Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. Let's begin in Tokyo today, where BOJ Governor Kazuo Owedo was making some hawkish comments earlier during an address to parliament. He seemed to use unusually clear language in defending the recent rise that we have seen lately in Japanese government bond yields. Joining me now for a closer look is Paul Jackson. He is Bloomberg News Economy editor, joining us from Tokyo. Paul, it's always a pleasure to benefit from your perspective. Talk to me a little bit about any concern that may be there in the market right now in Japan, given this move up that we have seen in JGB yields.

Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. Let's begin in Tokyo today, where BOJ Governor Kazuo Owedo was making some hawkish comments earlier during an address to parliament. He seemed to use unusually clear language in defending the recent rise that we have seen lately in Japanese government bond yields. Joining me now for a closer look is Paul Jackson. He is Bloomberg News Economy editor, joining us from Tokyo. Paul, it's always a pleasure to benefit from your perspective. Talk to me a little bit about any concern that may be there in the market right now in Japan, given this move up that we have seen in JGB yields.

Well, I think the market concerns largely reflect the reality that the BOJ has now pulled away a year ago from protecting these yields, keeping up lid on them so they can kind of go up and up and up. Now there has been an uptick to the highest levels in the benchmark yield, to the levels that we last saw during the global financial crisis. Before then, Even so, these our levels that are are much higher than they have been for a long time. That's causing some concern amongst market players and also for policymakers. Don't forget that Japan has the biggest debt load amongst advanced economies in the world, so rising yields on benchmark bonds is a problem for long term financing of the debt. And I think what we're seeing here from policymakers, not only from the Central Bank governor Uda, but also from the fireman Finance Minister Kato the day before, is that policymakers are trying to just reassure, just say, hey, look, this is kind of natural. We're back towards a kind of more market focused determination of yield pricing, and there's no need to get too overly concerned here. These market movements are normal, and.

Well, I think the market concerns largely reflect the reality that the BOJ has now pulled away a year ago from protecting these yields, keeping up lid on them so they can kind of go up and up and up. Now there has been an uptick to the highest levels in the benchmark yield, to the levels that we last saw during the global financial crisis. Before then, Even so, these our levels that are are much higher than they have been for a long time. That's causing some concern amongst market players and also for policymakers. Don't forget that Japan has the biggest debt load amongst advanced economies in the world, so rising yields on benchmark bonds is a problem for long term financing of the debt. And I think what we're seeing here from policymakers, not only from the Central Bank governor Uda, but also from the fireman Finance Minister Kato the day before, is that policymakers are trying to just reassure, just say, hey, look, this is kind of natural. We're back towards a kind of more market focused determination of yield pricing, and there's no need to get too overly concerned here. These market movements are normal, and.

It seems logical that it would also would reflect expectations that the boj is going to begin raising interest rates soon.

It seems logical that it would also would reflect expectations that the boj is going to begin raising interest rates soon.

Right, Yeah, I think we're going to continue seeing interest rate rises in Japan. We've still got inflation. Inflation is going to be above or in line with the boj's target. We're getting close to three years now, so those interest rates are going to keep going up. Now, they're not going to go nuts. It's not like every meeting. It's not back to back at rate hikes. We're not expecting anything at the March meeting. But I think we are seeing, you know, pretty hard baked team expectations that the Bank of Japan is going to be raising rates every six months.

Right, Yeah, I think we're going to continue seeing interest rate rises in Japan. We've still got inflation. Inflation is going to be above or in line with the boj's target. We're getting close to three years now, so those interest rates are going to keep going up. Now, they're not going to go nuts. It's not like every meeting. It's not back to back at rate hikes. We're not expecting anything at the March meeting. But I think we are seeing, you know, pretty hard baked team expectations that the Bank of Japan is going to be raising rates every six months.

Also, so earlier today we had the February reading on producer prices. You and I were talking a moment ago. This is pretty much in line with what the market was expecting, right, that four percent year on year increase in PPI.

Also, so earlier today we had the February reading on producer prices. You and I were talking a moment ago. This is pretty much in line with what the market was expecting, right, that four percent year on year increase in PPI.

