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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, the latest reads on inflation, what it could mean to the Federal Reserve. I'm Tom Busby in New York.
I'm Caroline Netge here in London, where we're looking ahead to the UK Chancellor's key speech to the City of London.
I'm Doug Krisner, looking ahead at what we may learn in the coming week about the impact of US tariffs on the Japanese economy.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, Sirius XM one twenty one, and around the world on Bloomberg Radio, dot Com and the Bloomberg Business App.
Good day to you. I'm Tom Busby. We begin today's program with two fresh readings on inflation. This week, coming off a better than forecast June jobs report. What all that plus retail sales for June could mean to the Fed. For more, we turned to Michael McKee, Bloomberg's International economic and policy correspondent. Well, Michael, I want to look back. Let's start with that June jobs report just over a week ago. What an upside surprise? What does it tell
you about the labor market? What does it tell you about how important it could be to the Fed, to the President?
Well, the upside surprise was in the headline, but when you look under the hood, the news wasn't quite as good. The unemployment rate did not rise, it fell a little bit, but that was because the labor force declined. So that's what we call drop an unemployment for the wrong reasons, And it does seem to have something to do with the President because the number of foreign born workers dropped significantly,
and long term that could be a problem for the economy. Also, what we saw was half of the gain was in government employment, and economists are pretty unanimous in suggesting that's a seasonal adjustment problem because in June you don't see a huge amount of education hiring since school is out, and that was what drove it. So we are looking at a labor market that is slowing down.
Would be the conclusion, but not in trouble yet. So for the FED, it's kind of a wash.
Okay, so even Stephen this week though two reads coming up for the month of June on inflation. The Consumer Price Index out on Tuesday, the Producer Price Index for June out on Wednesday. Also retail Sales for June that comes out Thursday, another big number.
It's a big week, and CPI is going to get most of the attention because it'll be our broadest picture of what the consumer inflation situation is, even if it's not the fed's main index for its inflation target, and it is expected to rise, and so that should get a lot of attention on Wall Street because everybody's been waiting for some kind of tariff impact on the price level, and so if we see that, people will be a
little concerned. For the Fed, it might be the producer Price Index that's more important in the sense that producer prices will tell you what are probably going to be a better indication of where underlying tariff inflation pressure is coming from, because all the parts that people buy from overseas to make other things will start to show up.
We've had tariffs on steel and aluminum, and that's the kind of thing that in theory will show up in the producer price index and suggest that we will see further consumer price increases down the road.
Auto parts, lumber all in there too, all in there too. And now you mentioned obviously the tariffs. A lot could change. Last week we heard President Trump talking about anti American bricks nations, a ten percent levy on nations. I mean, how bad could it get? Is it all bluster? I mean, what do you think?
Well, so far, it kind of looks like the way people are taking it is. Anything could change at any moment, because that's been the story of the President's tariff policies.
But for the.
Moment, I think what you're going to see is economists starting to put pencil to paper when they have some numbers, to try to figure out what the effect will be on prices and on consumer demand.
You mentioned retail sales. Retail sales have been.
Hanging in there at a lower level than they are, but if prices go up, then people may stop buying some things. So that'll be what the people with the Excel spreadsheets are doing. Companies have to figure out what they are going to do about supply chains, whether or not this means they should invest or not in expansion, what they think it's going to mean for their customers, so they know whether they're going to have to absorb things in their margins and that might have.
An effect on the stock market.
So a lot of questions to be answered yet. But if we start to get some clarity that we can believe in I believe it's not going to change, then that is going to give people a chance to start figuring out where this all goes.
Well, I'm sure we'll talk again until then the June CPI figure out this Tuesday PPI the following day retail sales On Thursday, our thanks to Michael McKee, Bloomberg's International Economic and policy correspondent, we turned out to earnings, and this week we'll hear from the streaming video giant Netflix as it goes deeper into live programming to raise revenue and for more on what's behind that push. We're joined by Get the Rag and often Bloomberg intelligence analyst on
US media GITA. Thank you for being here. Although they no longer report subscriber numbers, a key metric for Netflix as it builds its advertising business. What do you expect to see in the latest earnings report out on Thursday.
