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This is Bloomberg day Break Weekend, our global look at the top stories in the coming week from our Daybreak actors all around the world. Straight Ahead on the program, we'll look at upcoming housing data, along with earnings from eb Giant Tesla and the latest on its CEO Elon Musk. I'm Tom Busby in New York.
I'm Karen Hecke here in London, where we're asking what the European Central Bank we'll do next.
I'm dek Krisner taking a look at the upcoming national election in Japan.
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 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.
Well, good day to you.
I'm Tom Busby, and we begin today's program with some key US housing data as we wrap up the critical spring home buying season. Existing home sales for June out on Wednesday. New home sales for that same month on Thursday, for more on what to expect the impact of sky high home prices, elevated mortgage rates arise in existing home inventories, and the Trump tariffs and all that. We're joined by Drew Redding, Bloomberg Intelligence US home building Analysts. Well, Drew,
thanks so much for being here. I want to start with what you're expecting to see in these reports, and then we'll break down what's behind those numbers.
Sure, so let's start on the existing home side. Obviously, the resale market has been stuck in the mud. You know, we're expecting sales will be down modestly on a sequential basis, but you know, should be up a little bit from last year's three point nine million annualized rate. Keep in mind that was the lowest pace in about fifteen years, so some modest improvement, but the market's still down over
twenty sent from more normalized levels. We've kind of been hovering around this four million annualized rate of sales for a while now. But it does appear to us that, at least from a volume perspective, the market as troth. You have to realize there's some level of underlying demand out there. In the market given people have to move for one reason or another, and you do you think you'll see a little bit of growth this year and
perhaps stronger growth next year off that low base. Now it's a little bit of a different story in the new home market. Sales are expected to be down from last year. Some of the higher frequency data we've seen on purchase application showed a little bit of improvement, so there are some conflicting signals. We've also been hovering in a range for a part of two years now. But what we do know is that builders are having to fight harder for every sale, and they continue to discount
heavily to maintain their sales space. There's some evidence that these incentives that they've been using or having diminishing returns, they're just not as effective at a certain point. So you know, builders are turning the base price. We've heard that from Lennar and KB Home, so I think that's probably the path forward.
Well, I think that's the biggest sticking point is the price. The price not only on new homes of course, but on existing homes. They are still rising. The growth is starting to slow though, correct.
Yeah, that's a great point, and the resale market, prices are definitely still climbing. The latest data we've seen from Redfin showed about a two percent increase in mid July, but as you mentioned, prices are rising at a slower pace. Part of that reflects, you know, the obvious shift to more of a buyer's market where sellers are getting a
little bit more realistic in terms of listing prices. So it has started to help the monthly payment on the margins, you know, like we've seen with inventories, the stories really at the local level where we have a lot of markets across the country that are actually already seeing price decline. So you know, you talk about markets in Florida, like Tampa, also Atlanta, al So it really varies by market, and
it's going to be dependent on supply. You know. In the new home market, we've already seen prices come down more significantly and one of the reasons obviously builders have been aggressive in the use of incentives, but they're turning
more to base price cuts as well. And if you think about, you know, how builders account for incentives, it's reflected as a reduction in the average selling price, so to the extent that inventory continues to puddle up, they keep their foot on the gas in terms of incentives. We think you see further net pricing pressure in the new home market as well.
And those inventories of new homes the highest in almost two decades, right.
Yeah, it's certainly an interesting dynamic right now. Remember over the last couple of years, the lack of for sale inventory in the existing home market had been a key part of the investment thesis for home building investors. You know, you had a lack of options, so it helped the funnel buyers over to the new home market, who were
also able to help with the monthly payment. But you know, as you mentioned, that's that tailwind has turned into a headwind as more listings come onto the market and homes are sitting for longer. On the resale side of things, inventories are about thirty percent from last year, and you know, we're still ten percent below twenty nineteen. But looking at the national data, I think really blurs the picture. At
this point. We now have ten states where resale supply is higher than it was in twenty nineteen, and a lot of that's in some important markets for the builders, think of Florida, Texas, markets out west like Colorado and Arizona certainly a big risk out there, And as you mentioned, it's not just resale market, but it's also in the
new home market where completed inventories have really risen. And the reason for that is over the last couple of years, when there wasn't supply in the resale market, builders stepped in to fill that void, so they got more aggressive in their use of specs. Now that build an inventory was met with a rise in rates and a drop in demand. So now they're left sitting with all that inventory on their books. I think we ultimately that leads to is a pullback in production, so fewer housing starts.