Yeah, I think so. I think that the main takeaway from this is we've got high input prices coming in that means it's going to feed into inflation going forward. So inflation isn't going to disappear anytime soon, and so that feeds into the idea that the Bank of Japan will keep raising interest rates. Now, is inflation like six or seven percent requiring urgent attention? No, So I think we're going to see a continuation of gradual rate hikes.

Yeah, I think so. I think that the main takeaway from this is we've got high input prices coming in that means it's going to feed into inflation going forward. So inflation isn't going to disappear anytime soon, and so that feeds into the idea that the Bank of Japan will keep raising interest rates. Now, is inflation like six or seven percent requiring urgent attention? No, So I think we're going to see a continuation of gradual rate hikes.

So, how are consumers in Japan feeling these days about inflation? And maybe you can help me understand how that's showing up in politics.

So, how are consumers in Japan feeling these days about inflation? And maybe you can help me understand how that's showing up in politics.

Well, I think the average consumer on the street is thoroughly unhappy with all these rising prices. It's kind of an alien concept in Japan, the idea of prices are going up. It's only something that a generation has seen in the last you know, two or three years, so you know, they're seeing this cost of living crunch as even though wages are going up much faster than they have been, it's still those gains are lagging increases in prices. So in terms of people's real living standards, they are going down.

Well, I think the average consumer on the street is thoroughly unhappy with all these rising prices. It's kind of an alien concept in Japan, the idea of prices are going up. It's only something that a generation has seen in the last you know, two or three years, so you know, they're seeing this cost of living crunch as even though wages are going up much faster than they have been, it's still those gains are lagging increases in prices. So in terms of people's real living standards, they are going down.

Now.

Now.

Is anyone in the world going to be happy with that?

Is anyone in the world going to be happy with that?

Well?

Well?

No, And we do have an election coming up in the summer, so Prime Minister Ishiba kind of needs to do something to show that they are on top of the inflation story if he's going to perform well in that election. And the signs aren't great.

No, And we do have an election coming up in the summer, so Prime Minister Ishiba kind of needs to do something to show that they are on top of the inflation story if he's going to perform well in that election. And the signs aren't great.

So much of the conversation here Stateside has been around and tariffs that are going to be imposed in a few hours from now on imported steel and aluminum. Now, Japan at one point was a big steel producer. How are Japanese people feeling about this talk of increased tariffs?

So much of the conversation here Stateside has been around and tariffs that are going to be imposed in a few hours from now on imported steel and aluminum. Now, Japan at one point was a big steel producer. How are Japanese people feeling about this talk of increased tariffs?

Well, I think it is it is a concern for the economy going forward. Obviously, Japan relies a lot on its trade. The we have a whole raft of tariffs in the Trump universe, so we're starting off with steel and aluminum, but there's also these reciprocal tariffs that is also talking about, and potentially tariffs on cars. Now, I think that the tariffs on cars is probably Japan's number one concern because seventeen percent of this exports our cars, so and a third of those go to the US. So if those tariffs are slapped on cars, that's going to really hits the economy. Now, looking at the economy, we saw recent growth figures showing that the economy expanded two point two percent in the fourth quarter. That's a pretty good clip. You know, they could keep that going every quarter. I'm sure Japan will be very happy. But looking at the figures, most of that growth is based on trade and a business investment. Now, if you've got a whole load of tariffs being unfiled across the world, well, is that going to be good for trade? No? And our business is going to feel like this is a great time to invest. Well, I don't think so. So what does that leave you to drive the economy consumption well, as I told you, consumers are not happy with inflation. So all of these are dark clouds for the economy moving forward.

