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Let's discuss helping US elections and of course, attentions with China ongoing may impact the Fed's rate path. Joining us exclusively is Rob Kaplan, vice chairman of gold In Sachs. He previously served as a Dallas FED President. Rob, Great to see you here in Tokyo.

Let's discuss helping US elections and of course, attentions with China ongoing may impact the Fed's rate path. Joining us exclusively is Rob Kaplan, vice chairman of gold In Sachs. He previously served as a Dallas FED President. Rob, Great to see you here in Tokyo.

Good to see you.

Good to see you.

Sure, How comfortable are you? Because I feel that this is yeah, move a little bit, Okay, there you go. I mean we are seeing this momentum for President Trump, right should we be getting ready for what he is dubbing trumponomics low interest rates as well as low taxes, and what would that mean for the Fed's PAP.

Sure, How comfortable are you? Because I feel that this is yeah, move a little bit, Okay, there you go. I mean we are seeing this momentum for President Trump, right should we be getting ready for what he is dubbing trumponomics low interest rates as well as low taxes, and what would that mean for the Fed's PAP.

So I think whatever happens, the FED is planning and gearing up to cut rates in September. Won't move in July, but they'll move in September. I'll try to stay away from the politics of the two candidates other than to say there's still three or foms left between now and the election, And the only caution I would give is that's an eternity, and at the moment it may seem one way. I think this is going to have fits and starts and the big topics though, of debate. US is an aging society and we've got to find ways to grow faster with lower costs. We're very highly leveraged, and I think a lot of the debates are going to be about globalization versus de globalization, energy transition, fiscal spending, and I still think those debates need to happen and get resolved.

So I think whatever happens, the FED is planning and gearing up to cut rates in September. Won't move in July, but they'll move in September. I'll try to stay away from the politics of the two candidates other than to say there's still three or foms left between now and the election, And the only caution I would give is that's an eternity, and at the moment it may seem one way. I think this is going to have fits and starts and the big topics though, of debate. US is an aging society and we've got to find ways to grow faster with lower costs. We're very highly leveraged, and I think a lot of the debates are going to be about globalization versus de globalization, energy transition, fiscal spending, and I still think those debates need to happen and get resolved.

What you just said right now, fiscal spending, it seems that doesn't matter who wins at this point, you would get more of it. I mean, you have President Biden leaning towards erasing medical debt. I mean that will all have to come out of somewhere. So what would that mean if we get a more inflationary environment for the Fed? Is that something to be concerned about just next year? But this year the Fed stays put.

What you just said right now, fiscal spending, it seems that doesn't matter who wins at this point, you would get more of it. I mean, you have President Biden leaning towards erasing medical debt. I mean that will all have to come out of somewhere. So what would that mean if we get a more inflationary environment for the Fed? Is that something to be concerned about just next year? But this year the Fed stays put.

So I think if I'm at the Fed, I don't want to prejudge these policies. The things I'll be watching though, The Number one is what's going to happen with immigration. One of the things that's helped the United States this year has been workforce growth due to immigration, which is allowed us to grow faster and still improve inflation. If that if that gets revised or changed, or you depoored people.

So I think if I'm at the Fed, I don't want to prejudge these policies. The things I'll be watching though, The Number one is what's going to happen with immigration. One of the things that's helped the United States this year has been workforce growth due to immigration, which is allowed us to grow faster and still improve inflation. If that if that gets revised or changed, or you depoored people.

They're going to have to bore.

They're going to have to bore.

In and understand that tariffs is a very significant topic. But the fiscal spending, I think the juries out as to how a new.

In and understand that tariffs is a very significant topic. But the fiscal spending, I think the juries out as to how a new.

Administration will handle that.

Administration will handle that.

We're running in the United States close to seven percent of GDP deficits at full employment. Twenty nineteen, we're four percent, and you're starting to see the stresses in the US being able to sell the ten and thirty year treasury. So I still think there's a lot of debate on those issues.

We're running in the United States close to seven percent of GDP deficits at full employment. Twenty nineteen, we're four percent, and you're starting to see the stresses in the US being able to sell the ten and thirty year treasury. So I still think there's a lot of debate on those issues.

Yet to come.

Yet to come.

Goldman Sachs, is it making calculations right now a potential tariffs being up even if it was President Trump, even President Biden right now talking about those tech controls.

Goldman Sachs, is it making calculations right now a potential tariffs being up even if it was President Trump, even President Biden right now talking about those tech controls.

