tv Bloomberg Markets Americas Bloomberg April 20, 2017 10:00am-11:01am EDT
vonnie: we are want to take you from new york to london and cover stories at a paris and tokyo. but first, some headlines out of the bank of japan. speaking to francine affected ination is the short-term. they say they do not see constraints to doj policies and the japanese economy is growing well above its potential growth rate. doj has 40% of the japanese government bond market. that means 60% is still in the market. is current pace of purchase to continue for some time. if the fx appreciates, they will hitherto percent target.
france withover to marine le pen's interview. >> i think the economy is on track. were making an adjustment. likely to growl 1.35% this year. this is a big improvement compared to this last year. the japanese economy is growing 1.5%. growth potential is less, percent in japan. have, there risk we is a lot of judgment. for developingr countries is where the money is.
there is no sort of financial crisis or financial programs. ok.financial sector is however, there are some -- also, most emerging economies are doing quite well, including japan, and indonesia. francine: when you talk geopolitical risk, what is the one geopolitical risk? will it affect central-bank policy? have asia, as you know, we north korea -- we have a north
korea program. there are of east, -- there are some internal conflicts, and in africa, there are a number of countries engaging in internal war. there are a lot of geopolitical that worldi do think leaders,including u.s. will manage this precarious depreciation. francine: do you worry that the geopolitical risk will lead to stronger than -- stronger yen? and that will impact her policy? >> this is a difficult issue. certainly in the past. when we had geopolitical risk
appreciates, then the inflation rate could rise higher. and if the yen appreciates, inflation rates could decline. our forecast is based on continuous improvement in the labor market. continuous improvement in -- that the economy is doing is where the potential growth is. if the growth continues to tighten -- affect the inflation rate in the short-term, but we see that inflation rates will
.radually go up francine: you have done more than any other central bank governor to get rid of inflation. when we spoke six months ago, you have gone outside of the toolbox. are you so confident that you can achieve 2%? >> gift. francine: no doubt? >> yes. like i said, are forecast -- our forecast, in the sense that we would need 2% target, around based on the assumption that -- will not move. the timing could be timely.
the target. that is a different point. like i said, it is not a target anymore anyway. francine: could i say that you are more optimistic about what you have put in place now than you were back in january? >> yes. , the economy is doing better than we thought a few months ago. on the other hand, inflation be quiteinues to sluggish. although the economy is improving and doing better than anticipated, --
as far as the japanese economy yes, the economy is doing better than anticipated a few months ago, but inflation is not much improved. francine: do you worry that you -- you have used a lot of tools, some unconventional tolls. you worry about your balance sheet? 40%, have acquired about 80% of gdp beout have acquired, but this is the result of quantitative easing. we think that we can manage the large balance sheet in a reasonable manner.
exit from qe with, control, we have to consider how -- eal with but i said, i think we can manage a large balance sheet in a reasonable way. francine: when is the ideal time to start talking about it? >> it is too early. it is relative to the exit strategy. the target is 2%. 0% inflation rate. that is a long way to go. although we forecast the ,nflation rate will rise to 2% sometime around fiscal 2018. that is a long way to go. at this stage, it is pretty much luck.
situation whenhe we decide an exit strategy. francine: so, depends on inflation? >> it depends on the financial market situation. it is too premature to talk about an exit strategy, including how to manage a large balance sheet. francine: when the fed starts its exit strategy, do you see it as a possible shark -- shock for markets around the world? >> no. presumably, the federal reserve will continue to manage monetary and maintain robust growth in the u.s. it would be good for the world economy. make an exithey strategy, that means that the
in a verymy grows robust way to achieve that 2% inflation target. governor, at this moment in time, you have no doubt that you can introduce new policy tools or a new stimulus because of the balance sheet? free as youel as were a year and a half ago? >> we have acquired about 40% of gdp, which is outstanding. but there is still 60% in the market. [laughter] i don't think there are any constraints for our monetary to stimulate the economy in the coming years. so, i do not think that monetary -- by the fed that we
have 40% of gdp already. our balance is about 80% of gdp. francine: what have you learned in your time is head of the boj? i don't know if it is as difficult as you thought to manage this kind of economy. [laughter] >> it is challenging, but depending on the economy and but theonditions, current qe and current cost control. but i think it can be managed in a reasonable way. no particular concern the increase balance
sheet, or interest rate on the short end. francine: your term ends in a year from now. how many investors from -- how many questions from investors do you get about if you will stay on? [laughter] the cabinet -- with confirmations by the national -- outside of my death [laughter] francine: i understand, for once, if you were asked to stay on, governor, would you stay on? think that is a question i better avoid. [laughter] francine: i will try again in six months [laughter] . -- i will try again in six months.