We're starting to see it on the building from its side, so it's something that they're going to have to work through before they start to put more more units in the got.
To clear out that inventory.
Let's talk about interest rates, So you just mentioned still stubbornly near seven percent. You know, that's probably why mortgage applications just last week took a tumble down ten percent. Now the Fed meets again about ten days from now, no indication the Central Bank is ready to lower those benchmark lending rates. So how big a concern are rates to the housing market.
Right now, We've talked about one piece, which is home prices, and the other important piece is obviously where the thirty year rate is. Right now, we're about six point eight percent. We had seen a little bit of improvement, but now maybe some concerns reigniting with inflation pushing things back up. I think one of the main issues with rates is not only the absolute level, but just the volatility. You know.
I think if we could get rates into the low six high five percent range for more of an extended period of time, it gives you know, home shoppers a little bit more comfort of what their payment might be as they're going through the application process. So rates are certainly a very important piece of the puzzle. And you know, there's not a whole lot of indication that things are going to get significantly lower anytime soon.
Oh boy, it's a lot to take.
In June, existing home sales out on Wednesday, new home sales for that same month on Thursday. Our thanks to Drew Redding, Bloomberg Intelligence US home building analyst. We move now to earnings at Tesla. It's out with second quarter results this coming Wednesday. Has the ev maker bounced back
from a troubling first quarter. What has CEO Elon Musk's renewed focus on the company meant after he left his Trump Administration cost cutting duties, and what will the pending rollback of clean energy tax credits mean for the company. For more on what to expect, we're joined by Steve Mann, Bloomberg Intelligence Global Autos and Industrials Research Manager. Well, Steve, thank you so much for joining us. After a disappointing
first quarter results. Will there be good news in Tesla's upcoming second quarter report?
Yeah, I think the vestor will be more focused on what Elon must is going to talk about in the remainder of the year and beyond. In terms of earnings, we actually expected to report in line with consensus, but a few things that are on investor's mind, like you know, the Robotaxi, like the new models that they're rolling out they're planning to roll out, and even Elon himself, you
know he's tweeted a few things around politics. You know what does he thinking around that and how it's going to impact the company.
Let's start with those models. Well, the Model three is still the bread and butter for revenue, right, But how about the revamped model Why Juniper Suv. What does that mean?
The ramp up has been going fairly well. It probably disappointed some investors that they didn't ramp up as fast as they thought, but it seems like the second quarter it came in nicely. Is some initial data on China sales, which is right now is probably like close to forty to fifty percent of their sales now. They're also planning to launch an extended version, a longer version of the Model Y in China, and I think that's going to resonate with the clients over there fairly well.
How does it compete against the byds and the Cherries and the other very very low cost Chinese rivals.
Yeah, it's tough. Launching FSD full self driving in China earlier this year will help, But BYD did cut prices quite a bit early in the year by a magnitude of thirty percent, and Tesla it doesn't want to play in that low cost, low price market. I think they're going to be medium price to high price market, and I think launching the extended version will actually help drive sales for the company over there into next year.
Now, last month you mentioned this elon Musk rolled out as long delayed robotaxi unit in Austin, Texas. How far away is that service really for making any kind of on the company.
