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tv   Bloomberg Markets Asia  Bloomberg  August 24, 2017 9:00pm-10:00pm EDT

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♪ rishaad: 9:00 a.m. in hong kong. i am rishaad salamat. ,e are looking for clues investors watching jackson hole, and the currency markets face chop. lee accused of buying influence at the highest level. we are waiting for the verdict. haidi: i am haidi lun in sydney. qantas beating estimates, but falling from a record. flying direct to london and new york. this is "bloomberg markets: asia." ♪ rishaad: well, a look at
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samsung. the share price doing well. 9432,s chart number judges delivering of verdict in this graph to trial of jay y. lee. prosecutors requesting a 12 year sentence. they say they paid bribes to the confidant of the then the south korean president to secure governor support for the merger of affiliates. this has largely been ignored by investors. the kospi up 16% from august. it is an important stock. ,he percentage of total kospi the market cap, 18%'s or
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thereabouts, so does dictate in some sense where the kospi goes. that is what we have at the moment. haidi: absolutely. we will be watching the outcome of that verdict. has been the teflon market despite geopolitical concerns over north korea, samsung the ultimate teflon start despite concerns ongoing. we are 30 minutes from the open. , not aht, like volumes lot for investors on the macro front. everything is converging on jackson hole. let's look at asian markets. unsurprisingly we are seeing a holding pattern ahead of janet yellen and mario draghi speaking. taiex a sophie: a funny session indeed.
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it depends on the micro drivers in each market. little changed. the nikkei 225 getting .3% here 70, dollar-yen at 109. automakers helping to support gains in tokyo. kosptopix on the advance. bonds mixed. aussie notes tracking the drop in treasuries ahead of jackson hole there it in currencies, the kiwi-dollar a standout. the aussie dollar also under pressure. below thatan trading handle right there. i want to point out the taiex,
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, energyfor a fifth day shares leading gains, oil rebounding. we had a troppo overnight of 2% for new york crude. at 47.71, brent also of. -based metals, steel, copper, iron ore rebounding. a smart phone maker exploring strategic options, a selloff of its virtual-reality business. this stock rising for a second day. chen you look at how ht it's share has been, of the smart phone market has fallen below 2%. making it hardng
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for htc two maintain its top position. a fourthe gaining for straight session and up over 32% year to date, so teflon kospi and samsung shares. rishaad: that verdict later today. thank you for that. as the dojbut not would like it. that is our first word news headline. >> japanese inflation inching higher in july, core consumer prices raising .5% compared with a .4% gain in june. inflation lags as the boj struggles to spur price increases. the boj has pushed back the projected date of reaching its 2% objective six times. prime minister
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faces a verdict in her trial for negligence and corruption, accused of failing to curb 20 $6 in a controversial billion subsidy program designed to support rural communities. people who benefited were her cronies, it is accused. she faces 10 years in jail, if convicted. the trial of jay y. lee reaches .ts conclusion friday jay y. lee denies corruption, accused of funneling millions of dollars in return for government favors here it his defense has been that he was not involved in decision-making at samsung. that case has not hurt the company, posting record profit in the launch of the new galaxy eight smartphone. petrochina passing on the benefits of higher energy prices, paying shareholders its entire half-year net income, worth almost $2 billion and raises expectations.