[laughter] is d but francine: but is that the question you get the most? [indiscernible] in the international markets, long-term interest rates have been rising, but in the last couple of months, they have declined somewhat. but the trend is low term -- long-term interest rates, while the bank of japan has needed quite clear that we will maintain around 0%. how to implement cost control in the next several months, investors are concerned. but we will maintain these targets depending on the
economy. francine: this is what we were talking about last october. the yield control, if it goes into negative, it could be it could be considered tightening, but you have not had a problem so far. >> [no audio] maintained rates from 0%. long-term interest rates, we maintain the rate of around 0% in the last two years. managedcontrol has been as we intended. bank of japan haruhiko
♪ vonnie: this is bloomberg martin -- this is "bloomberg markets." i'm vonnie quinn. julie hyman is here with a check on the markets. julie: we have the cyclical bleeding energy industrials and financials in a classic transition out of real estate, committees, and telecom. we have big earnings reports good on the downside, verizon medication tops a list. that company coming out and saying it had its worst fiber loss in more than a decade as it
still decides to sell a limited mobile data. ebay coming after the close yesterday. that company cost turnaround efforts bearing as much fruit as investors would've liked it revenue in the current quarter looks like it could trail analyst cost estimates -- s cost estimates. railroads are higher. they beat estimates. mark? -- hereclicals versus as well. corporate results giving investors a lift. first reported its revenue growth ahead of estimates and an uptick in improvementaling an in the sluggish feeling beverage
market. unilever reporting quarterly sales growth, affirming its outlook for the year. this is a company that had a takeover from kraft heinz. and japanese exports grew at the fastest rate in more than two years in march come up by 12%, forcing a modest economic recovery. the march trade data indicating growing health and the growing economy. that's is the latest from european equity markets. senior we have the economist speaking about weekly jobless claims, and also treasury moves. this is bloomberg. ♪
bloomberg first world news. emma: this get you caught up. u.s.nited nations ambassador wants the u.s. to be the core of the middle east agenda. nikki haley will use a un security council monthly meeting on the region to discuss iran's role in syria and yemen. nikki haley has accused the u.n. of having an anti-u.n. bias. vladimir putin is taking advantage of mixed signals on the u.s. on ukraine. he has tightened his grip on two rebel regions. in maine sanctions will likely stay in place. people close to moscow says putin's strategy is to keep integrating the region with -- the white house seems uninterested. in the middle east, somewhat producing countries have reached an initial agreement to extend those cutbacks to try to end the
worldwide glut according to saudi arabia. the six-month deal involving opec and russia is due to expire in june. high oil stockpiles have kept prices from rising significantly. global news 24 hours a day part by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. vonnie? vonnie: the economy in the u.s. grew at a moderate pace in recent weeks. says a tightank labor market helped broaden wage gains, but consumer spending -- consumer sentiment was mixed. on the rate in hike. >> the median of three rate increases is still a good baseline. ,f the economy develops slowly then we can do less than that. if the economy is a little
stronger, we can do more than that. but i still think we are making good progress towards full employment. there is still some labor slack, but we are approaching full employment. vonnie: he is a voting member. we want to bring in an economist, michelle girard, who is also expecting three rate hikes this year. it is great to talk to you again, michelle. talk to us 2.4%. how do you possibly see three rate increases this year that is the 10-year right now? michelle: the market is not expecting as many rate hike as i am. you can look at 10 year treasury yields and where short-term market rates are and pricing. you're not even christ for two rate hikes -- were not even priced for two rate hikes. in past years, the market has been proven right to
underestimate what the federal reserve is going to do. this year is different. we are in a very different place and we were a year ago. , unless a year ago, we are essentially and both mandates. we have the unemployment rate around 4.5%. and you are essentially at the inflation mandate, even with the core rate sort of covering just below 2%. they arem line is that looking at this for below neutral could it is very difficult to make. it would take a lot for the fed to under delivered to the extent this year and they have had in previous years. vonnie: where are you seeing the strength coming from in future quarters? though q1 was a little soft, we are seeing a slowdown in auto sales and consumer spending? just wondering if you are waiting for some kind of policy to kick in that will spur growth
, or do you think it will come on its own? good point.at is a we were hopeful that we would get some fiscal stimulus in the form of tax cuts that would help to spur growth this year. put that into our 2017 forecast, even if we were to see some of that -- those policies enacted in 2017, we believe that that would be more of a 2018 story. i was pretty conservative expecting growth this year would at 2.25%lightly better this year. , it isn't so much that the economy is about to accelerate sharply and that is by the federal reserve will want to continue to normalize interest rates. it is just about even with an economy growing 2% or slightly better about the potential rate of growth, when you are already at full employment and at your inflation target, it doesn't
make sense. rates to be closer to normal. if we were looking at rate funds at 2%, the argument for rate hikes will not be that compelling, but i think it will want to continue to nudge rates closer to neutral assuming the economy does continue to grow even at a moderate 2% pace. [no audio] [no audio] once per quarter, which is why we get the three additional hikes this year. we do have them announcing the in the policynges starting in the fourth quarter, whether that is october or december, we are not -- we are not that dug in that in the morning -- that at the moment. i could envision that for just that meeting, i think that is what the fed officials have
suggested. at that one meeting, they may pause on interest rate hikes and announce a change in investment, and then resume the quarterly pace that would've been established throughout all of 2017. but it is not going to be a long drawn out pause. 2018n't as if there does forecast for one hyper quarter is going to change dramatically if they do announce a change at the beginning of this year. about theere talking $13 trillion gorilla in the room for the global market said when the big three central banks start to wind down there $13 trillion worth of balance sheets, heidi stop another --? you do it by being very transparent. that is what the federal reserve is trying to do.