Well, I think it is it is a concern for the economy going forward. Obviously, Japan relies a lot on its trade. The we have a whole raft of tariffs in the Trump universe, so we're starting off with steel and aluminum, but there's also these reciprocal tariffs that is also talking about, and potentially tariffs on cars. Now, I think that the tariffs on cars is probably Japan's number one concern because seventeen percent of this exports our cars, so and a third of those go to the US. So if those tariffs are slapped on cars, that's going to really hits the economy. Now, looking at the economy, we saw recent growth figures showing that the economy expanded two point two percent in the fourth quarter. That's a pretty good clip. You know, they could keep that going every quarter. I'm sure Japan will be very happy. But looking at the figures, most of that growth is based on trade and a business investment. Now, if you've got a whole load of tariffs being unfiled across the world, well, is that going to be good for trade? No? And our business is going to feel like this is a great time to invest. Well, I don't think so. So what does that leave you to drive the economy consumption well, as I told you, consumers are not happy with inflation. So all of these are dark clouds for the economy moving forward.

So our leaders in Japan attempting to get some exemptions, do you think, Oh?

So our leaders in Japan attempting to get some exemptions, do you think, Oh?

Yes, like many of US trading partners, especially those with surpluses on trade, We've seen a delegation go over to DC. We had our trade minister there just in recent days talking with COMMA Sectary Secretary Howard Lutnik, trying to find a way for some kind of win win result. As you can imagine in Trump's world, those are difficult to come by.

Yes, like many of US trading partners, especially those with surpluses on trade, We've seen a delegation go over to DC. We had our trade minister there just in recent days talking with COMMA Sectary Secretary Howard Lutnik, trying to find a way for some kind of win win result. As you can imagine in Trump's world, those are difficult to come by.

Mentioned a moment ago that we have the BOJ meeting in the week ahead, do you think that we're likely to get a hawkish hold? Is that the logical way of framing this.

Mentioned a moment ago that we have the BOJ meeting in the week ahead, do you think that we're likely to get a hawkish hold? Is that the logical way of framing this.

I think that's a logical way of thinking how the outcome would would be. I think it will be a bit more neutral, it will be a hold. I think there's so many uncertainties about what's going to happen with these tariffs. Don't forget we've seen you know, garis imposed, than delayed and postponed, then resort. Who knows what's going to happen. Is there's so many tariffs being talked about in the coming weeks. Is that a scenario, a situation when you want to be very hawkish with your messaging after holding I think it's more likely that they'll stick to a neutral take no change. That's what all fifty two of our economists surveyed recently expect at this meeting, and I think they'll keep the language fairly neutral going ahead, just staying with this idea that if their forecasts are realized, they will continue with gradual increases in interest rates.

I think that's a logical way of thinking how the outcome would would be. I think it will be a bit more neutral, it will be a hold. I think there's so many uncertainties about what's going to happen with these tariffs. Don't forget we've seen you know, garis imposed, than delayed and postponed, then resort. Who knows what's going to happen. Is there's so many tariffs being talked about in the coming weeks. Is that a scenario, a situation when you want to be very hawkish with your messaging after holding I think it's more likely that they'll stick to a neutral take no change. That's what all fifty two of our economists surveyed recently expect at this meeting, and I think they'll keep the language fairly neutral going ahead, just staying with this idea that if their forecasts are realized, they will continue with gradual increases in interest rates.

You and I have talked in the past about the proposed acquisition of US Steel on the part of Nipon steal. It was certainly a hot button issue going into the presidential election. I haven't heard much and there really hasn't been a resolution yet. What are we hearing about this?

You and I have talked in the past about the proposed acquisition of US Steel on the part of Nipon steal. It was certainly a hot button issue going into the presidential election. I haven't heard much and there really hasn't been a resolution yet. What are we hearing about this?

Well, if you remember when Prime Minister Ishiba met with President Trump recently in DC, you know they discussed this. This came out at their press conference and they tried to re imagine the takeover as instead a direct investment of of course less than half so now trying to realize that reimagining the deal as instead a direct investment. That's quite a leap of the characterization of what's going on. So I think both sides are still trying to work through that. My understanding is Nipon Steele's the case, insisting that it should go ahead and fighting against the block that former President Biden put on the deal that is still in process, still going ahead, So a lot of questions still to be answered on that deal.

