Daybreak Weekend: Fed Meeting, BOE Decision, BOJ Policy
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This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our daybreak anchors all around the world. Straight ahead on the program, a look ahead to this week's monetary policy decision from the Fed, what it means for interest rates. I'm Tom Busby in New York. I'm Caroline Hepka in London, where we're looking at whether the Bank of England does decide to hold steady on interest rates. I'm Doug Krisner, looking at the challenges for the Bank of Japan as it faces a decision on interest rates in the coming week.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App. ♪

Good day to you. I'm Tom Busby. We begin today's program with the Federal Reserve. The Fed concluding its latest two-day meeting, issuing a monetary policy decision on Wednesday. And for more on what to expect, what policymakers are watching, we're joined by Michael McKee, Bloomberg International Economics and Policy Correspondent.

Well, Michael, no change in rates in three earlier Fed meetings so far this year. What are you expecting to hear from the Federal Open Market Committee this Wednesday? The headline will be no change in rates. No change. And I think we're going to see that for a little while, this meeting and then probably the July meeting. It probably won't be until September that the Fed has enough of a feel for the economy to know whether anything else needs to be done.

Right now, inflation is under control. Basically, we saw this last week, CPI and PPI come in lower than expected. There were some tariff related increases in some categories, but nothing that screams problems for the Fed at the moment.

But all the tariffs haven't been put on yet. So they're going to have to wait and see the June inflation numbers and the July inflation numbers before they might want to make any changes. Well, that's the wild card in all this. And we're looking at a date right now. And, of course, this is fluid and always changing. July 9th, when the president's 90-day pause on tariffs goes into effect. I guess after that, things could really change. They could really change if indeed possible.

tariffs go into effect. That's the problem for the Fed is nobody has any idea what Donald Trump is going to do. So it's impossible to model what's going to happen. He raised steel tariffs to

to 25%. And then in the PPI, we saw that steel prices were up 7% last month. So there is a cause and effect there that will probably feed into other categories in the CPI and PPI, depending on what gets tariffed, when it gets tariffed, how much the tariffs are, and when they take effect.

So it's really hard for the Fed to think anything other than we don't need to do anything because inflation is under control. And at this point, the economy is hanging in there. Now, jobless claims are a little elevated, but it's a seasonal adjustment time of year. So maybe they're not signaling a terrible change in the labor market. But the Fed will be keeping an eye on those two things to see if there is any move either direction needed.

Another thing is economic growth, because the fear of these tariffs, the fear of inflation, really changed things in two earlier readings on GDP in the first quarter. And we're going to get a third reading pretty soon, right? Yes, we'll get a third reading that will be the final reading for the month. And what we're going to see is basically little change.

But then we'll get the second quarter numbers and we'll see a big change. Because in the first quarter, growth was held down by the fact that we imported a lot of stuff as people tried to front run the tariffs. And that basically comes out of GDP. So we had a negative print. But in the current quarter, the second quarter,

People are not buying a lot of imports imports our way down so that will artificially add to GDP So again for the Fed they'll probably average the two quarters But it isn't going to be a clean read on exactly what's happening now people You say are buying fewer of the imports, but are we still seeing you know jittery consumers especially lower-end consumers holding back on all purchases and

We're seeing jittery consumers, but they don't seem to be holding back on all purchases right now. Consumers seem willing to spend on what they need to spend on.

gasoline prices have come down. That gives people a little bit of a tailwind, a little bit of extra money to spend on other things, which food prices went up. So that's the other thing that they watch closely. But this is also not a period of time when there is a lot of what we would call extra spending because we're past the holidays. Now we're waiting for basically back to school, which will start in July. And if people are going to be spending a lot on that,

or whether they're going to hold off. One thing that we are watching these days is vacations. Airfares are way down because air travel is way down. Hotels are down. These are the time of years when you would think they would go up, but the prices of those things have come down because people aren't traveling as much, which is a sign of some nervousness. Let's talk about the future of the Fed, because this has been a subject last week.

Jerome Powell's eight-year tenure as Fed Chair will end in May of next year. We know what President Trump says about him. What's next for the Fed? And I know that there's one big name out there. Well, there are a couple big names out there, because the President has made no secret of people that he thinks could be Fed Chair, along with Scott Besson, who you're referring to this last week, Bloomberg reporting he's on the list.

Kevin Warsh, the former Fed governor, has been on the list twice. He was on the list before Jay Powell was chosen. And then Kevin Hassett, who is the director of the National Economic Council. So there are a number of names out there. The question is, what does Trump really want? The feeling has been, and the impression you get from Donald Trump, is that he wants somebody who's going to cut interest rates.

