You're listening to Asia Centric from Bloomberg Intelligence, the podcast that pulls back the curtain on global business so you can invest better across the Asia Pacific rim. I'm John Lee in Hong Kong. Global investors continue to pile into Japan, betting that the economy has finally broken out of its economic stagnation. The nik A two to five stock index has hit record highs and is up twenty five percent this year, making it the world's best performing major market in local currency terms. The Bank of Japan has also raised interest rates for the first time since two thousand and seven. How will the return of inflation transform Japan's economy and how sustainable is the recovery? Can Japan's efforts to improve its corporate governance meet high investor expectations? And what are the key strategic industries investors should watch out for Here to discuss Japan is Tarro Kimura, Bloomberg senior Japan economist and former Bank of Japan veteran. He joins Asia Centric for the second time, and Takeshi Katawa, senior industrials analysts or Bloomberg Intelligence, both joined from Tokyo. Welcome Taro and Takeshi thanks for having us.

You're listening to Asia Centric from Bloomberg Intelligence, the podcast that pulls back the curtain on global business so you can invest better across the Asia Pacific rim. I'm John Lee in Hong Kong. Global investors continue to pile into Japan, betting that the economy has finally broken out of its economic stagnation. The nik A two to five stock index has hit record highs and is up twenty five percent this year, making it the world's best performing major market in local currency terms. The Bank of Japan has also raised interest rates for the first time since two thousand and seven. How will the return of inflation transform Japan's economy and how sustainable is the recovery? Can Japan's efforts to improve its corporate governance meet high investor expectations? And what are the key strategic industries investors should watch out for Here to discuss Japan is Tarro Kimura, Bloomberg senior Japan economist and former Bank of Japan veteran. He joins Asia Centric for the second time, and Takeshi Katawa, senior industrials analysts or Bloomberg Intelligence, both joined from Tokyo. Welcome Taro and Takeshi thanks for having us.

Thank you, John Taro.

Thank you, John Taro.

The Bank of Japan finally raised interest rates in March this year, the first time in seventeen years. Wages are also rising in Japan. Is Japan finally breaking out of its economic stagnation?

The Bank of Japan finally raised interest rates in March this year, the first time in seventeen years. Wages are also rising in Japan. Is Japan finally breaking out of its economic stagnation?

Yes, I think Japan's economy is making a sort of tectonic shift. I wasn't really expecting that kind of thing would happen last year. So the thing is that the bottleneck of Japanese economist stagnation is a tape it private consumption, and this is because of the very stagnant waste growth, mainly so having achieved five point one percent wage growth obtained by the labor union in this year's spring wage negotiation we call it Shunto in Japanese, is a big step for the Japan's economy to recover its healthy shape, and the expectation for households and workers that their income could actually rise would be providing a big support for Japanese consumption, not only in the short term but in the long run. So that's why basically I think Japan's economy is cleared with the fundamental bottlemet that has been dragged down Japan's growth for a long time, and.

Yes, I think Japan's economy is making a sort of tectonic shift. I wasn't really expecting that kind of thing would happen last year. So the thing is that the bottleneck of Japanese economist stagnation is a tape it private consumption, and this is because of the very stagnant waste growth, mainly so having achieved five point one percent wage growth obtained by the labor union in this year's spring wage negotiation we call it Shunto in Japanese, is a big step for the Japan's economy to recover its healthy shape, and the expectation for households and workers that their income could actually rise would be providing a big support for Japanese consumption, not only in the short term but in the long run. So that's why basically I think Japan's economy is cleared with the fundamental bottlemet that has been dragged down Japan's growth for a long time, and.

Tarak, can you explain to the listener why the return of rising wages and also the return of inflation is so important to Japanese corporates and ultimately the Japanese economy.

Tarak, can you explain to the listener why the return of rising wages and also the return of inflation is so important to Japanese corporates and ultimately the Japanese economy.