Yeah, you're absolutely right. They have stopped reporting subscribers as of this year, but the metrics that they want us to focus on right now are revenue gains as well as operating margin, and they've really been delivering some stellar
numbers when it comes to both of those metrics. So what we're looking for and what they've guided to for the second quarter in terms of revenue growth is mid teens percentage increases, so about fifteen to fifteen and a half percent increase in revenues and a very very strong operating margin at thirty three percent. Remember last year was
absolutely a breakout yere for Netflix. They had six hundred basis point expansion in their operating margin, and again they've guided to pretty impressive increase for this year as well.
So you're absolutely right. The focus has really shifted now to financial metrics, But that doesn't mean that subscriber growth is slowing because they have an absolutely fantastic They had a very strong content slate for the second quarter, and they continue to put out really good titles and they have some really big series that are going to debut on their platform through the rest of the year as well.
Well, it's clear. I mean the share price has almost doubled in value in the past twelve months, so they are doing everything right. Let's talk about what they have done as well as the push into more live programming. They've raised prices and that doesn't seem to have heard at all either, right.
Not at all.
So what Netflix has really done well is they've established themselves as a must have platform, so they are the go to, kind of default entertainment option out there, which gives them a lot of pricing power. They also have content is obviously their greatest differentiator. They have a steady stream of really popular content on their service. But most of all, it's really the user experience. Right, The user
experience is unparalleled, and that's something that Netflix knows. And you know, they're able to raise prices and there has been absolutely no backlash or pushback from customers.
We've seen shown at very very manageable levels.
So it just gives them more confidence, really emboldens them to keep increasing prices at a steady pace even into the future.
Well, let's talk about some of that programming, because they have really tried to broaden the lineup to attract new subscribers, and it looks like it's working. I mean, the sports, there's a WWE, the raw wrestling, UFC matches. We know they've been aggressive trying to get Formula one. I mean, they are really branching out. And we know in the past there's no football games now NFL, but you know what worked for them on Christmas Day those two games there,
those big celebrity boxing matches. I mean, is that the future that they see right now? Those live programmings, the advertising revenue from that, and are we going to see more and more and more of that?
We're going to see more. There is absolutely no doubt about that. You're absolutely right. You bring up the WWE. That's been a great source of programming. We see that show up in the top ten literally every week, so we know that that programming is resonating very well. Again NFL, that's something that they tried last year with the Christmas Day games.
They're going to do that again this year.
They have more of this kind of boxing matches coming up, so they're really getting into live programming in a big way.
And if you think about what the.
Strategy is here, it's not just to kind of expand the entire programming lineup. They're really chasing advertising dollars, and we know that they are looking to get at least about nine billion dollars in advertising by twenty thirty. That's that's a pretty big ask because remember they just introduced advertising. It was only about one one and a half billion dollars again estimated in twenty twenty four.
They've got to really scale that up.
So the idea here is to really capture more consumer media usage time, and so they want to get all of these different genres.
Live sports is something that works really well.
They did a really very different type of deal just a few weeks ago in France where they're actually integrating content live content, live TV content from TF one. This is the first of its kind deal where they're taking a live broadcasting live broadcasters programming and actually putting it on Netflix. So again here we're you know, we're just looking at them experimenting with different strategies, basically just capturing more watch time, increasing engagement, reducing seoan.
Well, they've also done a similar thing with NASA plus they're ad free offering from the US Space Agency, and they've had talks with Spotify about even more programming, branching out beyond sports.
Right.
Yeah, again, this goes back to this whole concept of retention monetization. How do you keep driving user growth? And it looks like they are not afraid of experimenting and you know, really trying all kinds of things to scale and to become the dominant.
I mean, they already are the dominant.
Streaming platform, but it's just basically expanding that dominance and really really cementing it.
And we've seen Squid Games three, a blockbuster for viewership, the most watched program in ninety countries, the final season of Stranger Things, and coming out in just a couple of weeks, the second season of Wednesday. I mean, they've got a full lineup of shows too.