It's a pretty exciting development. He's been talking about it for a while. It's it's finally here. It's it's still a slow go. I think he's very focused on safety, not a surprise, and and that's where he should be focused on to make sure the long term reputation of that business stays positive. And we think, you know, no meaningful revenue or profit in the next couple of years is probably going to come through in twenty twenty seven, so we haven't baked in that that business as a
meaningful contributor to to the bottom line. But it's a it's a big market, so there's a number of players, Waymo being probably the largest at the moment. But I think the market's going to grow to a point where he's gonna be able to absorb a new competition like Tesla and even even Uber like. Uber announced that they're partnering with Lucid to develop automous vehicles for their robotaxi business.
You mentioned something earlier, and that is safety concerns, especially with the full self driving. I mean they've had quite a few problems, a lot of litigation.
I would say that's kind of normal mode of operation. I think there will be some safety concerns, there will be accidents. I think the investors should be aware. No engineering feat like this goes smoothly, so it's going to have some hiccups. So that's why it's very important for not just Tesla, but weimol to really hone in on safety and making sure the consumer, the users of ROBOTAXI, feels confident with this service.
Now I want to talk about something I think that the shareholders are going to be very interested in what Elon Musk has to say, and that's the expiration of the seventy five hundred dollars EV tax credits. That deadline is coming soon September thirtieth. Now we know how Elon must react to that Trump bill that removes those clean energies, and it was not pretty. How will Tesla respond, How will the company respond?
It's a double edgh sword. I think on the surface it is negative. It is negative because obviously they have generated quite a bit of revenue and profit from the selling these credits. If you look on the bottom line, it's minimal. It's probably like five percent, maybe less than five percent of profits. So it's going to have an impact on earnings definitely in the fourth quarter and well into the next year.
Well, a lot to look forward to.
Tesla Q two earnings out this Wednesday after Wall Street's closing bell Our thanks to Steve Man, Bloomberg Intelligence Global Autos and Industrials Research Manager, and coming up on Bloomberg day Break weekend, we'll look ahead to the next monetary policy decision from the European Central Bank. 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 Buzzby in New York.
Up later in our program, we look ahead as Japanese citizens head to the polls for an Upper House election. But first europe Central bankers will vote on their next move when it comes to interest rates. The Governing Council decision comes at a time of heightened trade tensions fueled by the back and forth with the US. How will policymakers respond For more Let's go to London and bring in Bloomberg daybreak. Euro banker Caroline hepger.
Tom the Bundesbank president and DCB policymaker Joakim Nagel has urged caution over the European Central Bank's next move on interest rates, telling a newspaper that it requires a steady hand. His comments come as policymakers have cut rates eight times between June twenty twenty four and June twenty twenty five, down to two percent. Economies and markets are now betting
on a pause in July. The final release of EU Area inflation for June also confirmed that the headline measure accelerated to two percent year on year from one point nine percent in the previous month, but still fairly well anchored in terms of inflation in Europe. So the focus is also going to be on the ECB September meeting when we get new ECB economic projections, and that may
give officials more clarity on the economic backdrop. But with US President Donald Trump's on again, off again tariff policy clouding the outlook, Nagel says that the impact on inflation is extremely uncertain and in Europe, member states are urging the Council to do more to support the economy. French Premier frostwy Beiru said his country's facing the same challenges as the US, but without the strong dollar that he says gives the Federal Reserve the option to create money
to fuel quote optimism in the economy. It's an issue, France's finance Minister Eric Lombard outlined, speaking to Primpaks and Edward's critique Cup and Mark Cardmore.
France as an issue of a large public debt and two large public deficit, and we are tackling the issue, I believe very seriously. The plan is a plan of forty four billion euro of savings and revenue increases. Forty four billion euro that will bring our deficit below the five percent threshold next year to four point six percent, and we are aiming at a deficit below three percent in twenty twenty nine. The bulk of the plan is
to cut public spending. There are thirty billion of savings of cuts in public spending, whether for the state of a social security, which is absolutely important but manageable. There will be ten percent of revenue increases and four billion more because French people will have to work more, two days more, because we will cut to making holiday next year and the years after. So it's a very easerious plan. Forty four billion euro okay.
