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Teneo's Harris: Abe's Hands Are Tied to Course of Action(Audio) · Bloomberg Intelligence

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  Speaker 1: seconds with the yeld of one. And that's a Bloomberg
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  Speaker 1: business flash. This is taking stock with Pim Box and
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  Speaker 1: Kathleen Hayes on Bloomberg Radio. The Japanese economy it is sputtering.
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  Speaker 1: Is it's spluttering to a halt? Or will government stimulus
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  Speaker 1: fix the economy? Here to tell us more as Tobias Harris.
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  Speaker 1: He is japan analyst and vice president for ten Ao
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  Speaker 1: Intelligence based in Washington, d C. Home to Bloomberg and
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  Speaker 1: one oh five point seven h D two and he
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  Speaker 1: can be followed on Twitter at Observing Japan. Tobias, thanks
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  Speaker 1: for being with us, you know, and trying to understand
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  Speaker 1: exactly what went on in the Japanese economy in the
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  Speaker 1: second quarter. I ended up reading a lot about a
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  Speaker 1: leap year, low income households, and statistical problems. What is
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  Speaker 1: up with the GDP report from Japan. So we look
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  Speaker 1: at the numbers and it looks like pretty much everything
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  Speaker 1: was flat or slightly negative except the housing number. And
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  Speaker 1: when you think about it, the housing number actually makes
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  Speaker 1: sense because that would be the first time where we
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  Speaker 1: start really seeing the effect of the negative negative interest
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  Speaker 1: rate cut that took effect in mid February, and so
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  Speaker 1: as those interest rates came down, a lot of people
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  Speaker 1: decided to refinance, and as corporate as corporates rolled over
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  Speaker 1: the loans, they took advantage of those lower rates, and
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  Speaker 1: so you started to see I mean, this is something
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  Speaker 1: that Krota has talked about that eventually we'd start seeing
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  Speaker 1: the effects of negative interest rates in certain parts of
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  Speaker 1: the economy. So that showed up in this form. But
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  Speaker 1: does that get Japan any closer towards positive inflation? It
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  Speaker 1: didn't look like it. Well. In fact, our bloom Big
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  Speaker 1: intelligence team I give them hats off in Tokyo because
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  Speaker 1: they put together a number of interesting slides. And when
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  Speaker 1: you look at real wages, when you look at the
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  Speaker 1: GDP to flatter versus GDP, everything is either moving in
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  Speaker 1: the wrong direction or just not moving up enough. Yeah
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  Speaker 1: is yeah, absolutely, And I think you know what we're
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  Speaker 1: really seeing too, is just how much the experiment has
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  Speaker 1: depended on the fact that they got the end down
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  Speaker 1: as far as they did in the first couple of years.
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  Speaker 1: And as it's come back up, you're seeing corporate profits
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  Speaker 1: going down, and that means you're not going to see
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  Speaker 1: wages going up. I mean, it's just this virtuous cycle
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  Speaker 1: that Ab talked about over and over again. I mean
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  Speaker 1: they needed, uh the end to say the levels that
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  Speaker 1: it reached last year when it got below it's not
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  Speaker 1: it's not going back that direction, and they're extremely constrained
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  Speaker 1: in the tools that they have to get back to
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  Speaker 1: those levels. And so as long as that's going to
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  Speaker 1: be the case, you're gonna look at the situation where
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  Speaker 1: they're gonna they're gonna be spinning their wheels and it
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  Speaker 1: doesn't really look like fiscal stimulus that they've put out
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  Speaker 1: is the answer to the to the problem. So why
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  Speaker 1: go ahead and spend two hundred and seventy six billion dollars.
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  Speaker 1: I mean, that's the amount that Prime Minister Shinzo AB's
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  Speaker 1: cabinet approved in early August as the stimulus package. Well,
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  Speaker 1: so that should be caveatic because they're not actually going
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  Speaker 1: to spend that much. Three quarters of that amount of
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  Speaker 1: money is actually coming uh in the forms of loans
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  Speaker 1: from public financial institutions in the timeline for getting those
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  Speaker 1: loans out, and you know they're gonna be prepaid. I mean,
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  Speaker 1: there's it's a that I mean, you have to you
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  Speaker 1: have to ring fence that because that actually is not
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  Speaker 1: straight up stimulus. In fact, there's a lot of hocus
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  Speaker 1: pocus going on when it comes to what number we
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  Speaker 1: should actually be talking about. The number we should be
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  Speaker 1: talking about is probably more like seven trillion in in
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  Speaker 1: which is gonna be divided between a supplemental budget that
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  Speaker 1: will be passed during the diet session that starts next month,
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  Speaker 1: and then some left over for the general budget next year.