Yeah.
Absolutely, so, believe it or not, this is the strongest six month period ever in the history of Netflix. They have never had three of their you know, biggest series ever. I mean, remember squid Game is their biggest series ever, against Stranger Things, Wednesday. All those three feature in the top five of the most watched series in the history of Netflix, maybe in the history of any streaming platform. And so we ssolutely believe that is going to drive
extremely strong subscriber growth. Management itself has kind of characterized this slate as, you know, a slight embarrassment of riches. You know, they've never had so many big series kind of come out, and they're absolutely capitalizing on it. So remember they are eventizing this whole stranger things. They're breaking it out into two parts. One part comes out, you know,
around Thanksgiving. The second part comes out on Christmas Day, So they're really going to capitalize on it and make sure that subscriber momentum is maintained.
Wow Big and getting bigger. Netflix Q two earnings out this Thursday after Wall Street's closing. Bell Our thanks to Githa raganathin Bloomberg Intelligence analyst on US media and coming up on Bloomberg day Break weekend, I'll look ahead to a major speech from UK Chancellor Rachel Reeves. I'm Tom Busby, and this is Bloomberg. This is Bloomberg day Break weekend, our globe look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York.
Up later in our program, we look ahead to several key data points for the Japanese economy. But first UK Chancellor Rachel Reeves do to deliver her next major speech to City of London at Mansion House on July fifteenth. She's expected to lay out the government's growth and competitiveness
strategy for financial services. But with pressure from within her own party to impose a new Wealth tax in Britain, what will Reeves's message be for more, Let's bring in Bloomberg daybreak earbanker Caroline Hepger in London.
Tom Rachel Reeves will face an audience in the city who may well be relieved to see her still as UK Chancellor. The Labour Party has been in power for a year in the UK, it has not yet been able to deliver the kind of meaningful growth that avoids very difficult tax and spending decisions in the autumn budget. Paul Johnson, the outgoing director of the leading think tank, the Institute for Fiscals Studies, wrote recently on the subject.
The Chancellor has to somehow reconcile tax and spending, but both her own Labour MPs and the Tory opposition are still living in a dream world, according to Johnson. David Miles from the independent watchdog the Office for Budget Responsibility put the Chancellor's difficulties into context when he spoke to us recently on Bloomberg Radio.
If one kept all the policy settings as they are, the generosity of various state pensions being uplifted in line with a so called triple lock, and health spending likely rising simply to reflect what's likely to happen to demographics. And if there's no change in the tax system, in otherwords, if nothing changes and you just let the system carry on as it is, it looks like it's going to generate a stock of debt that that doesn't get under control and in the longer run, in anyway, carries on
going up. The message of our certainly isn't you know this specific policy needs to chase angel that specific policy is to change. It's just that there are pressures which have to be offset over the long run or else through on a trajectory which is likely unsustainable.
So that was the obr's David Miles. But those difficulties are still some weeks away. For this Mansion House speech will be focus more narrowly on the specifics of the financial industry in Britain amid a push in the US to power ahead with deregulation, tariffs and tax cuts.
Well.
Joining me now is Bloomberg's UK Government reporter Joe Mays and Bloomberg opinion columnist Paul J. Davies. Welcome to both of you, and thank you for being with me.
Joe.
Can we just start by thinking about what we expect in terms of tone from Rachel Reeves. Obviously we had that moment of tearfulness in the House of Commons quite recently, followed by lots of beaming smiles and hugs with the Prime Minister. Does Reeves retain her authority?
I think we can expect the kind of tone which you'd normally get from a child, and imagine how speeds, which is projecting a positive, grateful attitude towards the city for the massive contribution it makes to the tax space, to the economy, and then setting out what she's done to help them so far and what she plans to do to make their lives even better going into the future.