And you think that this is enough to reassure investors, What about getting the support of all of the lawmakers in France, because that seems to be very difficult. You'll need the support of a number of parties. Which parties are you going to talk to to try and get support? Here are the socialists at the top of your list, because I think the far right and the far left have already found serious problems with this budget plan.
Well.
For first, let me remind you that with the same parliament we had an approval for the twenty twenty five budget which is currently being implemented, which is already a budget which is a very serious budget bringing down the deficit. We will talk to all parties because it is an issue of national interest. We believe it is the best interest of France to put its public finance right before the next presidential election of twenty twenty seven, and we
will talk to all parties. Having said that, the first reaction of opposition parties is quite normal because it's a huge plan. So the first reaction is negative. We will explain, we will discuss we will improve the plan and obviously there are probably more possibilities to reach an approval with
the Socialist Party. They are still a party in the opposition, but they allowed the budget to pass for twenty twenty five and if we have a fair discussion with them, and we will have a fair discussion with the Socialist Party, hopefully they can support the government for the budget. But again we will talk to all parties and we hope to have wider support because again it's an issue of national interest.
Eric, good Morning. Part of the plan is to raise revenues through selling selling down stakes in companies without losing influence. Apparently, what kind of sectors do you expect to see those kind of revenue gains? Are there any sectors off limits for selling down stakes and how much do you expect to raise through that?
Well, obviously, you know the French state owns many companies, some of which are listed, so I won't be very talkative on that point. So we are working on it. Obviously, the large public sector companies like La post or like EEDF are not on the plane, but there are many options and we will work on it ultimately.
The investor community, I think the initial reaction is not a lot of faith that the trajectory of this budget plan and the governments is much better than it was, you know, six months or a year ago. And I think there's a lot of worry about the government again Will will kind of struggle to get the budget passed and will kind of suffer on that. But we saw
last year the investors move on. Are you more worried about how the investor reaction this time or do you not think that we're yet at a critical period for investor pressure to cand of really force something to get done.
I'm not worried, but thank you to give me not part need to talk to them. I want first to reassure them on the twenty twenty five budget execution, because you know, public finance is something which is very operasional. We put a budget for this year cutting the deficit to five point four percent, and we follow the budget execution on a monthly basis. I gather all minister's General secretary every month, and I can tell you beginning of July, a middle of July, while we are today that we
are totally online in the review of spending. We are on plan on spending after I must say ten billion cuts that we did in the first quarter in the second quarter, but after ooskuts we are totally on NINER and on the revenue where the vty income tax, corporate tax we are also online. So we are monitoring the execution of twenty twenty five very closely. We have a
very ambitious target for twenty twenty six. I'm confident it will be approved, it will be executed, and that France will put itself back on track, which is absolutely key in order to play our role in Europe and.
In the world.
That was the French Finance Minister Eric Lombard there speaking to Blombergs and Edward's critique cup To and Mark Cudmore. The plight of France and other European countries in similar positions will be on the minds of policymakers as they make a decision about the ECB's immediate rate path in the days ahead. It's something I've been discussing with Bloomberg's ECB reporter Jana Randall. Yana, France's situation is one all too familiar to EU member states. High debt and stalling growth.
How can the EU mitigate.
Well, Mostly it's France's responsibility right, passing a budget that puts the government on a path towards sustainable public finances, and of course it has presented plans on how to narrow the deficit next year, which mainly look at austerity measures including freezing welfare pensions as well and acting to public holidays. As a matter of fact, whether that will do the trick, whether that'll fly we of course I'll remember what happened in France at the start of the year.
We won't know until September because that's when lawmakers come back and will properly engage and vote on This debate surely will also be colored by the outcome or the state of trade negotiations, because that affects growth in France but also across the region. And that's of course where the EU then comes in, because it's up to the EU to engage with the US on trade. Good deal has the potential to live confidence, thus demand investment and spending,
consumer spending across Frants but also across the region. And yeah, I don't need to tell you what a bad deal will do.