Right, So, usually the inflation is bad for the economy, but it's also important to have modest inflation. There are several ways to think of it. For example, if we live in the world where prices have to be very rigid, that means corporates cannot adjust prices even they are facing cost push pressure for example the high old prices, energy prices, food prices, whatsoever. And if they cannot pass onto those cost increases to their prices, the workers' wages are also subdued. Therefore, having mild inflation to keep the norm that the price can rise anytime is important. In Japan experienced deflation and this inflation for three decades. That norm that wages and prices aren't something that could be changed is dragging down the inflation expectations and corporate profits. But finally, the push from global inflation triggered by war in Ukraine became the big push in catalyst for Japan's corporates to break down from that rigid wages and prices setting behaviors, and also having no inflation or even deflation means it's sometimes optimal for corporates and households to keep their money as cash in their bank accounts instead of investing those money into more risky new areas. So I think probably this inflation and deflation in Japan had hindered the long term positive investments in the economy, and that will change if the inflation is finally secured.

Right, So, usually the inflation is bad for the economy, but it's also important to have modest inflation. There are several ways to think of it. For example, if we live in the world where prices have to be very rigid, that means corporates cannot adjust prices even they are facing cost push pressure for example the high old prices, energy prices, food prices, whatsoever. And if they cannot pass onto those cost increases to their prices, the workers' wages are also subdued. Therefore, having mild inflation to keep the norm that the price can rise anytime is important. In Japan experienced deflation and this inflation for three decades. That norm that wages and prices aren't something that could be changed is dragging down the inflation expectations and corporate profits. But finally, the push from global inflation triggered by war in Ukraine became the big push in catalyst for Japan's corporates to break down from that rigid wages and prices setting behaviors, and also having no inflation or even deflation means it's sometimes optimal for corporates and households to keep their money as cash in their bank accounts instead of investing those money into more risky new areas. So I think probably this inflation and deflation in Japan had hindered the long term positive investments in the economy, and that will change if the inflation is finally secured.

And you mentioned modest inflation in the US. There's too much inflation in Japan. In the past there was not enough, and now China is also suffering from deflationary concerns. Is the Bank of Japan also looking at a two percent target like the US Fed?

And you mentioned modest inflation in the US. There's too much inflation in Japan. In the past there was not enough, and now China is also suffering from deflationary concerns. Is the Bank of Japan also looking at a two percent target like the US Fed?

Yes, the official inflation target for the Bank of Japan is the two percent core inflation. Having said that two percent is just the kind of global myth, I would say, there's no solid academic background why two percent is important. So in my reading, it's enough for Japan's economy to have one percent or one point five percent of inflation because on others in the past thirty years before COVID, Japan's core inflation gains are averaged around zero point two percent. So as long as the Bank of Japan thinks inflation hasn't been anchored around two percent yet, I think they will keep their accommodative monetari policies.

Yes, the official inflation target for the Bank of Japan is the two percent core inflation. Having said that two percent is just the kind of global myth, I would say, there's no solid academic background why two percent is important. So in my reading, it's enough for Japan's economy to have one percent or one point five percent of inflation because on others in the past thirty years before COVID, Japan's core inflation gains are averaged around zero point two percent. So as long as the Bank of Japan thinks inflation hasn't been anchored around two percent yet, I think they will keep their accommodative monetari policies.

Asia Centric is produced by Bloomberg Intelligence, where more than five hundred experienced analysts and strategists work around the clock to bring you timely, world class research. Our coverage spans two hundred market indices, currencies, commodities, and industries, as well as over two thousand equities and credits. If you like what you hear, don't forget to subscribe and cham what's your expectation of interest rates going forward? There was a lot of excitement when the Bank of Japan finally raised interest rates, but in reality it was only like a ten basis point rise basically from zero percent to zero point one percent. What's your expectation? Is there a risk that maybe investors are expecting too much from Japan and the BOJ I.