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estimates, income dew point billion dollars. dollarsw point billion -- $2.4 billion. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: thank you for that. pretty low that we will hear market moving news out of jackson hole. traders will be watching closely indeed. let's head to wyoming. kathleen hays is standing by for us. a scenic backdrop indeed. what question are central bankers trying to answer? arehe big question they trying to answer and everyone would like them to find an answer to is why is it that many
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of economies have picked up and are in recovery, labor markets tighter, and yet inflation is not heading towards target. it is a conundrum of our times for central banks. earlier we spoke to the president of the federal reserve bank of dallas and ask him about this. he talked about different factors affecting this, but even though he can see it is moving slowly and urges patience, he up on theven eventuality that inflation will move higher. faith thatt lost inflation may well get back to its 2% target. you have to understand the historic cyclical forces and andls what they suggested that they are being offset by new forces that we can understand by looking at
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industries, companies, and talking to ceos, and those are having a muting effect on inflation. >> you will hear another view from the former vice chair of the federal reserve. i sat down with him. not be raisingd rates and tell inflation in the u.s. does start moving higher. the ecb has indicated that mario draghi will stick to the theme of the symposium, which is fostering dynamic global growth. the ideae downplaying that he may give us a more definite signal on tapering and timing. thing, the ecb is in the different spot from the fed. why does he take this trip to make a speech if he is not going to give us some kind of message? that is interesting to keep in mind as we wait for him, and of course, janet yellen kicking off
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proceedings in a few hours from now. about the topic of janet yellen's speech. it is a bit left field, isn't it? but you spoke to someone who said it makes perfect sense. surprised people in light of the fact they will talk about growth and i dynamic global economy. let's talk about inflation and maybe the balance sheets, but the topic is financial stability. have had fed minutes and comments about stock market valuations, see you get the sense that they are concerned about keeping rates too low for too long. the former head of the bank of israel, the chairman of j.p. morgan chase international thinks the risks will be seen in financial markets and that the fed should start raising rates right now.
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another possibility one person suggested is that may be janet yellen chose this topic because it is important, but will allow her to sidestep the question of , whether she hikes has changed her view and signals a more dovish stance. whether it isut big news are not come at what they don't -- not, what they don't say my be just as important as what they did say. rishaad: thanks a lot. janetahead, more on yellen and mario draghi. we look at what investors are hoping to hear with bank of america merrill lynch. haidi: plus, we analyze the inest incremental tick up japanese inflation, painfully slow still.
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this is bloomberg. ♪
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♪ haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. rishaad: i am rishaad salamat in the hong kong. policy makers meeting in jackson hole, most major currency pairs little changed. sees the dollar correcting higher, possibly against the euro. great to see you. what gives you this idea? something i have noticed, a change in sentiment towards dollar strength. what would be the foundation? >> if you think about the terminal fed funds rate, where it will be when it finishes its tightening cycle.
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that is low, peak pessimism around the u.s. the majority of the people thought it would be around 2.5%, incredibly low compared to the eurozone. that is the foundation. look at quantitative and positioning metrics, it does scream out that dollar positioning is extreme. rishaad: we have seen a massive increase in short dollar positions. , is30 year, 2.3% basically that also terminal? the five-year rate, five-year forward, 2.45%, pretty low from a long-term perspective. rishaad: we have seen these currency pairs looking stable of late. the euro has been moving higher, particularly against the pound at an eight year high. mario draghi speaks, does he
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mention the strength of the currency? we are trading at 118 now. if he does, doesn't that send a message that this economy may not be strong enough for a rate hike? >> first, i don't think he will mention it at jackson hole. inhave an ecb meeting september and he wants to wait to meet with the governing council. is the dataeason until recently had been strong. you could argue that euro appreciation has been consistent. the one wrinkle is german data, recently quite week, exports, gdp, so i'm watching today's survey closely. slows down, then mario draghi and the ecb will ratchet up their rhetoric on the euro. rishaad: i suppose he is caught between a rock and a hard place. he has traveled all the way to
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jackson hole, so why would he say nothing? >> absolutely. look, expectations into the speech are incredibly low because we have the report saying he was going to say nothing, so even a small mention about tapering outlook or exchange rate would have market impact. haidi: it was interesting this set up for janet yellen, expectations low for mario draghi, so maybe even lower for janet yellen to deliver market moving surprise. we have this the versions from the host, saying if the data holds up, we could get another hike before the end of the year, and robert kaplan saying policymakers need to exercise patience. is there a chance we will get a hawkish tone? >> the risks are skewed in that direction. the speech about financial stability and a global context, so probably not too much on u.s.
