Latest / Bloomberg Intelligence / BBH's Chandler Says Japan Would Favor a U.S. Rate Hike (Audio)

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BBH's Chandler Says Japan Would Favor a U.S. Rate Hike (Audio) · Bloomberg Intelligence

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  Speaker 1: thank you very much, Bill Maloney, and the here live
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  Speaker 1: Bloomberg business flash, Thank you very much. Charlie palis taking
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  Speaker 1: a look at President Obama's visit to Japan. The Japanese
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  Speaker 1: Prime Minister talking about the potential for a global crisis,
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  Speaker 1: warning of a risk on the scale of Lehman Brothers
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  Speaker 1: if appropriate policies are not taken. What are those policies?
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  Speaker 1: What exactly is the Prime Minister referring to. That's why
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  Speaker 1: we have Mark Chandler. He is the global head of
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  Speaker 1: currency strategy for Brown Brothers Harriman and he can be
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  Speaker 1: followed on Twitter at Mark m a r C. Making
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  Speaker 1: sense alright, Mark makes some sense for us. What is
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  Speaker 1: Prime Minister Shinzo Abe talking about? Thanks him, I don't
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  Speaker 1: think he's really talking about what he's talking about. I
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  Speaker 1: think what he's talking about is his own domestic issues
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  Speaker 1: and what it's happening. Is it next to April? Japan
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  Speaker 1: is scheduled to raising sales tax on consumption from eight
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  Speaker 1: percent to ten percent. The big movie to push against it,
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  Speaker 1: and the only way Abiter Japan say he will avoid it,
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  Speaker 1: he will he will push it out is if there's
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  Speaker 1: a Lehman like crisis, and so of course he's got
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  Speaker 1: a warrant of the list of a Lehman like crisis
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  Speaker 1: for domestic purposes, not that he's really saying we're on
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  Speaker 1: the verge of such a crisis. Well, you know when
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  Speaker 1: is there's a certain things stand out in your mind. Mark,
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  Speaker 1: I will never forget in when the consumption tax have
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  Speaker 1: been passed by Japanese lawmakers, it was clear the economy
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  Speaker 1: was slowing down. And used to sit there as a
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  Speaker 1: journalist or as a you know a trade or whatever,
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  Speaker 1: say don't do it, don't do it, and they did,
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  Speaker 1: and they helped push their economy over the edge. Is
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  Speaker 1: this another situation? And how I runic? What how many
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  Speaker 1: years thirty years later? Is it possible they're about to
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  Speaker 1: make them the same mistake if they do raise that
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  Speaker 1: consumption tax exactly kept and they raised it a couple
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  Speaker 1: of years ago, they raised it from five to eight percent,
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  Speaker 1: partly because the I M. S at the time was
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  Speaker 1: pushing them too, because Japan has the debt that makes
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  Speaker 1: it it makes Greece almost look solvent. Japan is debt
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  Speaker 1: to GDP is something close to about two. And so
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  Speaker 1: the idea is and how is Japan going to consolidate
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  Speaker 1: its fiscal situation? And the idea was raised the value
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  Speaker 1: added tacks, which is low in Japan compared to other countries.
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  Speaker 1: And when they did this, the Japanese the Japanese official said, oh,
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  Speaker 1: we're gonna have a small downturn. But a couple of
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  Speaker 1: years later they still haven't fully recovered from that tightening
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  Speaker 1: of fiscal policy, because remember what opty was about ebonomics
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  Speaker 1: was stimulating fiscal policy on a SX monetary policy and
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  Speaker 1: which was working. The economy was growing, and then they
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  Speaker 1: raised the sales tax pushed them into uh slower gear
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  Speaker 1: or even a recession. So Marcus, this just really a
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  Speaker 1: way of asking Janet Yelling and the other members of
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  Speaker 1: the f O m C to please not raise interest
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  Speaker 1: rates this year. Yeah, it's kind of interesting, Tim that
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  Speaker 1: they would do that, but I suspect that at the
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  Speaker 1: end of the day, this isn't really about U S policy.
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  Speaker 1: In fact, just the other day, the I think it
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  Speaker 1: was at Bloomberg News had the story of the vice
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  Speaker 1: president of the e C e a federate hike. I
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  Speaker 1: think the Japanese would like to federate's interest rates because
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  Speaker 1: what would that do. They would make the interest rate
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  Speaker 1: differential between the U S and Japan wide and out,
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  Speaker 1: and would attract more money of the US and allow
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  Speaker 1: the end to weaken after strengthening so much this year. Besides,
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  Speaker 1: this issue of the domestic economy in Japan and what
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  Speaker 1: is going on. The Japanese have another big issue, and
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  Speaker 1: it's Japan's maritime proposals and the dispute with China over
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  Speaker 1: some islands. This is something that never seems to really
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  Speaker 1: boil over into a crisis, but never seems to go away.
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  Speaker 1: What is it? What is what is on the table
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  Speaker 1: at this G seven meeting of anything? Yeah, the good question.
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  Speaker 1: I do think that it's the geopolitics is really first there.
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  Speaker 1: I think in terms of what the Japanese ultimately interested
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  Speaker 1: from rest of the world, and that is that they
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  Speaker 1: need some support because what happened is that acceptal factors
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  Speaker 1: at play here. But what happens a couple of years ago,
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  Speaker 1: the governor of Tokyo nationally basically nationalized some islands, and
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  Speaker 1: these lands were in dispute the Chinese going back to
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  Speaker 1: sixties and early seventies. The Chinese basically say, we had
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  Speaker 1: this dispute here, but let's not settle it. Let's let's
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  Speaker 1: just like, let's let's not address this. Let's smarter people
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  Speaker 1: than us. I think Jpe once said, let this next generation,
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  Speaker 1: smarter people than us, resolved this very thorny topic. But
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  Speaker 1: instead the Japanese sort of say that sort of woke
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  Speaker 1: the sleeping dogs by nationalizing these islands, and the Chinese
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  Speaker 1: cannot just let Japan resolved the issue by FIAT. And
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  Speaker 1: so I know that the US and look at the
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  Speaker 1: U S stress a lot of stories about how China
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  Speaker 1: is building out these islands, basically doing some landfill, making
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  Speaker 1: these shoals and tiny islands into larger places that can
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  Speaker 1: be militarized. Would say, say, uh, landing for airplanes. What's
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  Speaker 1: happening is many countries in East Asia are doing the
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  Speaker 1: same thing, the Philippines, for example, also doing this, the Vietnamese,
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  Speaker 1: the Taiwanese, and so I think this is a like
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  Speaker 1: a tinder box, uh, that that could turn into something
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  Speaker 1: more serious if the US and other countries do not
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  Speaker 1: hold their allies into account. Mark Chandler, thank you so
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  Speaker 1: very much, Mark Chandler. He's Global head of Currency Strategy
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  Speaker 1: at Brown Brothers Harriman. As the G seven Heads of
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  Speaker 1: State Summit is taking place in Japan, uh, the Japanese
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  Speaker 1: Prime Minister Mr ab talks about the possibility of a
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  Speaker 1: crisis like we saw with the Lehman Brothers collapse, back
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  Speaker 1: in two thousand and eight, but his Mark points out
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  Speaker 1: he's really just trying to get people fired up about
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  Speaker 1: the threat of a consumption tax being passed in Japan.
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