Asia Centric is produced by Bloomberg Intelligence, where more than five hundred experienced analysts and strategists work around the clock to bring you timely, world class research. Our coverage spans two hundred market indices, currencies, commodities, and industries, as well as over two thousand equities and credits. If you like what you hear, don't forget to subscribe and cham what's your expectation of interest rates going forward? There was a lot of excitement when the Bank of Japan finally raised interest rates, but in reality it was only like a ten basis point rise basically from zero percent to zero point one percent. What's your expectation? Is there a risk that maybe investors are expecting too much from Japan and the BOJ I.

Think generally speaking, the Bank of Japan is taking the balance in a way that on one side, Japan's inflation is just started to kindle, So the boj really has to be careful in jip kindle. The inflation fires so that the Japan's economy eventually secure a modest inflation around two percent. That said, current policy interest rate is kept around zero to zero point one percent given the recent inflation expectations around one point five percent to two percent. Generally this is too low. So therefore at the Bank of Japan is expected to start the adjustment process for that too low policy rates. So that's what the market and I am expecting. I am expecting the Bank of Japan will proceed with another rate hike in July. This month, they have the meeting at July thirtieth and thirty first, and also my expectation is they will also do another rate higher again in October, up to zero point five percent. That said, again, let's say if the long term inflation expectation is now somewhere in between one point five to two percent, they're really interested. It's still negative, so BOJA raising rates doesn't mean the monetary condition suddenly gets restrictive.

Think generally speaking, the Bank of Japan is taking the balance in a way that on one side, Japan's inflation is just started to kindle, So the boj really has to be careful in jip kindle. The inflation fires so that the Japan's economy eventually secure a modest inflation around two percent. That said, current policy interest rate is kept around zero to zero point one percent given the recent inflation expectations around one point five percent to two percent. Generally this is too low. So therefore at the Bank of Japan is expected to start the adjustment process for that too low policy rates. So that's what the market and I am expecting. I am expecting the Bank of Japan will proceed with another rate hike in July. This month, they have the meeting at July thirtieth and thirty first, and also my expectation is they will also do another rate higher again in October, up to zero point five percent. That said, again, let's say if the long term inflation expectation is now somewhere in between one point five to two percent, they're really interested. It's still negative, so BOJA raising rates doesn't mean the monetary condition suddenly gets restrictive.

Okay, to case I might bring you into the conversation, Taro did mention that low inflation kept a lot of Japanese households wealth in savings deposits. Now we have wages and inflation coming up, are we starting to see Japanese households finally reallocate money into say equities or other risk assets.

Okay, to case I might bring you into the conversation, Taro did mention that low inflation kept a lot of Japanese households wealth in savings deposits. Now we have wages and inflation coming up, are we starting to see Japanese households finally reallocate money into say equities or other risk assets.

Thanks John. I think there's two components to this, and one is an easy one. The government from this year started a program called new NISA, which is the Nepon Individual Saving Account, which allows us about eighteen million yen tax free investments on a multiple year basis. So this actually allows a lot of the normal day to day Japanese households to start to invest, and that's definitely how pushed a lot of the households to reallocate some of the cash. But also another thing is that we've been in a sort of stagnant situation for thirty years, so that's a little bit more difficult to change. And as Parosan mentioned, we did have the Shunto wage hike above five percent this year, but all that continue is still likely on Japanese household minds. So I think we need to have consistent wage hikes which in the end sort of lead to households being comfortable the spend cash instead of saving or investing. That really should drive the consumption side, which in the end leads to another sort of basis for inflation as.

Thanks John. I think there's two components to this, and one is an easy one. The government from this year started a program called new NISA, which is the Nepon Individual Saving Account, which allows us about eighteen million yen tax free investments on a multiple year basis. So this actually allows a lot of the normal day to day Japanese households to start to invest, and that's definitely how pushed a lot of the households to reallocate some of the cash. But also another thing is that we've been in a sort of stagnant situation for thirty years, so that's a little bit more difficult to change. And as Parosan mentioned, we did have the Shunto wage hike above five percent this year, but all that continue is still likely on Japanese household minds. So I think we need to have consistent wage hikes which in the end sort of lead to households being comfortable the spend cash instead of saving or investing. That really should drive the consumption side, which in the end leads to another sort of basis for inflation as.