You're right that it comes against this backdrop of that very dramatic moment we had in the House of Commons where the pound was moving on these fears that she might have resigned or been sacked. Yeah, I think she came out of that episode actually strengthened with the city and with financial markets because it really showed how markets were worried that she was going to be replaced by a more left wing alternative and so by staying, and you saw the reaction of the pound and guilts rallying
when she was confirmed she was going to stay. I think that shows that investors feel like she is probably the safest bets when it comes to labour chance. That's her fiscal discipline, commitment to those fiscal rules. So I think she'll go into this mansion house feeling somewhat emboldened by that episode, and I wanted to show the city that she's still informed. She's got plans to make the economy grow and.
Do better, and maybe that that lesson has become evident to her own party, within the Parliamentary Labor Party. Maybe what do you think she's going to announce then? I mean, there are so many rumors already, but let's start by thinking about icers, which is a particular investment product in the UK. I mean eighteen million people have investments in ers.
I think this is the most eye catching announcement we're expecting. Was this change to the twenty thousand pounds limit that you can currently put in a cash icer tax free on the interest. We're expecting her to announce a reduction in that twenty thousand pounds limit on cash, so that you could still have twenty thousand pounds in an ISA, but more of it would have to be in equities and stocks. I think that's the push she wants to make to move more capital into British shares British stocks
in a bid to get growth going. It's all part of that growth message. Now, it wouldn't be without controversy. We know that for some people this is something they do not like. They like the idea of having kind of safe cash as their form of saving, but then will be reacted negatively maybe, But I think that's what the bigges and Ulsomber are expecting.
Yeah, and some of the banks and the lenders that operate the isers that offer the iceers, you know, have also got a stake in this too and have pushed back somewhat against maybe some of the changes. Paul, let me bring you in at this point. So that's kind of setting the tone and maybe the eye catching announcements. But obviously the City of London wants the detail, and particularly on regulation in terms of maybe the idea of scrapping ring fencing rules, which is a rule that dates
back to the financial crisis. Any thoughts about whether that might be part of this mansion house speech.
Yeah, well, this is one of the key sort of I guess, most tangible debates at the moment in regulations. And it's pretty interesting because there's a split between Rachel Reeves seeming prepared to perhaps ditch it as a way of hopefully enhancing growth. Everything that they're trying to do is find ways to enhance growth. Bank of England has come out against it. Andrew Bailey, governor has said that he thinks it should remain, and there's a split in
the industry as well. So you know, Berkleay's Bank has defended it quite strongly and thinks it's very important as a way of protecting depositors. I mean, you remember that the whole point of this thing is to keep ordinary consumers deposits separate from the volatile, exciting, dangerous world of investment banking and trading and so on and so forth.
So Barkley thinks it's important to keep that. Other banks, particularly HSBC, thinks it be much better to find a way of releasing more of that money for you know, growth investment inside the UK and beyond. And they're unhappy that big global banks like JP Morgan and Goldman Sachs can use their small sort of UK deposit gathering businesses Chase UK or Marcus to raise cheap funding, which they're then free to use for whatever they want wherever they
want because they remain below this threshold. I mean, I think what we might see ultimately is maybe a compromise whereby you know, the banks like HSBC and Barclays get to use the first thirty five billion of UK retail deposits, which is the threshold for you know, ring fencing your
UK operations, separating it from investment. Then maybe they'll get to use that first thirty five billion in a freer way to kind of you know, to put into investment banking or some kinds of corporate lending or something more growth orientated, and that could satisfy both sides to some degree.
Yeah, And I think this goes to the argument about whether the government's changes all of these tweaks, these small incremental tweaks, actually going to add up to something more major. And meaningfully change the trajectory when it comes to economic growth, or in fact, this focus on financial services. We know that financial services is one out of the eight growth areas that the government is focused on, but how much
are they really relying on financial services? It's sort of an interesting quat, isn't it, in terms of what other maybe smaller banks are concerned about the increase potentially in capital requirements for smaller lenders, how big a difference would that make.
