling prices. People are trying to get their head around prices going up, so they don't want to squash out these initial signs. The Japan's economy and growth cycle is becoming something that looks a bit more normal than it has done over past decades. So I think what he's hinting at is, Okay, we go to zero first, we see what it's like. If it's not looking to like it's upset too much of the economy or markets or companies, then we'll go
ahead cautiously from that point on. But we are not going to see the kind of aggressive high after hike double hikes that we saw from the Fed happening in Japan.
Yeah, we had some comments in this past week from Pimco saying that in their estimation, the BOJ would scrap its negative interest rate policy, perhaps as soon as March, and it would make multiple hikes, but they were talking about something like ten basis points. At one point fifteen basis points. It takes a long time then to really get measurable gains in that.
Yeah, I think it's going to be a slow move. You mentioned March and April. April is our base case scenario for when the BOJ hikes. March is our risk scenario. If you look at overnight swaps, the risk is about twenty percent of an early move by the BOJ. And we've serve overed economists, the over fifty economists, and their view is that zero point five percent is probably about as high as the BOH is going to get as
its terminal. Right, it gets that far by the end of next year or not is still an open question, but there is a chance they will.
I'm curious, Paul, the outlook from companies versus individuals. Are individuals You mentioned that inflation really is an issue for mister and missus wattenabe and it is hurting spending companies presumably would like a little inflation.
Well, you know, I think once you get into the dynamic that you can raise prices and people will still buy, then inflation can often be helpful for companies for raising their profits because in other countries, generally companies raise the prices a little bit more than they need to, kind of creating a margin of leeway if you like, whereas in Japan they're so reluctant to raise prices and they'll often raise prices by less than they need to, so
it's not as a positive different profits as it could be. But I think once we get into this idea of inflation sticking, this is going to be good for companies to be able to increase profits through raising prices. And also if the Bank of Japan is right and we're in a cycle where wages are also part of the cycle and driving prices, then consumption should recover. But I think, you know, it's we're maybe a year or two years out before we can really draw the conclusion as hey, did they get it right?
Sometimes we don't see some of the differences in policy play out in public. In places like China and Japan. I'm curious now the current relationship between the b J and the Kisha administration.
Well, that's a good question. If you look at the whole campaign of generating two percent inflation and establishing that target that was out in a joint statement by the government and the Bank of Japan back in early twenty thirteen, so you know, the actual target itself stems from a collaboration working together. Now, if you look at how Kishita's administration has been working through this inflation cycle, it's been
offering generous subsidies to the public on energy. It's been paying at one point it was paying twenty percent of people's electricity bills. Quite extraordinary help from a central government here. And some people were saying, well, hold on, if you want inflation, why are you actually lowering inflation by providing
all these subsidies. But there is a kind of method in the apparent madness in that it's trying to generate some stability in this cycle by holding the inflation up for a little bit longer until it settles in around two percent, which is what the target is.
Now.
One other thing the administration is doing is very aware that inflation is eating into consumption, and that the wage growth still isn't high enough. So it's offered some tax rebates that are going to kick in in the summer, and so we should reach a point where real disposable income does actually increase. At that point, something that should
help drive some spending. And hey, when a politician does that, as always the thought of the back of people's minds, Oh, is that some kind of gambit for an early election.
Yeah, and presumably if we see more aggressive action from the BOJ not that it's expected, but if we do see it, that would be perhaps bad for the government bond market. And obviously it creates some interesting conditions for companies because if you get a big increase in the end, that could make it more difficult in some ways for Japanese companies. Right, So what are we expecting from the financial markets traversing through this next period.
Well, you know, in terms of the companies, the big exporters with a large global presence, they're loving the cheap yen. It's great for them, expands all their profits, so they're happy. It's the it's the smaller, more domesticly focused companies that feel the squeeze. They have to maybe import some stuff. They reliant on energy as well, so you know this
this kind of stuff is is bad for them. So if we if we head towards this new growth cycle with relatively stable inflation and the yen coming back to kind of stronger levels, there's going to be adjustment taking place and the b export is going to be a little bit hit, while the domesticly focused companies are going to be feeding a little bit of comfort in it.
Is it a bit too general to say that if you get repatriation of the yen, that the consumers will benefit and they'll be happy because they'll have more buying power with a stronger yen, But the companies, like you said, there's a little bit of a bifurcation. But generally speaking, corporate sector not so happy, but consumers happy.
Yeah.
I mean, you know, there's so many dimensions to look at these questions on so many different levels that the implications are different. You know, you look at m NA. I mean, Japanese companies wanting to buy abroad. If ye any is strong, it makes it a lot cheaper to do that, and it makes it more difficult if the ends if the end's week.
It is so fascinating. Paul, thanks so much for joining us. Paul Jackson, Bloomberg Economy Editor, I'm Brian Curtis along with you. Can catch us every weekday here for Bloomberg day Break Asia, beginning at nine am in Hong Kong and eight pm on Wall Street.
Tom, Thank you, Brian, and that does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning at five am Wall Street time for the latest on the markets overseas and the news you need to start your day.
I'm Tom Buzzby. Stay with us.
Top stories and global business headlines are coming up right now.