Well, and do we have any figures like how conservative Japanese households are versus say, the US in terms of how much they allocate towards savings, deposits and equities.

Well, and do we have any figures like how conservative Japanese households are versus say, the US in terms of how much they allocate towards savings, deposits and equities.

If I remember correctly, the share of the equity and its Japanese households asset is around ten percent. It's increasing because of the NISA effects, but still I guess very much lower compared to the US or even other countries.

If I remember correctly, the share of the equity and its Japanese households asset is around ten percent. It's increasing because of the NISA effects, but still I guess very much lower compared to the US or even other countries.

To Keshy, you recently co authored a major report entitled Emerging from the Lost Decades, and one of the reasons why global investors are piling into Japanese equities is this optimism over its corporate governance reform, this belief that corporations will finally start acting or behaving in the interests of shareholders. Now, you've been covering Japanese equities for quite a while, over a decade. What's your view. Are we seeing a major c change or is it more baby steps?

To Keshy, you recently co authored a major report entitled Emerging from the Lost Decades, and one of the reasons why global investors are piling into Japanese equities is this optimism over its corporate governance reform, this belief that corporations will finally start acting or behaving in the interests of shareholders. Now, you've been covering Japanese equities for quite a while, over a decade. What's your view. Are we seeing a major c change or is it more baby steps?

Yeah? Thanks for the question. So we are seeing quite a drastic sort of proposal out of the Japan Stock Exchange on corporate governance, and they have clearly mentioned to target above PBR of one times and to do that raise the ROE, which in a component also means raise the profit margin in the business. At the same time, it can also be raised through shareholder returns. So those two are some of the corporates are talking and companies that I sort of talked to. Industrial companies definitely have started to talk about how to raise their corporate value more aggressively compared to the past decade or two. For example, one of the bigger changes that we've seen with the valuation as well as the change in the company has been Hitachi. They have predominantly been manufacturing oriented in the past, but they have shifted a lot of their sort of hardware oriented assets and sold them and invested more into the digital side of product portfolio and their IoT platform. Loumada is expected to make up about twenty nine percent of total sales this fiscal year with a sixteen percent adjusted EBITA margin, which is above the company's average target of eleven point five and they have I've pointed to twenty percent margin eventually for this platform as well. So we are in the steps of improving the margins there as well, and that's also going to be through training GENAI specialists. Fifty thousand of them and to lead that to efficiency in their own operation but also clients through better solutions. And also there was a report recently on Hitachi potentially rewarding external directors with company shares to further that initiative. So this is one company example, but as you mentioned, baby steps maybe, but we are seeing actual change coming from some of the leaders in this area, So it'll be an equity market that everyone should continue to be focused on.

Yeah? Thanks for the question. So we are seeing quite a drastic sort of proposal out of the Japan Stock Exchange on corporate governance, and they have clearly mentioned to target above PBR of one times and to do that raise the ROE, which in a component also means raise the profit margin in the business. At the same time, it can also be raised through shareholder returns. So those two are some of the corporates are talking and companies that I sort of talked to. Industrial companies definitely have started to talk about how to raise their corporate value more aggressively compared to the past decade or two. For example, one of the bigger changes that we've seen with the valuation as well as the change in the company has been Hitachi. They have predominantly been manufacturing oriented in the past, but they have shifted a lot of their sort of hardware oriented assets and sold them and invested more into the digital side of product portfolio and their IoT platform. Loumada is expected to make up about twenty nine percent of total sales this fiscal year with a sixteen percent adjusted EBITA margin, which is above the company's average target of eleven point five and they have I've pointed to twenty percent margin eventually for this platform as well. So we are in the steps of improving the margins there as well, and that's also going to be through training GENAI specialists. Fifty thousand of them and to lead that to efficiency in their own operation but also clients through better solutions. And also there was a report recently on Hitachi potentially rewarding external directors with company shares to further that initiative. So this is one company example, but as you mentioned, baby steps maybe, but we are seeing actual change coming from some of the leaders in this area, So it'll be an equity market that everyone should continue to be focused on.