Yeah, so, I guess one of the debates around ring fencing has been is this is keeping it away of restricting competition from smaller banks because it puts a cap
on their growth to some degree. Those smaller banks like you know, Starling or One Savings Bank, they're kind of much more worried about these kind of emrel capital requirements which kick in sooner and are much more costly, very quickly in terms of the amount of capital and and sort of you know, loss absorbing debts, which is the kind of capital that you have to issue as those banks, so they would much rather see a change there, And there is a kind of an idea I think that
maybe the point at which that kicks in might be lifted as well currently from sort of fifteen to twenty billion pounds of assets up towards that thirty five billion where the ring fencing kicks in.
Okay, So that on regulation, Joe. In terms of other things, that could also so feature in the next few days a shakeup of the pension system, especially if auto enrollment. I mean, pensions are such a major issue for the UK, not enough savings, not enough good returns for investors. What might a shake up look like?
Yeah, so I think the government would like to see more money going into pensions, firstly so that more could be invested in the economy. That'll be a growth story for them, but also for us and our retirement savings and do we have enough. So I think we could see changes, as you mentioned, to the contribution levels for what gets paid into pensions. So at the moment you have the system where minimum contributions of eight percent by employees only three percent by the employer, and there's some
talk about that three percent number perhaps going up. Now Torsten Bell, the Pensions Minister, has said that the rates won't change for this parliament, but there could be an announcement that says we're looking at in the longer term. Could that number change?
Now?
Businesses would be reluctant to that because it would mean more costs for them if they had to pay more into our pension, But it might be something that does boost retirement savings, boost the economy. So I think that's one to potentially look out for, Paul.
The city functions as part of a global financial system. We're seeing really big changes in the US in lots of ways. Is London keeping up? Some banks that I speak to actually are very positive about positioning themselves in London, the trading hub, the hours and so on. Should we be Can we be optimistic and London keep up?
Yeah?
I mean there are you know, there's a whole lot of issues surrounding this, obviously. I mean, I think the risk with the debate that we're having in the UK over financial services regulation and what we need to do to kind of tweak things slightly to encourage growth, risks being completely overtaken by a big deregulatory wave in the US.
I mean, I think in the City, the kind of the long term debate and the issue that they want the government to address with the Bank of England with the FCA is one of you know, a very risk averse kind of culture and approach to not only the kind of rules we have, but how they are applied. And they would love to see you a bit more freedom and a bit more growth focus and competition focus in the attitude of regulators. And there's signs that that's
starting to happen. The Bank of England is looking at has already delayed, you know, stricter capital requirements for the trading books of investment banks, and is looking at ways to make the remaining capital requirements for banks a bit more flexible so they could sort of operate at a lower level of capital during times of crisis.
Thank you so much, Bloomberg's UK. I'ment to report to j Mays and to our opinion columnists Paul J. Davies. Thank you so much for your time. I'm Kroline hepgar Here in London. You can catch us every weekday morning for Blueberg Daybreak. Youre at beginning at six am in London. That's one am on Wall Street.
Tom, thank you, Caroline, and coming up on Bloomberg Daybreak weekend to look into the impact of US tariff policy on the Japanese economy. I'm Tom Busby And this is Bloomberg. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. In the week ahead, we'll get several key data points for the Japanese economy likely
to show the impact of US tariff policy. For more, let's get to the host of the Daybreak Asia podcast, Doug Krisner.
Tom, the Japanese economy was beginning to show signs of vitality and inflation before President Trump unleashed his tariff policy, and now the story in Japan seems to be about economic uncertainty, especially since Washington and Tokyo are still trying to reach a trade agreement. Now in the coming week, we'll get the reading on Japanese core machine orders as well as the print on industrial production plus trade figures
for the month of June. And to help me preview these readings and the impact US tariffs are having, I'm joined by Katya Dmitrieva, Bloomberg Asia Economy reporter. Katya is based in Hong Kong. Thank you for making time to chat with me. Can I ask you right out of the gate, how dark is the cloud hanging over the Japanese economy right now, well.