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monetary policy. if there is in u.s. monetary monetaryit is normalization. expectation of the fed funds terminal radar low right now, so the risk is skewed towards of her sounding a bit more hawkish than markets are expecting. haidi: where does that leave the u.s. dollar? whether mario draghi will try jawboning, so if you have a weaker sterling, a weaker account ofn washington, it is a one-way bet when it comes to the euro, but you see upside to where the dollar goes. >> i think so. one hurdle is the political noise that will continue into september as we approach the debt ceiling government shutdown
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deadlines. that is the near term weight on the dollar preventing it from rallying, but once you move past the political noise, there is risk that the dollar starts to appreciate, whether the euro, japanese yen, maybe not sterling, but you do have to get past this september hurdle that will weigh in the u.s. dollar. rishaad: who is runnable in asia? who isink -- haidi: vulnerable in asia? >> asian currencies continue to be range bound near term. we have noticed that central banks in the region are intervening more actively. official intervention numbers show the appetite for further fx appreciation is lower than it used to be. if the dollar goes up, there
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will be an opportunity to sell asian currencies. preferences to be short the singapore dollar versus the u.s. it is expensive relative to the midpoint of the band, so it makes sense against the basket of currencies. haidi: stay with us. we continue our conversation after a very short break. this is bloomberg. ♪
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♪ let's take up from where we left off. thank you for sticking around. inflation numbers just out of japan, inching up, nowhere near 2%, looks like that will be
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pushed back to agai again. you will need to see significant weakness in the yen to get to that 2% market. do expect the yen to weaken, or do we get that geopolitical play continuing to push it higher? around 109,n his supported at that level for a while, but geopolitical risks will dominate monetary policy dynamics, which means dollar yen rakes lower a low 109. particularly as the u.s. political noise increases. fordokyo print, the looking component, surprised to the upside, and gdp numbers in japan have been stronger so debate around the boj shifting away from its target will start, and maybe that will impact the yen, but we are not there yet,
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so geopolitics dominates the domestics for the time being. rishaad: that inflation target, 2%, six times they have delayed it. why not scrap it right now? what is a comfortable level for the yen? implicitly, it doesn't matter anymore, but scrapping it presents a communication problem which is why the boj will maintain it. concerned,he boj is the not concerned about that. this trade have deficit. donald trump said he would reduce that deficit, and if anything, it has increased, putting pressure on the fed to raise interest rates because it would be supportive for the dollar. has all the bad news been priced into the dollar?
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is that why you suggest room to the upside? >> how much of the bad news is priced in? the metrics earlier tell you the bad news is priced in. the other thing i look at is investor surveys. at expectations around fiscal policy and monetary policy in the u.s., expectations are the lowest in terms of tax reform or fed interest rate hikes on the so theso far this year, bad news as far as the dollar is concerned is priced in with the euro close to 120. rishaad: where do we go from here if we get a stronger dollar? is it supportive or unsupportive of currencies in this part of the world? >> it is why the dollar strengthens, right? up u.s. economy is picking and the fed is tightening gradually. bonds and fx markets do well
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against that backdrop. fear for asia would be if the fed gets ahead of the curve, inflation will be higher, and they need to raise rates to-three times per year and that leads to a selloff in the equities market, that is a bad scenario for asian markets. whetherg to watch is they are raising rates and whether it comes along with stronger data. rishaad: janet yellen may be losing her job in january. how do you behave and think about what monetary policy should be? >> janet yellen will behave incredibly professionally. she would do the right thing leading up to that date and leave the fed out of politics. she couldnd that stick on as a board member afterwards. increasinglyg likely that a non-academic will