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  Speaker 1: So we're talking about a very different number than what
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  Speaker 1: the headline figure was. Well, you know, um terrific story
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  Speaker 1: widely read on the Bloomberg terminal today the Tokyo Whales
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  Speaker 1: Unstoppable rise to shareholder number one in Japan, and it's
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  Speaker 1: Tokyo Whale as its Bank of Japan. The story poets
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  Speaker 1: points out that the b o J, through its purchases
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  Speaker 1: of ets, this is part of its plan to stimulate
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  Speaker 1: the economy by you know, increasing UH risk appetite, boosting
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  Speaker 1: stocks top five O of eighty one companies in Japan's
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  Speaker 1: nick average. Many experts in this right question if this
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  Speaker 1: is a proper role for a central bank. Yeah, and
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  Speaker 1: you can. And that article I think was really great
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  Speaker 1: in pointing out some of the downside risk that on
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  Speaker 1: the one hand, you know, is this going to be
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  Speaker 1: government intrusion in management to the private sector. On the
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  Speaker 1: other hand, if having the b o J sit on
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  Speaker 1: all these stocks, does that decrease pressure on managers to
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  Speaker 1: improve returns and to actually make their companies better? I mean,
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  Speaker 1: does it undercut the corporate government push that we've been
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  Speaker 1: getting from the Abbe government. And so, I mean it
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  Speaker 1: does seem like a incredibly problematic shift. And and and
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  Speaker 1: also it just doesn't seem like it's gonna be it's
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  Speaker 1: going to do the job when it comes to getting
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  Speaker 1: inflation up. I mean, I think the portfolio rebalanced channel
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  Speaker 1: that we've seen with Quanta City Easing hasn't quite done
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  Speaker 1: the job over the last few years, and it seemed
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  Speaker 1: like this was more of a placehold to policy. I mean,
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  Speaker 1: the expectations were so high going into the meeting last month.
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  Speaker 1: I think the b o J had to do something.
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  Speaker 1: But obviously now the question is we're going to see
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  Speaker 1: this review had at the September meeting, And that's the
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  Speaker 1: real question. I mean, is there anything more in Corolla's
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  Speaker 1: bag of tricks that that to get inflation expectations going
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  Speaker 1: in the right direction. I'm skeptical, but you know, I
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  Speaker 1: don't think July is the end of the discussion went
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  Speaker 1: as far as monetary policy goes Tobias, if one of
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  Speaker 1: your clients called you and asked for the same information
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  Speaker 1: on a regular basis, and they took that information and
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  Speaker 1: the results were terrible, wouldn't they change what they were doing,
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  Speaker 1: or wouldn't they listen to someone else? Why are all
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  Speaker 1: these central banks continuing to just do more of the
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  Speaker 1: same when the results have been terrible? You know, I
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  Speaker 1: think if there's a certain amount of path dependency, I mean,
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  Speaker 1: I think in terms of the Abbe Crooda partnership, I mean,
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  Speaker 1: at this point, I mean, if there was an abandonment
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  Speaker 1: of this course of action, or if Abby decided that
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  Speaker 1: he'd had enough of Kuroota and he was going to
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  Speaker 1: replace him, I mean that that blows up in Abbey's face.
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  Speaker 1: I mean this, you know, at this point, for better
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  Speaker 1: or worse, Abbey is committed to abbeomics, He's committed to
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  Speaker 1: leaving Japan better and he found it. I mean, whether
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  Speaker 1: that's going to happen or not, you know, at this point,
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  Speaker 1: he has no choice but going forward, lets he faced
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  Speaker 1: opposition within his ruling party. Lets the opposition go after
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  Speaker 1: his government in the diet. I mean, unfortunately his hands
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  Speaker 1: are tied when it comes to a real course correction.
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  Speaker 1: It is an exciting if you're excited that I do
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  Speaker 1: about montery policy and economies. It's a very exciting situation
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  Speaker 1: in Japan. So many cross currents and Tobias Harris today
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  Speaker 1: helping us UH see where Japan is in terms of
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  Speaker 1: the economy and growth in montery policy and where it
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  Speaker 1: may be heading. He's japan analyst at to Neo Intelligence.
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  Speaker 1: I'm Kathleen Hayes along with Pim Fox. This is taking
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