It's pretty dark right now. And if we were going to take that metaphor further, I mean you're getting not just storm clouds with thunder and lightning, because you have an economy that for the past few years has been trying to engineer inflation and has been fairly successful at
doing that. Right, they were in a period of deflation and then pretty flat growth, prices started to perk up, the Central Bank started to hike interest rates with planning to continue to do that, and then enter President Donald Trump in tariffs, and now the economic outlook is looking
a lot more uncertain. So they went from trying to increase prices to now the risk is a technical recession with two back to back quarters of negative growth, and the reason for that is largely because of tariffs and tariffs on autos in particular. Japan's number one market for car exports is the US. It has been for some time, and the twenty five percent tariffs that were added on cars in April by the US government is hurting them already.
We actually saw signs of that recently, so Japan's automakers cut their export prices to North America by a record amount. So what that signals is that essentially producers are not willing to face a decline in orders. They're trying to keep the demand going and trying to remain competitive in the US market by cutting their prices. But of course, if they're cutting prices, that means other companies are cutting their costs and prices along the chain, which means in
Japan overall inflation might actually face some dampening here. So it's a huge risk.
So when I'm listening to you, I'm thinking of Japan Inc. And the degree to which margins are going to be under pressure.
Yeah. Absolutely, I mean, this is not good for Japanese companies, and they're hoping that President Trump and Prime Minister Ishiba can sort of reach an agreement on trade. But the signals we've gotten from the Japanese government is very much we'd rather be patient. We'd rather wait for the right deal, even if it means that we may initially get hit with tariffs. But we don't want to rush into this because they want to protect their domestic sector as well.
They want to ensure not just that they can continue to sell cars and other goods, into the US. They want to make sure that their agriculture sector, for example, doesn't get slammed by US agricultural goods if they change those non tariff barriers, which of course Trump wants. Trump wants to have more US exports and support US farmers. So it's they're kind of at an impasse right now.
And the difficult thing is, and the scary thing is for other countries, is that Japan has been far and above one of the most active countries when it comes to trade negotiations. So they have flown their trade team to the US at least seven times, and we ran the calculations for how many hours that is in the air and how many miles that is. So they're far
and above every other country in that regard. And if even they can't reach an agreement and avoid for them it would be twenty five percent tariffs as of August first, then who.
Can On top of that, Japan is the largest investor in the US. It has been for the past five years. It's also a crucial security Ally, I would think that there is a level of good will that's a part of this story as well.
There should be, And it's a similar case to South Korea and to Taiwan as well. I mean, these are allies in Asia of Americas for some time, and that's something that the Prime Minister and trade delegations have flagged time and time again, both in meetings with the administration and also publicly and in the media, is that there is a lot of common ground and they do hope
that they can reach some sort of resolution. And the data, at least for Japan's side, is really going to underscore that next week, because you had mentioned we're getting some of the industrial production data that's probably going to slow down. We're getting producer prices and consumer prices. This is something at the Central Bank and the government really wants to see perking up, and it's it's probably going to slow again for CPI. It's going to probably the fourth month
in a row. And then we also have export. Both of those fell in May, and it sets up this interesting dichotomy between Southeast Asia and North Asia because South Korea, Japan we've seen a slowing of exports, but Southeast Asia has really accelerated because a lot of the stuff essentially from China is going through there onto the US. That'll be something interesting to watch in the data as well.
But really next week, I think the message from Japanese data is going to be they need to reach an agreement. They need to reach an agreement soon, otherwise their economy is at risk.
So any notion of the Bank of Japan positioning itself to begin to hike interest rates is off the table at this point. I don't see a way for the BOJ to be able to execute on that mission.
It'll be really tough, especially if there is an economic even if it's a technical recession, Even if policymakers can sort of look through some of this data as short term fluctuations related to ongoing trade talks. I mean, it's really hard to think of a world where as a central bank, you high rates into a recession or during
a recession. Just doesn't happen, and they only have to look around the world, to the Federal Reserve, to the US to see the exact same uncertainty over there minutes we're really least this week, and it clearly shows there's a debate and there's uncertainty about whether what to do with interest rates because the economy is looking like they can start taking action, but tariffs are showing that there might be some economic uncertainty and they might need to
potentially cut interest rates. So there's that cut versus raise debate happening across central banks globally, and what it likely means is just holding until you get some clarity and then looking back in hindsight and saying okay, you know, either' patting yourselves on the back or saying, ooh, we moved a bit too slow on that. I mean, it's not a great situation.