So we have economists that have written in doing scenarios on a whole bunch of policies, but on terriffs is a good example. All things being equal, tariffs would raise costs. However, things are almost never equal. There are adjustments made. Maybe people substitute other types of products for those where there are tariffs. Example would be lithium batteries. If there are tariffs on lithium batteries, maybe the next generation of batteries maybe in the United States will leap frog lithium. So I think the juries out I think people out there should just be prepared that there's.

So we have economists that have written in doing scenarios on a whole bunch of policies, but on terriffs is a good example. All things being equal, tariffs would raise costs. However, things are almost never equal. There are adjustments made. Maybe people substitute other types of products for those where there are tariffs. Example would be lithium batteries. If there are tariffs on lithium batteries, maybe the next generation of batteries maybe in the United States will leap frog lithium. So I think the juries out I think people out there should just be prepared that there's.

A lot yet to clarify.

A lot yet to clarify.

The FED, though its path I think for September is pretty clear. I think there's a good chance they could do one more cut in December. But I do think as new policies, if new policies come out, it'll take some time for them to digest those, and that may affect their next decisions.

The FED, though its path I think for September is pretty clear. I think there's a good chance they could do one more cut in December. But I do think as new policies, if new policies come out, it'll take some time for them to digest those, and that may affect their next decisions.

When you take a look at the previous Trump presidency, how much of what played out in the economy and the inflationary picture was the fact that we did have a pandemic and some of the policy responses to that, and how much of it was down to fiscal management, do you think and does that give us a gauge of what potentially one way could go post November.

When you take a look at the previous Trump presidency, how much of what played out in the economy and the inflationary picture was the fact that we did have a pandemic and some of the policy responses to that, and how much of it was down to fiscal management, do you think and does that give us a gauge of what potentially one way could go post November.

So, initially.

So, initially.

After COVID first hit, there were substantial supply.

After COVID first hit, there were substantial supply.

Disruptions, particularly for goods.

Disruptions, particularly for goods.

I think as we look forward to today, those supply disruptions have pretty much been resolved, and in fact we have goods disinflation and China over capacity has helped that disinflation. I think the substantial fiscal policy. The CARES Act was twenty twenty, the American Rescue Act was twenty twenty one, spent over the following years, Infrastructure Act, Inflation Reduction Act. That's six trillion of legislation. The COVID gap quote unquote was about two trillion. And so I think it's clear to me that we've stimulated demand in the United States, probably overheated the workforce and the FED rate increases, although maybe late they've now done what they needed to do, and I think it's starting to cool and rebalance the workforce. So initially it was supply, I think ultimately it was excess demand, and I think the FEDS worked hard to try to cool that excess demand.

I think as we look forward to today, those supply disruptions have pretty much been resolved, and in fact we have goods disinflation and China over capacity has helped that disinflation. I think the substantial fiscal policy. The CARES Act was twenty twenty, the American Rescue Act was twenty twenty one, spent over the following years, Infrastructure Act, Inflation Reduction Act. That's six trillion of legislation. The COVID gap quote unquote was about two trillion. And so I think it's clear to me that we've stimulated demand in the United States, probably overheated the workforce and the FED rate increases, although maybe late they've now done what they needed to do, and I think it's starting to cool and rebalance the workforce. So initially it was supply, I think ultimately it was excess demand, and I think the FEDS worked hard to try to cool that excess demand.

We heard from Governor Christopher Wallers saying that whilst the final destination hasn't been reached yet, that they are getting closer. Do you feel confident that that dual mandate is now within reach and do you think that sort of ultimate self landing.

We heard from Governor Christopher Wallers saying that whilst the final destination hasn't been reached yet, that they are getting closer. Do you feel confident that that dual mandate is now within reach and do you think that sort of ultimate self landing.

Will be achieved?

Will be achieved?

Is November a big threat to that?

Is November a big threat to that?

So getting down to three percent was going to be relatively doable. I think getting from three to two is going to be slower. I would think that folks at the FED think it may be slower. Having said that, we've made enough progress that I think they could do a rate cut in September, but I think people should be prepared. That doesn't mean we're going to kick off a rate cutting cycle. I think because fiscal policy and fiscal deficits are historically high, and there's other cross currents like deglobalization and the expensive energy transition, I think the FED would be wise to after September take it one meeting in a time, assess any new proposals, what a new administration, if there is one, would do, and I think there'll be more deliberate as opposed to what we've seen in the past. Once you start cutting, you usually have a cycle.