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be head of the fed. rishaad: thank you very much indeed. coming up, looking at the fate of the heir apparent of samsung, jay y. lee. ♪
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♪ 9:29 a.m. in hong kong. we are counting you down to the start of the session. is about jackson hole, janet yellen, mario draghi, keynote speeches. we are watching stocks. 2% -- 4.2%ur point caution is the watchword, a tepid session on wall street amid low volumes, japanese inflation slightly higher, in line, but nowhere near that 2% the boj wants. i am rishaad salamat coming to
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you from bloomberg's asia headquarters. haidi: i am haidi lun in sydney. a seasonal tepidness when it comes to of items, exacerbated by this calendar on the macro front has been like this week. we are looking ahead to jackson hole. we will take a look if there are any hence as to tightening for either central bank. shanghai and hong kong joining the fray. 300 extendingi day and the hang seng rising, the eighth monthly rise. that looks to be intact. straight to stocks and focus given earnings. petrochina,giants,
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cnooc rising after beating estimates. , it's agraded to a buy shares raised to a buy. that stock was raised by mccoury. looking elsewhere in the region, some carriers, qantas shares snapping a four-day rise after its earnings beat. revenue at its international unit fell 2%, shares now swinging to gains. x jumping, the stock upgraded to hold. her is worry over ring it depreciation. it is headed for its best weekly leading ao months,
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handful of emerging-market currencies against the dollar with the philippine peso leading the drop when it comes to emerging-market asian currencies. is little changed after a slightly weaker effects from the pboc. analystsnbi confounded come a consensus estimate for the end of this quarter still at 680 a dollar, so the yuan current performances 2% higher than that forecast. the trend does not look like it will change. that 6.5%isor saying by year end is for a much possible. rishaad: thank you very much. engle witho stephen the latest first word news headlines. >> currency traders may experience some chopped friday as janet yellen and mario draghi speak at jackson hole, bets on a weaker dollarand
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combined with a thin liquidity on friday afternoon in august could cfx markets and portable to frenetic moves as policymakers gather. policy chairman told us week inflation will dominate the rate decision. >> we have this small puzzle of why was in inflation rising. puzzle, whya bigger is inflation falling? if inflation keeps falling, it would be nutty for them to raise interest rates. >> the struggle for emphasis sees founders regaining control, forcing the chairman and three other directors to leave the board, installing someone in his place. the ceo was one of the directors to resign. shares rose 2% on the news, inosys has been struggling the tech industry it helped to create. google is policing you to more tightly, targeting videos it
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determines crosses the threshold for offensive content. buts not removing them, adding warnings and disabling advertising. google outlined the move in june amid the debate on free speech and extremism is front and center. macau said wednesday's typhoon killed 12 people. it was the strongest storm to hit the area and five years, powerful wind and torrential rain. two victims were found in an underground garage. it caused power outages at hotels and casinos and gross game revenue may be hit. six hotels remain without electricity as of thursday night. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. rishaad: the seoul, korea high court will deliver its verdict guiltyher jay y. lee is
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of corruption, accused of paying millions of dollars to buy influence at the highest level. that the court. what are we expecting? i panel of three judges will start the proceedings at 2:30, and it will take an hour for the verdict after markets closed. gripped the nation because jay y. lee is one of the richest and most powerful men here, but because of the wider scandal that brought down the ander president, in peach leading to her ouster. years,lee is facing 12 the harshest criminal sentence leader and since a message about the intentions of the president. jay y. lee is up on charges
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including bribery and embezzlement, and he has tonight all of those. they will be expecting protests later today. so far, no big ones as of yet. touched on it,st what are the wider implications for these family-run who have aes disproportionate impact for the south korean economy? moon came into power promising to reform the situation. bloomberg,74 in the the korea discount, showing the andi against the topix shanghai index. it shows korean shares are cheaper than their peers. has say that the dominance sapped shareholder value, are