Are we seeing more female composition in boards, more female executives? I do know the irony of having three miles on this podcast, but are there more females getting involved in japan.

Are we seeing more female composition in boards, more female executives? I do know the irony of having three miles on this podcast, but are there more females getting involved in japan.

In Basically that's the target and the government has stated at least same for thirty percent over the next couple of years, and a lot of the companies have real targets towards that in terms of having enough sort of candidates to fill these positions. A lot of these female executives already have positioned in various posts and different companies as well, so it'll be a you know, difficulty of both filling these spots going forward, but also internally training a lot of their current employees to these positions as well.

In Basically that's the target and the government has stated at least same for thirty percent over the next couple of years, and a lot of the companies have real targets towards that in terms of having enough sort of candidates to fill these positions. A lot of these female executives already have positioned in various posts and different companies as well, so it'll be a you know, difficulty of both filling these spots going forward, but also internally training a lot of their current employees to these positions as well.

Okay, let's get back into some of the industries now. Earlier you mentioned AI. What is Japan's role in AI.

Okay, let's get back into some of the industries now. Earlier you mentioned AI. What is Japan's role in AI.

So that's a pretty difficult question. I would say, I think Japan's currently not the superb leader in AI technology at this point. One thing I can say in the area of industrials, for example, is that AI could have help with the declining population, which is another megatren that we are seeing in Japan ahead of a lot of the other countries. So a lot of tasks that currently people do need to be done more efficiently so it doesn't require as many people. This can come from, for example, factory automation equipment, but there is a limitation to applying automation to unrepetitive tasks formerly used in the auto industry, for example in the welding line. So if we manage to utilize AI, it'll allow for broader tasks and non repetitive tasks to be automated, and that's a pretty big win for Japan as well. And so I think AI and actually putting them into application, having the technology and actually putting it into works, that putting into the works is one area that Japan can continue to be at the forefront of.

So that's a pretty difficult question. I would say, I think Japan's currently not the superb leader in AI technology at this point. One thing I can say in the area of industrials, for example, is that AI could have help with the declining population, which is another megatren that we are seeing in Japan ahead of a lot of the other countries. So a lot of tasks that currently people do need to be done more efficiently so it doesn't require as many people. This can come from, for example, factory automation equipment, but there is a limitation to applying automation to unrepetitive tasks formerly used in the auto industry, for example in the welding line. So if we manage to utilize AI, it'll allow for broader tasks and non repetitive tasks to be automated, and that's a pretty big win for Japan as well. And so I think AI and actually putting them into application, having the technology and actually putting it into works, that putting into the works is one area that Japan can continue to be at the forefront of.

Okay, So you mentioned AI factory automation. Is there any other key strategic industries that investments should be focused on in Japan?

Okay, So you mentioned AI factory automation. Is there any other key strategic industries that investments should be focused on in Japan?

We mentioned a lot of that in the Japan briefing LEEP dive that we did. One was factory automation. For example, One area is Jascala's robot using AI technology can do a lot of tasks without as much programming that you used to need, So that's one area. Other areas will be similar efficiency through AI as well, and to do these AIS. Semiconductor supply chain is one definite area where the base materials of these wafers, production equipment are some of the areas that Japan continues to have strong technology and so these will continue to be key areas to look into for Japan. Another that I would highlight from the geopolitical risks rising would be the defense industry. And we are seeing a lot of news flow these days, but we are seeing the Japan potentially spending up to two percent of GDP or the course of the next five years or so in their new defense plan, and we are already seeing forty two percent of their sort of promised budget being deployed on a contract term and these will flow into the revenue and also there will be a margin boost potential as well, because in the past they used to be a mid single digit margin business. The government is trying to help to bring that closer to double digits, so the supply chain remains strong in Japan to manage these defense needs. I'll just mention that the next generation jet fighters, which will be co developed with global partners like Italy and UK, will be one area of highlight in the industry on a global basis.