Well, if you remember when Prime Minister Ishiba met with President Trump recently in DC, you know they discussed this. This came out at their press conference and they tried to re imagine the takeover as instead a direct investment of of course less than half so now trying to realize that reimagining the deal as instead a direct investment. That's quite a leap of the characterization of what's going on. So I think both sides are still trying to work through that. My understanding is Nipon Steele's the case, insisting that it should go ahead and fighting against the block that former President Biden put on the deal that is still in process, still going ahead, So a lot of questions still to be answered on that deal.

Paul will leave it there. It's always a pleasure. Thank you for joining us. Paul Jackson there, Bloomberg News Economy editor joining us from Tokyo. Here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner. It certainly was another volatile day in the equity market, and the cross currents were many. We had the trade tension between the US and Canada. We also had Ukraine saying it's ready to accept a US proposal for a thirty day truce with Russia, and here in the States, heightened concern over economic growth. Let's get to it now with Michelle Martin. She's our guest. Michelle is president of Prosperity, the wealth management arm of Eisner Amper and Michelle joining us from just outside Minneapolis. Good of you to make time to chat with us. Can we begin with the tariff story, because tonight at twelve oh one am, the US tariffs of twenty five percent on imported steel and aluminum will take effect. Obviously, in terms of equity market action, we've seen some heavy selling recently on concern over the impact of these tariffs. To what extent do you think the market is now fully embraced the risk or is there still potentially some more downside as it relates to these tariffs biting.

Paul will leave it there. It's always a pleasure. Thank you for joining us. Paul Jackson there, Bloomberg News Economy editor joining us from Tokyo. Here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner. It certainly was another volatile day in the equity market, and the cross currents were many. We had the trade tension between the US and Canada. We also had Ukraine saying it's ready to accept a US proposal for a thirty day truce with Russia, and here in the States, heightened concern over economic growth. Let's get to it now with Michelle Martin. She's our guest. Michelle is president of Prosperity, the wealth management arm of Eisner Amper and Michelle joining us from just outside Minneapolis. Good of you to make time to chat with us. Can we begin with the tariff story, because tonight at twelve oh one am, the US tariffs of twenty five percent on imported steel and aluminum will take effect. Obviously, in terms of equity market action, we've seen some heavy selling recently on concern over the impact of these tariffs. To what extent do you think the market is now fully embraced the risk or is there still potentially some more downside as it relates to these tariffs biting.

Well, that's an interesting question, Doug, and I think that that question is going to remain out there until we actually start to see this communication in the back and forth settle down a little bit. I think that tariffs are absolutely having an impact on the markets right now, and I think that the fact that the markets were so the valuations were so high, this is kind of the pen that's bursting the air out of the bubble here a bit. We're seeing Nasdaq in correction territory, and you know, it's really difficult at this point to even keep track of on a day to day basis what is happening with the tariffs. I'm as you said, I'm here in Minneapolis, and the premiere of Ontario just removed the threat to our electric grid here in northern Minnesota, in Michigan and New York. So there's a lot of bargaining going on, and I think it's important that we follow that. But I think it's creating a lot of uncertainty and fear, which is affecting the markets, absolutely.

Well, that's an interesting question, Doug, and I think that that question is going to remain out there until we actually start to see this communication in the back and forth settle down a little bit. I think that tariffs are absolutely having an impact on the markets right now, and I think that the fact that the markets were so the valuations were so high, this is kind of the pen that's bursting the air out of the bubble here a bit. We're seeing Nasdaq in correction territory, and you know, it's really difficult at this point to even keep track of on a day to day basis what is happening with the tariffs. I'm as you said, I'm here in Minneapolis, and the premiere of Ontario just removed the threat to our electric grid here in northern Minnesota, in Michigan and New York. So there's a lot of bargaining going on, and I think it's important that we follow that. But I think it's creating a lot of uncertainty and fear, which is affecting the markets, absolutely.

No doubt. It's kind of curious. Today President Trump seemed to downplay the recent sell off that we have seen in the equity market. At one point when he was talking with reporters, he said, and I'm quoting him, it doesn't concern me. So if you look at the concerns, I'm sure there are many, and I'm sure that you're hearing a lot of concerns coming from your clients. What are they asking you when the phone rings.