We don't know a lot about what Scott Besson thinks about rates. We do know that Kevin Warsh, as much as Trump likes him, has been a hawk all his life on inflation. So he's probably not going to be ready to cut interest rates right away. And the issue for the president is he can fill one seat for a governor whose term is expiring in January, Adriana Coogler, and then he could fill the Powell seat.

If Jay Powell resigns as a governor when his term as Fed chair is up, so he's got one or two seats and the Fed will not otherwise turn over during his term. So he doesn't have an opportunity to pick enough people to influence monetary policy. Even if he got somebody who walked in the door and said, I want us all to cut rates, the rest of the Fed isn't going to go along if they see inflation is still a danger.

Well, a lot to look forward to. And we can look for the Fed's next decision on interest rates this Wednesday, 2 p.m. Wall Street time. And our thanks to Michael McKee, Bloomberg International Economics and policy correspondent. We move now to a closer look at the troubled U.S. housing industry, which has been stung by stubbornly high interest rates, sky-high home prices and a lot of economic uncertainty. And this week...

We get housing starts for the month of May and the latest earnings from one of the nation's biggest home builders. For more on what all this might tell us about the state of the housing sector, we're joined by Drew Redding, Bloomberg Intelligence U.S. Home Building Analyst. Well, Drew, let's start with those earnings out on Monday from the Miami-based builder, Lenar, because I think they may illustrate a lot of the challenge the home building industry is facing right now, a lot of those challenges. So what do you expect to see?

So the two main things that investors focus on for the builders are orders and gross margin. Now, among the large publicly traded homebuilders, Lennar is operating a somewhat unique strategy in that they're focused primarily on driving pace, so higher sales absorptions,

over price and they've been willing to sacrifice their gross margin to do so. So they'll give us a good read on demand trends. We've heard from some other builders, you know, that the market softened in April. We saw that in the data, but maybe improved a little bit in May. So we think that any pickup in demand is still likely to

the result of an elevated use of sales incentives. Builders have had to be really aggressive. So we're looking for order growth of about 8% with a gross margin just under 18%, but we expect the company to communicate further pressure through the remainder of the year.

During the first quarter, a number of builders actually reduced their full-year guidance for closings. But just given Lennar's business model, we think there's probably less risk for this. So they're expecting to close 86,000 to 88,000 homes this year. And really, their primary objective is to turn through their inventory to generate cash and drive shareholder-friendly actions. Now, also this week, we get housing starts for May. So what do you expect to see there?

Housing starts have been trending lower over the last several months. I think we're down about 7% year to date on the single family side. And we expect builders to maintain this more cautious approach to production. You've got the combination of weak demand trends along with rapidly increasing inventory levels.

including one of the highest levels of completed new home inventory since 2009. So you're going to see builders continue to utilize incentives to work through the existing inventory before putting new projects in the ground. Well, let's talk about some of those incentives. What are the more popular ones?

So I think it's pretty well understood that builders have been aggressive in the use of mortgage rate buy downs to help with the affordability equation. Generally speaking, we think builders like to maintain a spread of about 100 to 150 basis points versus the headline mortgage rate, which is just under 7%. Right now, I mean, we've seen some builders be even more aggressive getting rates into the 5% range, but it's really dependent on the buyer. So in addition to

what they're doing on the buy down side you also have others who would rather up for closing cost assistance or credits towards structural options or design options typically you'll see a first-timer entry-level buyer opt for the rate buy down because they're more dependent on that monthly payment while buyers you know with a stronger profile in the move up or second time move up market will typically look for um you know credits towards um structural and design options

Are you seeing anything from the Trump administration, that is, any moves to help home buying, to help people secure loans? I know some of the mortgage guarantees, those Fannie Mae, Freddie Mac, there's a lot of movement there. But what is being done out of Washington?

Yeah, so that was a big topic of discussion on the campaign trail. There hasn't been a whole lot of movement right now. I mean, the three biggest things I think from the political spectrum people are looking at are tariffs, which thankfully for the builders is less of a concern perhaps than it was a month or so ago, as well as immigration and deregulation. I think there's more focus on immigration. You mentioned that

that we're starting to see more ICE raids. It's certainly a headline risk to the industry. You've got more than 30% of trade contractors are farm born and there's estimates that one in 10 may be undocumented. Now, most of the builders that we've talked to have acknowledged that this is a risk, but I think to this point there hasn't been too much of an impact on the actual job site. This is, as you mentioned before, the lack of trade labor has been an ongoing issue.