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closely tied to the government, meaning the stocks are undervalued. moon has been focused on a , putting intoy place someone who will watch the family-run conglomerates and make sure they stay in line. haidi: just a status update, what about the former korean president? still on trial, a separate trial, expected to wrap up in october, so still a few months to go. will have. lee t.r.y. a big impact on what will happen to her. an author we spoke with had this to say. >> it is important for the prosecution that he is it because that means they can go for the strongest penalties against the former south korean
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president, so in that sense a lot is hanging on for the prosecution case, and she can expect to have a long sentence. even if this jay y. lee trial goes nowhere and he is acquitted, there are other family conglomerates that the prosecutor has been looking at an line for questioning and possibly scrutiny. general,of reform in the commission is pushing back, and regardless of the outcome of this try or other trials, they say they want to create a much fairer environment here for businesses. back to you. be expecting some of these other conglomerates keenly. rosalind chin awaiting the heir jayon the samsung
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y. lee. earnings season underway, qantas an otherwiseat is lackluster session and australia. .8%, the carrier beating estimates with profits of $1.1 billion, the second-best result in the company's history. it has plans for new routes that are very long. all allen joins us from the qantas campus to break down these earnings. let's deal with the result third not too bad, 1.4 billion australian dollars each estimates. another dividend for shareholders of seven cents, backing up the dividends last year for the same amount. mentioned, a bit of a bright spot on the asx, rising just under 2%, but look at this
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chart, 6824. hascan see how qantas outperformed the asx over the ,ast 12 months, shares up 73% the best performer on the bloomberg world airlines index. i have been coming down here for five years now and remember when alan joyce was in the neck of what he called the transformation program. it seems all of that has been now andd -- validated qantas has confirmed they will continue to return cash to shareholders. >> we have said we have a range we are comfortable with between $4.8 billion and $6 billion. it is now $5.2 billion. we have been clear on our capital expenditure over the surplus years, and any cash above that will be distributed to shareholders. to getantas lost a lot
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to this point, but the staff there remain have been rewarded come all getting a bonus of $2500 each. rishaad: i will jump in here. tell us about these ultra long-haul routes, sydney to london, sydney to new york, the quickest to new york is 26 hours, 23 hours to london. they want to take four hours off of it. how will they do it? paul: the technology does not exist but is working with falling and airbus to make sure that the next generation of long-range jets can make , a feat of endurance really. you need a strong fortitude to deal with it. to london is the last frontier of air travel, reducing the flight time to 20 hours and
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20 minutes, and sydney to new york will be 18 hours. i'm sure it will be great in business class, but in economy, you would need something to help you sleep. rishaad: i think you will. thank you for that. coming up, japan's inflation inching up in july, but what hope for that elusive 2% target? we discussed that with wisdom tree coming next. this is bloomberg. ♪
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♪ a quick check of the business flash headlines. santos higher despite questions about payouts to shareholders. biggest oil and gas producer decline to pay dividend revealing net debt down from the
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start of the year and $6.6 billion two years ago. the share price has been lagging wti crude. toshiba's bond prices have surged on reports of of it is resolving a dispute with western digital over its chip division. rallied thursday, reaching a two month intraday high. a slight gain at the moment with reports they aim to sign a deal at the end of the month, toshiba needing the cash to put its books in order. highershares in htc open as it is said to be exploring spinning off its virtual-reality arm to a full-scale sale of the entire company. it is bringing in a strategic and pfizer or separating the headset business.
