Global business news twenty four hours a day at Bloomberg dot Com, the radio, plus mobile, lapt and on your radio. This is a Bloomberg Business Flash from Bloomberg World Handquarters. I'm Charlie Pallett. Stocks are approaching a record after an increase in consumer spending underscored the strength of the U. S economy. As traders assess the outlook for interest rates. The dollar rose oil is slumping. West Texas Intermediate crewed down one percent, now falling fifty seven cents of arrow
forty seven oh seven. Right now on West Texas Intermediate Crewed Gold up one tenth of one percent, gaining a dollar eighty the ounce to thirteen twenty four, the tenure of nineteen thirty seconds, the yield one point five six percent. The SMP up thirteen eighty two, a gain of six tenths of one percent. Down indust reels up one hundred sixteen, also a gain of six tenths of one percent. I'm
Charlie Pallett, and that's a Bloomberg Business Flash. This is taking stock with Pim Fox and Kathleen has on Bluebird Radio. Massive stimulus. Is this what is going to take for the Bank of Japan to finally weaken its currency to help Japanese exporters who have certainly been clobbered by the rise in the end which has occurred despite already some pretty significant easing steps by the b O J Joining us now is Eric Valoria. He's currency strategist at Wells
Fargo Securities right here in New York. Eric, Welcome to
the show. Thanks for having me. Kathleen, So I certainly was paying close attention on Saturday, late Saturday morning in Jackson Hole, the Kansas City feder WID Deserved Symposium, where I was fortunate to be attending, when Governor Kuroda was on a wrap up panel and overview of the last two days of papers and discussions in Jackson Hole and Boyle Boy when he basically said that the Bank of Japan, far from maybe reassessing a stimulus and pulling some back
or going an other direction, very determined to do what needs to be done to get inflation higher and boost the economy. Yeah, the Bank of Japan and Corota specifically have been committed to achieving their inflation target. UM. I think the comments that we heard from him over the weekend at Jackson Hole were reinforcing some previous comments that he had not too long ago, just about a week and a half ago, he had said that there's a
sufficient chance for more easing in September. So certainly dubbish in terms of the monetary policy bias by the Bank of Japan, and this should keep the Japanese gen restraint. So in terms of more stimulus, we know that yes, Japanese rates are negative, but they're only the key rates only negative by point on one per cent. Right, that that's a rounding here, right. Uh. We know they are buying so many etf that they become a very large owner of stocks in Japan. We know that they've done
quantitative easing type moves. What do they need to do in your view to weaken the en Well, they could do more of the current policy tools that they've been implementing. You know, as you mentioned, with the negative interest rates, it's just a negative tent basis points. So um, there there could be further deepening of negative interest rates, and Kuroda hinted at that, saying that you know their current rate is still far from the lower bound, suggesting that
they could go more negative. Um, and then you know the the asset purchases, a quantitative and qualitative easing UH could also be expanded further. So there there's still um those three dimensions that they could use in terms of easing policy further. So you know, your currency analysts, you're watching these markets and the traders, and you know on the desk, et cetera. What is it going to take
to move the dial for those people? Because shakunaw some have said, is almost what Governor Krota needs to come up with to really shift this this dynamic which has taken hold where seems no matter what the Bank of Japan does, the end strengthens. Yeah, and I think that the strengthening of the end that we've seen earlier this year UH came from when you look at the strengthening of the end or surrounding the policy meetings and the
policy easings by the Bank Japan UH. It appears though the market we're expecting the Bank Japan to be more aggressive and easing. I mean, the last time they ease was just a tweak of the et F purchases. UM. Earlier in the year we saw that introduction of negative interest rates, but again, you know, just a small move and not really being applied to a broad base of cash. So, uh, they could be more comprehensive in terms of the policy
measures announced and implemented um or expanded upon. And the other side of that is also the U S and the Fed. So we think that if the Fed raises interest rates, and we are expecting the Fed to raise interest rates um by another twenty five basis points this year, that would also help to weaken the Japanese yen relative to the US dollars, so supporting a higher dollar end
exchange rate. So we can only wonder if maybe over one of those uh, you know, cups of coffee or or you know, lunches, if Governor Kroda perhaps didn't whisper in Janet Yellen's here are just course imagining this, but still that because it would be awfully nice, wouldn't it. It It seems it would make the Bank of Japan's steps more effective if as they eased more and as you said, did something you know, bigger and more substantial, the said made his first interest rate in increase in you know,
over nine months. Uh yeah, So I mean, certainly policy is monetary policy is is a key driver of the foreign exchange markets in the US dollar exchange rate, and in particular, and that's because of the impact that it has on on bond yields, and when we look at the bond yield or the interest rate differential between US Treasury yields and Japanese government bond yields, that that has
a strong correlation with the exchange rate. One of the other things that we look at is the broader risk environment. You know, the Japanese yen has strengthened significantly this year also because of UH more volatile UH global market conditions. So we saw a significant strengthening in the end following
the UK vote UH who leave the European Union. So you know, UH, if if markets remain calm um as they have or relatively benign H, then you know, this could also be another factor that that could help to weaken the end overtime. So interesting story today on the Bloomberg and also on our website Bloomberg dot Com from our one of our colleagues on our Tokyo team talking about forget helicopter money. Maybe in this direct you know, UH, dispersion of cash somehow to consumers in Japan to spend.
Bank of Japan might next target financing a bit closer to the ground trains, hospitals, power plants, and sewers, in other words, infrastructure by buying bonds of local governments and public corporations. Does that make sense to you, Eric, Um, Well, it makes sense in in the in the sense that helicopter money is probably a very well likelihood. I think that Governor Corota earlier this year um pretty much rolled
it out. I believe his comments were that there was no needing, no possibility for helicopter money, is what he said a couple of months ago. Uh. And then the comments that he made over the weekend Attack and Hole that their scope to move lower and interest rates and that they could um expand easing for their just kind of reinforced that they could still use the tools available
to them. Um. If they were to go with other bond purchases, UM, you know, then that would certainly be additional easing and could further way on the end here Florida, thank you so very much for joining us today. Derek is currency strategist at Wells Fargo Securities here in New York. So oil boilers was up above fifty bucks, now it's back below again. What's driving it? And how much lower
will it go this time? I'm Kathleen Hayes. This is Bloomberg coming up and in the in depth look at the state of energy markets in wide demand recruit Oil will continue to be slow to recover with stron hein rock from a T. Kearney