for the industry really since the last downturn because you have a lot of people switch industries. You've had a lot of people age out of the industries. So, you know, that's really been a focal point for the last several years. And to the extent that, you know, that,

the labor market tightens up further because we're losing some more of the workforce. Now you're looking at a cost impact for the builders. Yeah, just another challenge for those builders. Well, our thanks to Drew Redding, Bloomberg Intelligence, U.S. Home Building Analyst. Coming up on Bloomberg Daybreak Weekend, we'll look at whether the Bank of England will decide to hold steady on interest rates. I'm Tom Busby, and this is Bloomberg. ♪

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This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Up later in our program, a look ahead to the Bank of Japan meeting and what that could mean for monetary policy moving forward. But first, the Bank of England. Policymakers will once again gather on Threadneedle Street to determine the country's interest rate path. How will the Monetary Policy Committee deal with inflationary pressures as the U.K. economy and the employment market soften?

For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Tom, the Bank of England has been slowly cutting interest rates since last year, lowering borrowing costs twice in 2025 to four and a quarter percent. But tax rises in April, including on employers from higher national insurance contributions, have pushed inflation up 2%.

There's a big question about how the bank deals with this amid an economy in the UK that appears to be losing some steam. So do the nine-member committee at the Bank of England opt to skip a rate cut this month? And what then of the rest of the year? Economic growth began 2025 with a bang. It's now dealing with the fallout of some US tariffs. And

And the bank's decision comes only a few days after the Chancellor set out the government's spending plans for the next three to four years. A record funding boost for the National Health Service, but tighter budgets for less favoured government departments.

Well, joining me is Bloomberg's chief UK economist, Dan Hanson, and our senior economics reporter, Phil Aldrich. Very good to have both of you with me. What do you make of the economic picture in the UK right now and whether it means interest rate cuts coming? Has the inflation outlook improved? Yeah, obviously, as Dan said, there's been a

there's this temporary hump in inflation which is caused by a whole load of regulatory household bills which were due to rise and that increase has happened and so we've seen that bump. So the bank is trying to look through it and they're looking particularly at wages and the labour market. I mean, you hear this from members of the committee and that

The process is proceeding there. They would like it to be proceeding faster for them to cut faster. They have this quarterly trajectory for interest rate cuts, which is communicated through the gradual and careful language, which remains in place. So you don't think... I mean, it doesn't look like the governor wants to move from that quarterly pace of cuts. And two of the internal members of the bank are...

actually quite hawkish. So Hugh Pill has already skipped one meeting, so he's voted not to cut when everyone was expecting him to. And Claire Lombardelli, who's the deputy governor, Hugh's the chief economist, they prepare the forecasts and she and Hugh are clearly prepared

quite concerned about the stickiness of inflation in the UK. So you've got to think about the nine-member committee when you're thinking about whether the bank is going to cut, and you've got to think about who, you know, they've got to get five people doing it, and I think that'll be tricky in June. I would have thought that in August it's pretty, I mean, it is nailed on in the markets, it seems to be completely nailed on. And the economic situation in the UK, it's kind of mixed. If you look at some of the surveys, the business surveys they've been

picking up people, businesses seem more confident. You know, there's strong profitability or increasing profitability among small businesses. And households and businesses are both sitting on huge cash balances. But actually, what's happening in the economy is that, you know, things are, you know,

employment has risen there's been these damaging tax rises on business from the Chancellor which only came into effect in April energy bills are still high and there's genuine just concerns about the policy outlook and whether more tax rises are going to be coming so this is holding back the animal spirits but you can see the potential for a release of growth energy at some point it's just not quite happening yet

The backdrop to this, Dan, of course, also in recent days, is actually a slight cooling in terms of economic growth, at least on a monthly basis, though. So again, I guess the state of the UK economy from your perspective. Yeah, I mean, I broadly agree with what Phil said there. I think we've had a cooling in activity. It was pretty widely expected. The fall was a bit sharper than people thought, but most people thought there was going to be a fall in GDP. And it relates to

This idea that the first quarter of the year was exceptionally strong, partly to do with what's been going on with tariffs and firms front-loading in anticipation of tariffs.