We mentioned a lot of that in the Japan briefing LEEP dive that we did. One was factory automation. For example, One area is Jascala's robot using AI technology can do a lot of tasks without as much programming that you used to need, So that's one area. Other areas will be similar efficiency through AI as well, and to do these AIS. Semiconductor supply chain is one definite area where the base materials of these wafers, production equipment are some of the areas that Japan continues to have strong technology and so these will continue to be key areas to look into for Japan. Another that I would highlight from the geopolitical risks rising would be the defense industry. And we are seeing a lot of news flow these days, but we are seeing the Japan potentially spending up to two percent of GDP or the course of the next five years or so in their new defense plan, and we are already seeing forty two percent of their sort of promised budget being deployed on a contract term and these will flow into the revenue and also there will be a margin boost potential as well, because in the past they used to be a mid single digit margin business. The government is trying to help to bring that closer to double digits, so the supply chain remains strong in Japan to manage these defense needs. I'll just mention that the next generation jet fighters, which will be co developed with global partners like Italy and UK, will be one area of highlight in the industry on a global basis.

And some of these Japanese defense stocks have done really well. But you mentioned Japan's going to be spending two percent of GDP on defense, but that's also coming from a very low base, right, it's almost doubling from one percent currently.

And some of these Japanese defense stocks have done really well. But you mentioned Japan's going to be spending two percent of GDP on defense, but that's also coming from a very low base, right, it's almost doubling from one percent currently.

Correct, Yeah, so it's doubling from one percent, and basically I Thinko's spending is around two percent as well, So overall, I think it's sort of coming back in line. One thing that there is a discussion about is if Trump is elected next, would that also raise Japan's responsibility within the reason to spend even more. So that's one thing that will continue to monitor as we head into the US elections.

Correct, Yeah, so it's doubling from one percent, and basically I Thinko's spending is around two percent as well, So overall, I think it's sort of coming back in line. One thing that there is a discussion about is if Trump is elected next, would that also raise Japan's responsibility within the reason to spend even more. So that's one thing that will continue to monitor as we head into the US elections.

I wanted to bring Tara back into the conversation. You know, many pundits thought that with the Bank of Japan raising interest rates earlier this year, we thought it could actually strengthen the Japanese currency. But in fact the currency as we can significantly to levels we have not seen since the nineteen eighties. Obviously, it's great for your tourists, but you know what went wrong and how worrying is this trend?

I wanted to bring Tara back into the conversation. You know, many pundits thought that with the Bank of Japan raising interest rates earlier this year, we thought it could actually strengthen the Japanese currency. But in fact the currency as we can significantly to levels we have not seen since the nineteen eighties. Obviously, it's great for your tourists, but you know what went wrong and how worrying is this trend?

Yes, I think recent yen slide is a sort of a surprising factors, but having checked history, we have already seen this when the Bank of Japan and that its first form of quantitativising back in two thousand and six. And at that time, although the Bank of Japan is tightening, the yen is sold against a dollar because of the speculation. Basically, the traders and investors are seizing on still start contrast between the US interest rates and Japan's interest rates, and that's making a momentum that speculatilating on short position is profitable. So in my eyes, the yen now around one sixty one zero point seven is supported by a speculative power and the correction will happen to some extent at some point. But we don't know when and how it's going to happen. Probably the trigger would be a more clearer stance from the Federal Reserve on its rate cuts, and also probably in the Buja's July meeting they will start the quantitative tightening and also proceed with the rate hikes simultaneously. That could change the yen's declining trend. But as long as it's a speculative, we don't know how far the dollar end. We'll go further from here.

Yes, I think recent yen slide is a sort of a surprising factors, but having checked history, we have already seen this when the Bank of Japan and that its first form of quantitativising back in two thousand and six. And at that time, although the Bank of Japan is tightening, the yen is sold against a dollar because of the speculation. Basically, the traders and investors are seizing on still start contrast between the US interest rates and Japan's interest rates, and that's making a momentum that speculatilating on short position is profitable. So in my eyes, the yen now around one sixty one zero point seven is supported by a speculative power and the correction will happen to some extent at some point. But we don't know when and how it's going to happen. Probably the trigger would be a more clearer stance from the Federal Reserve on its rate cuts, and also probably in the Buja's July meeting they will start the quantitative tightening and also proceed with the rate hikes simultaneously. That could change the yen's declining trend. But as long as it's a speculative, we don't know how far the dollar end. We'll go further from here.