But it's the French Prime minister writer to ask for interest rate cuts in the near future.
Then I find it always difficult when politicians tell central bankers what to do, especially because central bankers are independent for a reason, because they need to be, you know, keeping their cool when when maybe tensions and a sentiment heats up and passions heat up in political decision making. And of course we can see what is happening in
the US currently with the federal reserves. The Prime Minister's motivation is easily explained, and if you're naughty, you can you can say it's very much in the same spirit as the arguments that the president in the US makes low barring costs for the government at a time when dead levels are high and a lot of money is needed to service that debt. Right, so low boring costs
help the government deal with its fiscal mess. If you look a little bit back in the past, we've seen similar voices, similar initiatives in Italy increase when those countries were in the spotlight of markets. Well as for France, you know, I wouldn't make too much out of it in terms of whether the youc be swayed by those
calls or not. I really would would see it more as a sense of a sign of desperation from from the French you know, realizing that something is going really really wrong with their budget.
Yeah, absolutely, and perhaps can't be compared to the sort of relentless pressure that President Trump has put onto your own power that we've seen repeatedly. But look, we might not get an interest rate cut from the ECB this time round. Over all, though, how fast our interest rates expected to continue coming down in the months ahead, given EU inflation that does look at the moment reasonably tamed. What is your view now on the path of interest rates.
We're not expecting anything for the upcoming meeting, and as as far as September is concerned, that is still very much in play. Economists expect another rate cut in September. Others, you know, the majority, I should say, expect another cut. Others say the ECB is done or you know, might wait a little bit longer to deliver it. It essentially all hinges on some signals on how how trade negotiations are going, uh, the implications they will have, or the
implications any result will have. And September in that sense is a good month because the ECB will get another fresh round of economic forecasts, so another look at growth and inflation prospects for the Eurozone in September, so it would be a good month to make up their minds. Equally, if they still can't be sure and things are kind of cod sting along, they might write it a little longer. So overall, one more rate cut is more or less expected September if you need to put your money on it.
But uncertainty is just exceptionally high. And listening to policymakers, some say, you know, the bar is very high for another cut. Others are concerned about inflation maybe following a bit too low below target. It's you know, highly answertain.
Okay, Diana, thank you so much for being with me this morning. That is Blomberg CCB with Porta, Yana vandall. Thank you. I'm Caroline Hepke here in London. You can catch us every weekday morning for Bloomberg Daybreak. You're at the beginning at six am in London. That's one am on Wall Street.
Tom, thank you, Caroline.
And coming up on Bloomberg day Break weekend, we look ahead to an Upper House election in Japan.
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. Japanese citizens head to the polls in the coming days for an Upper House election. This comes at a time when the country's Prime Minister finds himself in a precarious political position. For more, let's get to the host of the Daybreak Asia podcast, Doug Krisner.
Tom, this election will serve as the latest referendum on the leadership of Prime Minister Shiguru Ishiba. He's already running a minority government after last autumn's dismal election results in the lower House. For a closer look now at what's at stake in the Upper House, I'm joined by Bloomberg's Isabelle Reynolds. She is our Tokyo bureau chief, joining us from our radio studio in Tokyo. Isabelle, thank you. I know the stakes are high, as I understand where the
ruling coalition could lose its majority. This would be a first, is that correct?
Not exactly a first, but we did see a similar case back in nineteen ninety four where the ruling LDP lost its majority in both houses. But the party has been in government for almost all of the time since nineteen fifty five. Just so to be out of power in both houses is pretty unusual. They did also lose power to an opposition party in two thousand and nine, of course, but yes, this would be a historic occasion.
So give me a sense of where things are in terms of political stability. How would you describe that at a time when Japan is really struggling with so many issues, not the least of which is a trade deal with the US.