No doubt. It's kind of curious. Today President Trump seemed to downplay the recent sell off that we have seen in the equity market. At one point when he was talking with reporters, he said, and I'm quoting him, it doesn't concern me. So if you look at the concerns, I'm sure there are many, and I'm sure that you're hearing a lot of concerns coming from your clients. What are they asking you when the phone rings.

Clients are definitely concerned, and I think that just the lack of certainty is really on settling to them. I think that people are feeling like perhaps it was time for a pullback. And one of the things that we talk about a lot with our clients is just having a diversified strategy and being diversified in your portfolio. You know, they're calling and asking where their equity exposures are and if if their portfolio is rebalanced appropriately. Those are all things that are top of mind for people. And I think the other thing is they're just concerned about, you know, if they have some short term investment needs, you know, need for cash, need for income. They're they're more apt to be putting more in cash and fixed income at this point, just thinking that there's gonna be a short term correction.

Clients are definitely concerned, and I think that just the lack of certainty is really on settling to them. I think that people are feeling like perhaps it was time for a pullback. And one of the things that we talk about a lot with our clients is just having a diversified strategy and being diversified in your portfolio. You know, they're calling and asking where their equity exposures are and if if their portfolio is rebalanced appropriately. Those are all things that are top of mind for people. And I think the other thing is they're just concerned about, you know, if they have some short term investment needs, you know, need for cash, need for income. They're they're more apt to be putting more in cash and fixed income at this point, just thinking that there's gonna be a short term correction.

Trump said today he does not foresee the US going into recession. I don't know how you get your economic reporting, whether or not you outsource that, or whether it's something that happens internally at Eisner Amper that you have access to. Is the house view right now that we are at risk of a recession?

Trump said today he does not foresee the US going into recession. I don't know how you get your economic reporting, whether or not you outsource that, or whether it's something that happens internally at Eisner Amper that you have access to. Is the house view right now that we are at risk of a recession?

I think I think our view, and and you know this is from from several several investment houses, is really where we draw our information. I think we think it's a little bit early to say that a recession is absolutely on the horizon. I think that it is going to really depend largely on what we're seeing with consumer spending and jobs. Those are the key drivers here. And we've got some some reports, you know, coming out shortly, but I think monitoring that and really understanding consumer confidence is going to play largely into that.

I think I think our view, and and you know this is from from several several investment houses, is really where we draw our information. I think we think it's a little bit early to say that a recession is absolutely on the horizon. I think that it is going to really depend largely on what we're seeing with consumer spending and jobs. Those are the key drivers here. And we've got some some reports, you know, coming out shortly, but I think monitoring that and really understanding consumer confidence is going to play largely into that.

Do you think this is going to move the needle where the FED is concerned? I mean, there were many folks who watch market action saying that the FED is probably going to be on hold for the foreseeable future, and I'm one wondering whether what we've been seeing in terms of volatility and uncertainty changes that outlook slightly.

Do you think this is going to move the needle where the FED is concerned? I mean, there were many folks who watch market action saying that the FED is probably going to be on hold for the foreseeable future, and I'm one wondering whether what we've been seeing in terms of volatility and uncertainty changes that outlook slightly.

I'm a former banker, Doug, and I think that we're in this. I think the FED, you know, it did some easying and last fall. I think that, you know, there was talk that perhaps they got ahead of themselves in September, but it actually has has has worked quite well, and we were, you know, heading for what appeared to be a soft landing. I think that the FED is going to hold steady for a while. I think they've signaled that, and I think one of the things that's important is that we listened to the messaging of the FED. The market tends to lean towards what the market thinks, not necessarily always what the FED is seeing, and so I think the FED would absolutely adjust if there's true signs of recession coming into play, but I think it's a little early for that.