ultimately, one of the misconceptions i think in the market is what it means for interest rates, for longer-term market rates. when the fed stops reinvesting, the treasury will have to pick up the slack and issue more debt to the public that would otherwise have been going to the fed. how the treasury continues to choose the issuance will change the market. if it is longer-term securities, expect longer-term rates. if they make up the funding shortfall by issuing more bills, then the implications for longer-term rates are much less clear. i do not think the market fully appreciates this. but we are not as concern of the impact of upper pressure on longer-term rates just simply by the fed reinvesting. vonnie: what is your outlook for the u.s. dollar? we just had haruhiko kuroda on talking about the yen and it has seen a lot of strength in recent years.
the dollar is now consolidating and reversing course a little bit. where you expect that to go? michelle: it should go stronger. if our forecast is correct, we have more fed rate hikes this year than the market is currently anticipating, then we should see the dollar push higher. right now, we are seeing some of the nervousness about fiscal policy and what may or may not be implemented. and of course, as we have talked about, we have taken about that action for some of thisaction fd reduced enough to be expected to see. [no audio] i actually think we are going to get more fiscal policy. i am not willing to throw that out completely. i do expect the dollar strength and gradually over the course of the year. vonnie: what is your case for things like the border adjustment tax? michelle: that it will not
happen. that is the nephew all along. expediency ise going to be key in terms of delivering something on the tax front. i just think the border adjustment tax is going to require a larger discussion. it needs to be-- undertaken in the scope of broader tax reform and whether or not you want to think about coupling that with movement -- willing in that direction. all of this is a very important discussion and i think worthy of being had, but if we want to be able to deliver corporate tax cuts or tax will be to the economy, sooner rather than later, all of that has to get put off. there is just too much divided opinion on it. i don't think we will see her she contemplate this year. vonnie: michelle girard. it thank you.
♪ vonnie: live from new york. i vonnie quinn. mark: and i'm mark barton in london could this is "bloomberg markets." right time for the bloomberg business flash looking at some of the biggest business stories right now. chinateel has taken on attracting attention from politicians. the company wants the government off the trade agencies that steelmakers join forces to keep prices low and undercut
competitors in the american markets. international trade commission will hear u.s. steel pot the argument today. sold itsovernment has bank for $3 billion. the u.k. government set up the bank in 2012 to spur clean energy investments. it was put up for sale last year to raise money for privatization. bloomberg spoke with the chairman. try to develop a relationship in the region, and currently, we have potential especially -- ,
we want to be a platform, a base, a gate for turkey, for investments. upside will behe $200 billion. that is the latest bloomberg business flash. vonnie: it is time for our latest business quick take where we find background on issues. after inflation, and the 1960's and 1970's, central bankers wanted more freedom, but their shields began to crack after the financial crisis did critics say independent central banks are secretive and put the interest of commercial banks before those of taxpayers pretty central bank officials say they need to be screened from political pressures. president trump has sent mixed messages about federal reserve cost janet yellen. he accused the chair of holding interest rates low to help obama
and clinton. but he said he likes both a low interest rate policy and gel and -- and janet yellen herself. to race the benchmark rate butcausing the recession, they set the scene percent economic growth. the bank of england got its operational independence in 1997 and a european central bank was independent from the outset. lately, there have been movements in the opposite direction. the bank of japan the great in 2013 to coordinate policy with to anvernment and move alarming attack on the boj's independence. by larryer co-authored summers concluded that central banks are better at controlling
inflation than their independence them america under political control. but a noble laureate argues that central banks do better and a financial crisis saying all public institutions are accountable, the only question is, to whom? you can see all of our quick takes on the bloomberg. mark: house republicans announcing a plan to repeal dodd-frank. hearings on a 600 page bill aimed at replacing the law expected to start as early as next week. financial regulations also the topic of conversation when bloomberg's kathleen hays spoke to -- just yesterday. [laughter] >> i don't think you could impress me with that rule. if you want to test your judgment against the rule, but i don't think we're going to