Absolutely, yes, I would say the situation is extremely unstable at the moment. What we're seeing is the support for the ruling coalition is falling again as we're going into
the election. What we see is several of the big media outlets here, the newspapers which were still widely read in Japan and like other places in the world perhaps, but they do massive polls and analysis of what's going on in the run up to the election, and it's looking pretty likely that the ruling courlition and will lose its majority in the upper house.
So with that then Prime Minister Ishuba would probably lose his position as prime minister.
Is that right?
Well, we don't know that for sure. It sort of depends how bad the result is. You know, obviously they could lose their majority by a very small margin, in which case they could hope to sort of cobble together not a formal coalition, but a loose coalition with some other party to get to legislation through. And that's what they're already doing in the lower house, so it's not out of the question that they could do that in
the upper house. But if the results are extremely bad, I think Ishuba would eventually have to take responsibility for that situation and step down, and then we could see a whole different level of chaos in Japan.
So he's considered a physical hawk. So if the outcome is such where Ishiba has to withdraw from the prime ministership, and that wouldn't necessarily I think put Japan on a path where maybe the country's finances are somewhat in question.
Is that fair?
Yes, you're absolutely right there. I mean, the big issue in the election, as it was in the last election, is the issue of inflation in Japan. It's the cost of living. The level of frustration is growing among the public. They've been putting up with this situation where prices are growing much faster than their own wages, and the question is how to deal with that situation. So the LDP, she get a issue buzzed party, is sticking to these kind of temporary, one off solutions. It wants to do
a cash handout things like that. But those opposite, smaller opposition parties that are growing in popularity proposing these much more drastic ideas, such as cutting consumption tax, which is a key source of income for the government, And that's why we're seeing these kind of ructions in the bond market. Fears that these kind of policies could gain traction after the election are raising concerns about Japan's finance.
So you mentioned the fact that households in Japan are dealing with higher inflation, much higher inflation. Is that why this election is being referred to as the rice election?
Yes, I mean that the symbolic issue it comes to inflation is the price of rice, which at one point was double what it had been a year earlier. There are a lot of structural reasons why that's the case, and the LDP has put in place this young politician, Koizumi, who has dealt with this by immediately sort of releasing rice stores at a much cheaper price to the public. So that did gain them some time, but that is
not a long term solution to what's going on. So people who want a more drastic solution, for example, ramping up production of food in Japan might opt to vote for a different party.
So how does what is happening in the diet the Japanese parliament impact what the Bank of Japan is trying to do in weaning the economy of massive stimulus that, as you well know, has been going on for decades now, right.
Yes, I mean we're seeing obviously the government tries officially at least to keep its handle off the Bank of Japan is choosing to do. But if we are going to see a massive ramp up in spending, obviously that will have to play into the thinking at the Bank of Japan. So this path that we've been seeing towards normalization could potentially be affected if we're going to see a massive cut in, for example, revenue from consumption tax and so on over the coming years.
So put this election in the context of Tokyo and Washington trying to work out a new trade deal. I think the deadline is now August first, to avoid being slapped with twenty five percent tariffs. And we know that for Japan when you're talking about automobiles and steel manufacturing, this is critical. Put the election in context of trying to work out a trade deal with the US.
Yes, well, I think that that's an interesting question because I think there's a growing doubt in Japan about whether anything, any action or words on their part can affect what decision Donald Trump makes on these tariffs. So although it's been somewhat of an issue in the campaign, I think there's very little sort of faith that either Ishiba or any of these smaller opposition parties could do any better job than they have done so far in trying to negotiate a deal. So I'm not really sure how it
affects that. Obviously, Ishiba could opt to reshuffle his cabinet after the election if there is a poor performance. But if you ask the public who's going to do a better job in organizing this trade deal, I doubt they would come up with a very swift answer for you.
Before I let you go, Isabelle, can you break down from me how this might look if we segment different generations of Japanese society, let's say younger voters versus the older generation.
Yes, I think we are seeing increased interest in voting among the younger voters. They traditionally have not had a very high turnout. It's been the older voters who have always voted for the LDP or its coalition partner, the Core metor one particular. Their support is falling away rapidly, and for the LDP, it's always a bad sign. If young people are coming out to vote, that means that
somebody is going to be voting for opposition parties. So for the LDP, I mean they'll be hoping that the young people stay at home.