Right being behind the curve rather than being prudent and trying to wait for the data to drive the decision making. One of the debates you mentioned the Fed minutes as
to whether or not the East tariffs are inflationary. But I'm really curious about what it means for the political future of Prime minister issue of the situation that Japan in right now vis a VI, these tariffs that have been put in place, and the fact that maybe we're going to see a tariff freight that is permanent, much higher than the one that exists now, is this in any way a political setback for Ishiba.
It's a political setback in the sense that if we see the impact of the tariffs roll through into an economic crisis in addition to consumers having to pay a lot more for a staple. You know, I've seen this called the rice election, for example, because rice prices have soared this year in Japan and there have been lineups and the government had to sort of unleash their strategic reserves of rice. And you know, in case listeners don't know,
rice is a food staple. It's sort of like if the same thing happened with bread prices in North America. There's been a lot of pushback on that. The government has been very keen to come out in front of that and do as much as they can to lower prices. And also, frankly, this is why they want to protect their agriculturals from imports abroad. They want to protect their farmers feeble to continue to produce rice and other agricultural goods.
I'm uncertain as to whether or not the impact of these tariffs on the Japanese economy is having any effect on the way in which people in Japan are feeling about the United States. Katya, you and I have talked in the past about how this trade war between China and the US is changing the attitude of people in China toward the United States.
Right, There's definitely been a visceral reaction on social media both ways.
In China.
You know, you have a lot of netizines basically saying, you know, Trump is making China great again because you know, China just has to sit back and wait for the US to isolate itself and China can form all these trade agreements and trade deals and come out on top. And then you have the other half basically coming out against the US and against Trump in this because of
the economic pain it could have in China. I think in Japan, the bigger issue, to be honest, among people has been the currency and the impact that that's had on tourism and on more Americans and Westerners living in Japan and also traveling through Japan. There's been a huge pushback domestically against that.
So do you have a sense of this tension between the US and Japan having an impact on Japanese relations with China? Is that at all possible that Japan begins to perhaps look for other markets or to fortify the relationship with China in a way where that trading relationship is maybe improved to some extent.
Yeah, there is that happening for sure. As the US continues to isolate itself and issue tariffs. As a country, you're just going to look to do business with other major economies, and especially if they're in your neighborhood. That definitely helps, you know. There was a former South Korean official that I was speaking with a few months ago who made this exact point, who said, you know, if your previous friend becomes your enemy, you're going to look
for other friends. You're going to look for other people that you can form agreements with. And it's true that the Asian region has the most integrated trade of any other region in the world. So more than fifty percent of trade agreements are within the region, and so a lot of the growth in trade and exports and imports and demand frankly comes from within the region. The issue with that, unfortunately right now, is that China's economy isn't doing as well as it was a few years ago
pre pandemic. So that's one consideration that, yes they have a huge population, Yes they have consumers with a lot of savings, there's still not unleashing those savings. And so if you bet on the Chinese consumer and the Chinese economy, you might kind of end up in a similar place as dealing with tariffs on the US. In other words, you're not going to see the same amount of growth. So there are a few considerations on both sides. But
of course we've seen more trade agreements made. You know, China has traveled through Latin America, they did the Southeast Asia tour, meeting with leaders, so we've definitely seen those ties grow closer. The question is how serious is it and is China willing to make changes to its own market, especially in services and access of other countries' service providers within China is one of the main issues. So if they can tweak that, great, but it remains to be seen how serious they are about it.
Katya, we've certainly covered a lot of ground. Thanks so very much, Bloomberg's Katya Dimitrieva. Katya is our Asia Economy reporter based in Hong Kong. I'm Doug Kristner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast. Tom.
Thank you, Doug, and that does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning at five am Wall Street Time. For the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with US. Stories and global business headlines are coming up right now.