And I think the broad picture is consistent with what the Bank of England set out in its May forecast, which is you had this strong start to the year, and then the remainder of the year is going to be significantly weaker. So I think on the growth side, there's nothing that's going to push them one way or the other in terms of speeding up or slowing down how fast they cut interest rates. I think the bit of information that is new to them

relative to what they knew in May, is on the labour market. And it does look like the labour market has cooled faster than they were expecting. So, you know, all else equal, that is a dovish signal. And the markets have responded to that. They've moved from pricing...

one and a bit cuts for the remainder of the year to fully pricing too. And it's quite possible, you know, there's more to come there. But I think that's the news. Is it going to be enough to push them to cut interest rates in June? No, I don't think it will. Will it, if the trend continues, I think it will give them the confidence to carry on cutting

as Phil said, at this quarterly pace over the remainder of the year. Yeah, I remember speaking to Petra Tagg from Manpower UK, which is the big recruitment firm on Bloomberg Radio, and she was saying that there is a lot of nervousness for employers at the moment or that they are feeling very nervous currently. Look,

The other issue is the kind of ramifications of Bailey's decision when it comes to Chancellor Rachel Reeves, who has also recently set out her spending plans for effectively the rest of her term or the rest of this kind of parliamentary term. And so have a listen in now to Chief EMEA Market Strasher Karen Ward at JP Morgan talking about actually the government's debt bill and

the possibilities and the difficulties that the government has with that. Have a listen. We have to get productivity going here in the UK. I mean, if you look at the long-term projections the OBR do, it's their lesser-read report than their sort of year-ahead projections. But the trajectory over the next 50 or so years for government debt is...

unpretty over 250% if a rising productivity scenario. If there is not a recovery in productivity, it's headed more towards 600% of GDP. So we absolutely have to get growth going. We have to get investment going. That's the reason we haven't got productivity.

companies are not equipping their staff with better skills and better equipment. And until we get that going, then we're going to be in this perennial conversation about why there isn't enough growth and why, therefore, we don't have money to fund public services. So that was JP Morgan's Karen Ward there who was speaking to us in the last few days. Phil, what's the link then between the

costs of borrowing and the UK's debt issues? I mean, Karen was talking about it in very long-term horizons, but how do you thread that needle? Well, obviously, the faster the Bank of England brings down interest rates, then the more that's going to send messages through to the market and the whole curve will potentially drop and that'll help the Chancellor because debt interest is £100 to £110 billion a year across the forecast, which is, you know,

is almost double the defence budget. So, you know, that's an enormous cost. So that would help. Basically, one of the problems, actually, I mean, one of the issues stems from Rachel Reeves' own policies here because she's...

It's this tiny sliver of headroom or the buffer against the fiscal rules that she set herself has just sort of embedded this uncertainty about future policy into sort of the thinking of business leaders and just generally into the economy. Because every time, you know, there is a small shift in borrowing costs, she's got 10 billion of headroom and she can lose all of that.

in just minor movements in the markets. In terms of the vote split, what we should be watching out for in terms of the language, I mean, and the comparison, obviously, between the Bank of England sitting between the ECB and the Fed, what are we thinking about in the next few days? Yeah, so taking each of those in turn. So with the vote split, I think you'll probably get, though the vote split has been very difficult to call and there have been a few changes

volatile members of the MPC in terms of their voting patterns, but as a best guess, I would say you would have a 7-2 vote split. So you'd have Swati Dhingra and Alan Taylor continuing to advocate more easing. I think there's a risk that Sarah Breeden, who's one of the internal members...

votes for a rate cut but I think a base case a reasonable base case is 7-2 I think there's a question Which two are voting for cut and the rest voting to hold? Exactly yeah so we get a hold being interviewed by two people now and

There's a question mark, I think, about whether that – because so in May, both of those members voted for a 50 basis point cut. So there's a question mark, do they go 25 or do they stick with 50? You know, I think that there's a question mark there. In terms of the guidance, going into the May meeting, there was a lot of speculation that the bank would drop this commitment to gradual and careful cuts, the wording that Phil mentioned earlier.

I think they will stick with that. I think they're very comfortable with that because, as Phil has also alluded to, the market perceives that as quarterly cuts. And I think they're quite comfortable with quarterly cuts. So I don't think there's any reason for them to upset the apple cart on that front. And then on where the bank sits between the Fed and the ECB, the ECB...

Inflation's in the euro area inflation sort of beaten. Yes. Yeah, and they've sort of you know close to declare victory They're basically now at a level. They're very comfortable with they may do one more. That's our house view A lot depends on what happens with tariffs whether they go up after this this 90-day pause That will have a big bearing on what's going on there for the Fed It's it's very difficult the economy is appears to just about be holding up at the moment and

But, of course, tariffs create a trade-off. It creates higher inflation, though we haven't seen it yet in the data, and weaker growth. So, there is a tough trade-off. Whereas, if you think about tariffs in and of themselves for the ECB and the Bank of England, I think most people, majority, I'm not saying everyone, but most people would say they are not growth-friendly and disinflationary. So, that's quite obvious what you do with interest rates against that backdrop.