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htc isn't an obvious fit for any single suitor. japan, still failing and those inflation doldrums, only edging up slightly in july, point 5%, and behind gains in growth way behind that doj 2% target. our next guest says no problem. optimistoclaimed japan , you're reading of the situation? a goldilockse is situation. you have the situation where wages are increasing and you have a strong increasing corporate profits, and the purchasing power of the people keeps on rising while the profitability for investors is going out, so that is a
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fantastic situation, and ironically japan is in a egg economic sweet spot. -- is innate league economic big economicn a sweet spot. rishaad: is that a problem ultimately or are people getting their knickers in a twist for the wrong reason? problem for the boj because they have promised to percent inflation and now we get .5%, so there is a long way to go, but in the real world for consumers and for corporations, japanese companies, we are out of the doldrums. remember that in the 1990's over the last 20 years, japan had bad deflation with wages falling, profits falling, and prices falling. the bad part of japan, now wages are rising, profits
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are rising, inflation is not rising. that is awesome news. why then are but people so concerned about abenomics not working? your view,ng in or is it just a happy coincidence? forhe numbers speak themselves, the pickup and economic growth you alluded to. in the world of investment, which is what we care about, you have this record increase in corporate profits. profit margins are increasing at the highest levels. evident growth, japan is the highest dividend growth country in the world right now, so it is a win-win situation. whether you attribute this to abeme minister shinzo or not, japan is interesting because of a virtuous cycle of
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rising profits, rising wages, is coming through. goldilocks,, so sweet spot, win-win, you have described it in every positive way possible, but how do levels of the yen play into this? to get to 2% is not technically possible. >> you are making an important point. if you get to the nitty-gritty and say let's focus on price inflation, what you have got is the terms of trade effect. the impact of the yen exchange rate on import prices, and remember that japan is a big importer of energy and food, so the gyrations of the yen are very important for the headline inflation index. you will find it is technically and possible to get to 2% cpi inflation without all again ring
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at 120 or 125. haidi: yes, but talk to me about have we run the course when it comes to hitting the peak business sentiment in japan, or will animals spirits only build from here? >> you put your finger on the key point. business expenditure cycle is picking up, japanese companies reinvesting in japan, and that lays the foundation for potential growth in productivity growth for future profitability so the key number for investors going forward over the next couple of quarters is that business expenditure cycle. see machineryo orders, construction orders, business investment expenditure?, continue to grow if that is the case, the nikkei will reach 25000 and six months.
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the boj do,does stay the course and do more of the same? >> the boj entered this year , stability,tra stability, stability. they will not rock the applecart. let the federal reserve figure out what they want to do with monetary policy, let the ecb figure out what they want to do with monetary policy, let the pboc figure out what they want to do with monetary policy, but japan is an anchor of stability and nothing will have for quite a long time. haidi: what did they do about the tax hikes? >> this is where it gets interesting. the big corporate tax decision is due in the autumn of next .ear 2018 will the consumption tax be increased from 8% to 10%? whereis a bit of a window
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we still have some calm here, but the big fiscal decision, tax reform, an increase in the consumption tax, that will be a big topic in 2018. haidi: always a pleasure. coming up, more from jackson hole, hearing from the dallas fed president robert kaplan, why the fed should resist calls for faster tightening. this is bloomberg. ♪
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♪ haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. rishaad: i am rishaad salamat in hong kong. the inflation debate has been staked out at jackson hole while --sas city that president
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this time from dallas fed boss robert kaplan. >> you have to adapt to reality. i have not lost faith inflation make it back to 2%. you have to understand the historic cyclical forces and the thels that suggested what cyclical forces and the impact they should have are being offset by new forces, which you can understand mainly by looking at industries, companies, and talking to ceos, and those are having a muting effect on inflation. it is not black and white. a may find that we can run lower level of employment in order to help the cyclical forces to overcome some of these structural headwinds we face. i think it is more that and we have to adjust and adapt to that. ,> there is talk in japan
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saying that 2% target is unrealistic and why don't they adopt a lower target? is that something the fed should consider? >> for the time being no. we have a history in this country, and that is deflation. high inflation is not something you want, but you also don't want deflation, particularly when you are this highly leveraged. u.s. debt held by the public is 76% of gdp, japan's government is highly leveraged, and if you have deflationary forces, it is hard to deleverage. too high inflation is dangerous, and so is too low inflation, and that was the thinking in the 2% target, and that thinking is still solid. haidi: that was robert kaplan speaking with kathleen hays at
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jackson hole. ahead to the look verdict when it comes to that jay y. lee trial. aboutak with the writer the rise of the samsung empire and the fall of its heir apparent. this is bloomberg. ♪
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