monitor monitor policy buy a house rule. mark: for closer look at the replacement bill, kevin cirilli is at the white house. kevin, what is the key take away from this replacement bill? kevin: it is ambitious and more conservative than any republicans had anticipated. this effort is being led by chairman jeff hintzman who has been meeting privately with vice president mike pence in the treasury secretary and top banking lobbyists in washington. the message he is sending is that this is setting a marker. this is a conservative marker, that conservative end point come setting up a more successful negotiation once this advances. senate ares and the very difficult -- the politics in the senate are very conservative than the politics in the house. these negotiations between the house and senate are going to be
contended upon whether or not the republicans in the senate are able to convince people, get on theirs, to side because the centrist them across are facing intense pressure from the likes of senators elizabeth warren and bernie sanders. vonnie: that me ask you about this directive that the president is due to sign today. are told it is an investigation into steel and national security? kevin: we were just talking about this at the white house. the president is going to be directing commerce secretary ross to lead an investigation into whether or not -- [no audio] from: the top executives u.s.-based copies will be at the
white house talking the top administration officials about this. this is something that the still industry has lobbied heavily on for like a -- has been lobbying heavily for quite sometime. the time prime minister will meet with president trump right where you are. what is on the agenda? being bilateral trade that will happen before they are expected to make public comment at about 3:50 today. the argument both of these world leaders will be taking questions. this meeting comes just ahead of the g-7 summit, which is going to be hosted in italy. is it is part of a broader effort on behalf of the misfortune to signal to nato allies like italy and germany, that the u.s. still has a strong commitment to nato. vice president pence overseas eurasia. house speaker paul ryan in europe.
all right, kevin cirilli outside of the white house there. a beautiful shot. later, president trump is hosting italy's prime minister at the white house. the two will hold a joint news conference and that is scheduled for 3:50 p.m. eastern. you can watch the news conference right here on bloomberg television. stabilizing oil is on the signs and opec could extend outlook. this is bloomberg. ♪
we will begin with oil. why this reversal. stockpiles are there doubt. there is a potential for extending that opec agreed and promising but imagine that oil would plummet if they lower? tom: good morning, vonnie. oil is way overvalued at these levels. there is way too much supply and not enough demand. if you throw in that we have more fuel efficiency now, we don't have much more of a demand coming. now that we have seen retail stores start closing down, there is not much need for driving. even though we are going into the driving season, i am looking for oil to going to the low 40's. once we break through 50, we go right through 47. vonnie: what is holding and above 50? still at $51.61.
tom: you have a lot of speculators trying to hold onto opec and a lot of people believing that we may see some growth. stuff pushing of it higher, but really, you are living it up artificially, similarly to the markets themselves. you are seeing mark is being held up with no potential and the tax cuts. more ofyou are seeing an imaginary hold here. of the otherome platforms you are trading on today. what are traders doing when it comes to the euro-dollar or fed funds futures? tom: although the fed says they are want to raise rates, and everything appears that they will raise rates, labonte continue to go higher, although they are lower today, indicating there is a little battle going on between the fixed income traders in the federal reserve. to ais going to come down
key decision, but what we are seeing is the yield curve are indicating this is a -- indicating that there is a slowdown coming. we have a lot of problems. even on the surface, i have not -- those issues have not been solved. we're not going to see real growth here. vonnie: talk about gold. why buy gold when you can stay with cash? todd: gold is a hard asset that cannot be manipulated by the federal reserve. they do not take the money away from you by reducing its value. they do not try to create inflation, but gold is a great hard asset to own. one of the things you are starting to see throughout the country is elimination of cash. people want to hold gold. alternative currencies -- the federal bank have to much
manipulation over other currencies. vonnie: we're talking about .alance sheet unwinds and then i saw qt, quantitive tightening. is goinghink that cash to be a thing of the past one of these days. i think you can see it going on. when we look at the whole picture, i don't think it looks real good. until we get some real true growth and keeping coming back. vonnie: thank you so much, todd. oil: coming up, speaking of , and exclusive conversation with canadian prime minister justin trudeau from toronto.
on "bloomberg markets." ♪ mark: we will take you from new york to london in the next hour and we are covering stories out of paris and toronto. here are the top stories we are following. sprint tos, a crowded the finish in france. four major candidates are close to a dead heat for the presidential election. we look ahead to the key interviews tonight for marine le melenchon and salon. vonnie: our guest is neil jones who has provocative thoughts on the pound and the u.s. dollar. and the canadian prime minister justin trudeau will be joining bloomberg