Isabelle, thank you so very much for helping us look ahead to Japan's upper House election in the week ahead. She is Isabelle Reynolds, Tokyo bureau chief for Bloomberg News. Let's stay in Japan because we heard earlier in the week from Masahiro Kihara, CEO of Misohu Financial Group. He sees an end to uncertainty and reason to be optimistic on the future. Here's part of the conversation with mister Kihara with Bloomberg's friend Sine Laqua.
How confident are you about reaching the one trillion yen profit within a few years, given all the global uncertainty, and given what we heard on tariffs and trade.
In fact, I think from a current earning profile, I think we have almost reached one trillion again. Actually we had eight hundred last year. We had eight hundred and eighty billion. We took one time losses around somewhere around one hundred and twenty billion actually, so I think in reality we reached one trillion. Thanks for all the you know, circumstances.
But what does the uncertainty do. The uncertainty is surrounding some of the Trump policies and trade and tear.
Yes, yes, so before April second, we were aiming somewhere around one point one trillion for this year. Actually, however, because of all the uncertainties, we sort of shrink it down from as a conservative base to nine hundred and fifty trillion. I'm sorry, nine hundred and fifty billion yen. But I think you know, when things get certain, the corporate action will come back, which means that we can wratchet up a little bit. Yeah, our guideance.
So where are you seeing that uncertainty play into us now? Is it loans? Is it cheap executives spending not deploying cash.
Yes, right now, the CEOs are very very on the sidelines actually, But for example, if it is a domestic deal, even in each region, if it is a domestic deal, things are happening, which means that we don't see a lot of cross border happening right now. All of them are we have a big chunk of pipeline, but they're not executed. But from a domestically perspective, people are moving a little bit. So I think, you know, there is a good chance that people will get confident at some point.
How do you see them You know, Japanese landscape for businesses changing, how much will they look? I mean, Japan has been a great experiment right in terms of financials for a long time. Yes, is it companies that will then grow also abroad as economy stabilizes.
I would say that if right now there's many uncertainties, but things get clearer, the coporate action will come back. These couple of years, we have seen many corporate actions happening, investing outside Japan, changing their business portfolio, miss selling parts of the business that they are not doing well, so
concentrating the areas that has strengths. So I would say that when things get clear corporate action will come back, and many you know Japanese corporates will try to invest in outside of Japan too.
Are you confident in the Japanese economy overall?
Over, I think we still have strengths in the economy sectors that we have, so I think over we are very I am very confident in that. The thing is that we have to concentrate our resources in the area that we have strengths. We have high quality manufacturing, high quality you know products, So I think we need to figure out where the strengths are and try to sell it to the world.
Do you worry or are there dangers actually to Japan given the spike in long term interest rates?
Yes, so twenty years so for the long end it's been twenty years, thirty years. There has been spike and there has been volatility. But I think the government said that they will try to shift the issuance to a ten years of below. I think that BOJ is a little bit shrinking, is QT. I think that will help.
Is there a point where it actually starts treating your business and starts shooting the real economy?
Well, I think BOJ is saying that the neutral rate is somewhere around one point one percent to one point five percent, and on top of that ten years will be somewhere around two to two point two five percent. Then I think that that's the level that is okay. But if it goes beyond to three percent or so, they will then hurt the budget.
I think, are you expecting more turmoil in the end, but also not in the one market?
Not at this moment. Actually, I think the current level of one point four one point five for ten years is very it's okay. I think I haven't seen any turmoil in the ten years old, so as long as the ten year is fine, I think it's fine.
That is masahiro Kihara, CEO of Misahu Financial Group, speaking with Bloomberg's friend Sine Laqua, and I'm Doug Prisner. You can catch us weekdays here 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 Buzby. Stay with us top stories and global business headlines are coming up right now.