I'm a former banker, Doug, and I think that we're in this. I think the FED, you know, it did some easying and last fall. I think that, you know, there was talk that perhaps they got ahead of themselves in September, but it actually has has has worked quite well, and we were, you know, heading for what appeared to be a soft landing. I think that the FED is going to hold steady for a while. I think they've signaled that, and I think one of the things that's important is that we listened to the messaging of the FED. The market tends to lean towards what the market thinks, not necessarily always what the FED is seeing, and so I think the FED would absolutely adjust if there's true signs of recession coming into play, but I think it's a little early for that.

Where are you in terms of the opportunities that may exist in the bond market right now? Is that the place to be?

Where are you in terms of the opportunities that may exist in the bond market right now? Is that the place to be?

Do you think?

Do you think?

Yeah, it is. We've increased our allocations in fixed income. I think bonds are actually for the first time in in you know, a decade, really putting that ballast, that foundation into a portfolio when you're picking up a yield of four and a half to five percent. We extended duration last winter on our portfolio, and so you know, I think by locking in and holding individual bonds, clipping coupen's at five percent sounds pretty boring, but it actually works really well in a volatile market like this.

Yeah, it is. We've increased our allocations in fixed income. I think bonds are actually for the first time in in you know, a decade, really putting that ballast, that foundation into a portfolio when you're picking up a yield of four and a half to five percent. We extended duration last winter on our portfolio, and so you know, I think by locking in and holding individual bonds, clipping coupen's at five percent sounds pretty boring, but it actually works really well in a volatile market like this.

So what type of credit risk are you taking? Where are you going in terms of credit quality?

So what type of credit risk are you taking? Where are you going in terms of credit quality?

So we're we're taking We're not taking a lot of credit risk on our core bond portfolio. We're in high quality bonds, but we are taking some credit risk dug in private credit and high yield. That has served us very well over the last twelve to eighteen months. And as you've talked about with you know, a change here and a shift, I think we were watching that very carefully. That's an area where obviously it can be affected if we see a real downturn in the economy, but for now, those yields are working quite well.

So we're we're taking We're not taking a lot of credit risk on our core bond portfolio. We're in high quality bonds, but we are taking some credit risk dug in private credit and high yield. That has served us very well over the last twelve to eighteen months. And as you've talked about with you know, a change here and a shift, I think we were watching that very carefully. That's an area where obviously it can be affected if we see a real downturn in the economy, but for now, those yields are working quite well.

Are there opportunities offshore something outside the United States that maybe has peaked your interest a little?

Are there opportunities offshore something outside the United States that maybe has peaked your interest a little?

Oh well, it's so interesting right now because there's clearly a rotation going on. And you mentioned this earlier with the talks with Russia and Ukraine. But you know, just in general, the equity markets in Europe are the valuations are much lower than they are here in the United States, and we're actually seeing that rotate where you know, the IFA is actually up almost eight percent year to date and when we've seen a pullback in the US markets. So that is an opportunity we have an allocation to international We're watching and not necessarily jumping in on emerging markets or China at this point, I think that that economy still has some issues, but just really when you look at Western Europe, it's just riding along pretty steadily right now.

Oh well, it's so interesting right now because there's clearly a rotation going on. And you mentioned this earlier with the talks with Russia and Ukraine. But you know, just in general, the equity markets in Europe are the valuations are much lower than they are here in the United States, and we're actually seeing that rotate where you know, the IFA is actually up almost eight percent year to date and when we've seen a pullback in the US markets. So that is an opportunity we have an allocation to international We're watching and not necessarily jumping in on emerging markets or China at this point, I think that that economy still has some issues, but just really when you look at Western Europe, it's just riding along pretty steadily right now.

Michelle will leave it there. It's always a pleasure. Thank you so much for joining us. Michelle Martin there. She is president of Prosperity, that is the wealth management arm of Eisner Amper, joining us from Minneapolis here on the Daybreak Asia Podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Prisoner and this is Bloomberg

Michelle will leave it there. It's always a pleasure. Thank you so much for joining us. Michelle Martin there. She is president of Prosperity, that is the wealth management arm of Eisner Amper, joining us from Minneapolis here on the Daybreak Asia Podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Prisoner and this is Bloomberg