Okay, before I let you guys go, I wanted to ask you what could go wrong? Like everyone, all investors seem to love Japan right now. If you turn on Bloomberg TV, you've got activist shareholders loving Japan, private equity investors, you hear stories of how investment banks and hedge fund traders are looking for Japan rate traders, Like, what could go wrong with this bullish case?

Okay, before I let you guys go, I wanted to ask you what could go wrong? Like everyone, all investors seem to love Japan right now. If you turn on Bloomberg TV, you've got activist shareholders loving Japan, private equity investors, you hear stories of how investment banks and hedge fund traders are looking for Japan rate traders, Like, what could go wrong with this bullish case?

There's a lot that can go wrong. One would be going back to the wage hike, whether wage growth will continue and boost consumer confidence to spend more. This is also on the back of the weekend because for Japanese, for example, tourists going abroad is a very difficult thing to do right now, so confidence in the wage growth could lead to more spending internally at this point. Also, the pace of change has always been, you know, it not done in a day, so or Hitachi, It took a decade or two to actually transition, and now investors are noticing that, and we are seeing similar transitions with companies like me to be see electric with their portfolio of businesses. That just doesn't happen over a period of a year for everyone. So I think it'll be a gradual step and whether the market is patient enough to wait for that step is one thing we do need to continue to monitor and be realistic about.

There's a lot that can go wrong. One would be going back to the wage hike, whether wage growth will continue and boost consumer confidence to spend more. This is also on the back of the weekend because for Japanese, for example, tourists going abroad is a very difficult thing to do right now, so confidence in the wage growth could lead to more spending internally at this point. Also, the pace of change has always been, you know, it not done in a day, so or Hitachi, It took a decade or two to actually transition, and now investors are noticing that, and we are seeing similar transitions with companies like me to be see electric with their portfolio of businesses. That just doesn't happen over a period of a year for everyone. So I think it'll be a gradual step and whether the market is patient enough to wait for that step is one thing we do need to continue to monitor and be realistic about.

And Tarosan, do you have any final comments?

And Tarosan, do you have any final comments?

Yeah. On the positive note, the history sets, For example, the US Great Depression took two decades or twenty five years for the stock market to recover previous peak. Probably in Japan's case, it started to plunge in ninety and it's more than three decades, probably because we had a great financial crisis or some unfortunate events. But we see kind of one cycle is over and we are going to the positive trend overall. So it's not just about waste growth and inflation, some very structural positive shift that's happening in many perspectives, so I think investors should be focused in various industries and should keep an eye on how the economy will be transformed structurally going forward.

Yeah. On the positive note, the history sets, For example, the US Great Depression took two decades or twenty five years for the stock market to recover previous peak. Probably in Japan's case, it started to plunge in ninety and it's more than three decades, probably because we had a great financial crisis or some unfortunate events. But we see kind of one cycle is over and we are going to the positive trend overall. So it's not just about waste growth and inflation, some very structural positive shift that's happening in many perspectives, so I think investors should be focused in various industries and should keep an eye on how the economy will be transformed structurally going forward.

It's been a fascinating discussion on japan It's economic turnaround and also some of the risks for the Japan pol story. Thanks Takeshi and Taro.

It's been a fascinating discussion on japan It's economic turnaround and also some of the risks for the Japan pol story. Thanks Takeshi and Taro.

Thank you, John, thank you so much.

Thank you, John, thank you so much.

I'm John Lee in Hong Kong. This podcast was produced by Clara Chen and you've been listening to the Asia Centric podcast

I'm John Lee in Hong Kong. This podcast was produced by Clara Chen and you've been listening to the Asia Centric podcast