So getting down to three percent was going to be relatively doable. I think getting from three to two is going to be slower. I would think that folks at the FED think it may be slower. Having said that, we've made enough progress that I think they could do a rate cut in September, but I think people should be prepared. That doesn't mean we're going to kick off a rate cutting cycle. I think because fiscal policy and fiscal deficits are historically high, and there's other cross currents like deglobalization and the expensive energy transition, I think the FED would be wise to after September take it one meeting in a time, assess any new proposals, what a new administration, if there is one, would do, and I think there'll be more deliberate as opposed to what we've seen in the past. Once you start cutting, you usually have a cycle.

This may not.

This may not.

I wouldn't prejudge that this will be a cycle. I think it will be more one.

I wouldn't prejudge that this will be a cycle. I think it will be more one.

Meeting at a time, and so consequential for all of the global central banks, especially the Bank of Japan with the yen weakness. Such a great time to have you here because you around Goldman Sachs in the nineties here in Tokyo. Are you seeing what is the difference the biggest difference for you? I mean, I don't want to compare it to the nineteen nineties, but just in the sense of are you getting that feeling that normalization will finally happen in this economy.

Meeting at a time, and so consequential for all of the global central banks, especially the Bank of Japan with the yen weakness. Such a great time to have you here because you around Goldman Sachs in the nineties here in Tokyo. Are you seeing what is the difference the biggest difference for you? I mean, I don't want to compare it to the nineteen nineties, but just in the sense of are you getting that feeling that normalization will finally happen in this economy.

So Goldman Sachs is celebrating our fiftiest anniversary of opening office in Tokyo, and so we're very proud of the Tokyo office. And I think it's been a model at Goldman Sachs for how do you build a office outside the United States, And it's helped us learn a lot about how to globalize the firm. So when I look at Japan now versus the nineties, there have been a number of reforms on a shareholder govern and its crossholdings. The government has now been very encouraging of taking some fourteen trillion of savings and turning some of it more to investment and really stimulating more capitalism. That's caused there's been some reflation here and so we're very optimistic across all of our businesses there'll be great opportunities in Japan. I think Japan is a critical economy in the global economy and some of the great companies in the world, and so I think we think there's great opportunities here.

So Goldman Sachs is celebrating our fiftiest anniversary of opening office in Tokyo, and so we're very proud of the Tokyo office. And I think it's been a model at Goldman Sachs for how do you build a office outside the United States, And it's helped us learn a lot about how to globalize the firm. So when I look at Japan now versus the nineties, there have been a number of reforms on a shareholder govern and its crossholdings. The government has now been very encouraging of taking some fourteen trillion of savings and turning some of it more to investment and really stimulating more capitalism. That's caused there's been some reflation here and so we're very optimistic across all of our businesses there'll be great opportunities in Japan. I think Japan is a critical economy in the global economy and some of the great companies in the world, and so I think we think there's great opportunities here.

That's sort of the sense that I get when I speak to people coming from outside of Japan, but being here in Japan, there seems to be a lot of skepticism, especially that the boj's policies are actually leading to reflation that might be sustained that actually people might go out and spend. How does a bog battle the deflation there?

That's sort of the sense that I get when I speak to people coming from outside of Japan, but being here in Japan, there seems to be a lot of skepticism, especially that the boj's policies are actually leading to reflation that might be sustained that actually people might go out and spend. How does a bog battle the deflation there?

Remindset so with the BOJ has been battling is there's one headwind in Japan worth mentioning, and that's demographics. Workforce is aging, it's actually shrinking. GDP growth is growth in the workforce plus growth and productivity, and unfortunately workforce growth here has been shrinking. And while there's been a good temporary worker program and more women in the workforce, really there hasn't been any policy to combat that. So I still think that's the big challenge. The central Bank can do what it can to try to ease that challenge, but ultimately need other policies away from monetary policy to deal with this structural issue of shrinking workforce.

Remindset so with the BOJ has been battling is there's one headwind in Japan worth mentioning, and that's demographics. Workforce is aging, it's actually shrinking. GDP growth is growth in the workforce plus growth and productivity, and unfortunately workforce growth here has been shrinking. And while there's been a good temporary worker program and more women in the workforce, really there hasn't been any policy to combat that. So I still think that's the big challenge. The central Bank can do what it can to try to ease that challenge, but ultimately need other policies away from monetary policy to deal with this structural issue of shrinking workforce.

Oh kaplan, good to have you with us vice chairman of Goldman Sachs and former Dallas FED president joining me here in the Tokyo studio today, thank you

Oh kaplan, good to have you with us vice chairman of Goldman Sachs and former Dallas FED president joining me here in the Tokyo studio today, thank you