I think the challenge for the bank is actually domestic and going to what Phil said, this point about sticky inflation and the point that I think in the UK inflation expectations are probably inconsistent with target levels at the moment. And I think the bank is worried about that. So the extent to which they can look through this hump in inflation is

is more limited than perhaps it was prior to the big inflation shock. Remember Brexit, we had this big increase in inflation, or relatively large increase in inflation. They eased policy despite that. Same happened during the financial crisis. So, I think the dynamics and the trade-off, and the way they think about the trade-off has changed.

OK, some interesting points. Thank you so much for giving us a heads up on what to expect, of course, on the Bank of England rate decision in the next few days. That is Bloomberg's chief UK economist, Dan Hanson, and our senior economics reporter, Phil Aldrich. Thank you so much for being with me. I'm Caroline Hepka in London. You can catch us every weekday morning for Bloomberg Daybreak here beginning at 6am in London. That's 1am on Wall Street. Tom.

Thank you, Caroline. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to a monetary policy decision from the Bank of Japan. I'm Tom Busby, and this is Bloomberg.

while also creating opportunities to give back along the way. Visit Thrivent.com to learn more. Thrivent, where money means more. How can you free your team from time-consuming office tasks? Amazon Business empowers leaders to not only streamline purchasing, but better support their teams.

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plus taxes, fees, and economic adjustment charge. Terms apply. For J.D. Power 2024 award information, visit jdpower.com slash awards. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York.

The Bank of Japan is out with an interest rate decision this week. And for more on what to expect, let's get to the host of the Daybreak Asia podcast, Doug Krisner, for a preview. Tom, these are interesting times for Bank of Japan Governor Kazuo Ueda. Core inflation in Japan has been above the BOJ's target for nearly three years now. And in that time, there's been constant worry over the durability of higher prices.

In the last week, Governor Ueda said the BOJ is still some distance from its inflation goal. Perhaps the bigger worry these days has to do with trade.

Joining me now for a closer look is Paul Jackson. He is Asia economy editor for Bloomberg News in Tokyo. Paul, thank you for making time to chat with me. It's always a pleasure. So we have a BOJ meeting on tap in the week ahead. And from what I'm reading, Paul, the BOJ is likely to maintain this kind of wait and see approach. That's kind of surprising when you look at the forcefulness that we have seen in inflation in Japan. Why are they adopting this wait and see approach, do you think?

I think the answer is Donald Trump. Ha!

I mean, we have this wave of tariffs hitting the world. We still don't have the final view on what those levels will be when this kind of temporary pause on the reciprocal rates is lifted. We've seen a lot of kind of conflicting reports about whether talks will continue or will be wrapped up in the next couple of weeks.

But the long and the short of it is, amid all this uncertainty, would you want to be raising interest rates aggressively, even if you've got quite a bit of inflation there? So I think the pause button is going to be played next week. We've got economists and analysts generally thinking that the Bank of Japan does face a strong inflation trend here.

And it must act at some point, but it's going to be, um, uh, later in the year, uh, or even early next year. Of course, if we do get clarity on, on tariffs and, uh, uh, what the levels are going to be for Japan going forward, then that could change, uh,

the thinking at the central bank. But for now, rates on hold. So the policy rate we know is just one tool. The BOJ has also been very, very forceful about trying to manage the yield curve. And from what I understand, the pace of tapering bond purchases is going to be a hot topic at this meeting, right? Oh, yes, very much so. So as part of Governor Ueda's kind of drive to

normalize policymaking at the central bank and kind of help Japan to return to some kind of normal status as a G7 economy rather than an experimental outlier.

He's been looking to pull back from all these market interventions that the central bank had gotten into. And one of them is the bond buying. And the Bank of Japan was buying incredible amounts of bonds. Even now, it holds around half of all the outstanding Japanese central government debt.

And it's wanting to kind of like remove its status as a whale in the pond and let market forces kind of take over price setting in the market. Now, that all sounds great. But how quickly can you actually do that without triggering a lot of volatility in prices? And I think what's happened amongst all the uncertainties going around in the world, the pace at which the Bank of Japan

has been cutting back its purchases. So it's still buying a lot, but it is buying less with each quarter that it's maybe going a bit too fast. And there's concerns about what happens from this point forward. So are policymakers keeping a very close eye on the currency right now, particularly the yen's relationship with the dollar at a time when people in the States are expecting the

the Fed to lower rates sometime before the end of the year, maybe we get two rate cuts and that would be dollar negative. So talk to me a little bit about how policymakers in Japan right now are viewing the yen, which has been a little choppy lately. Yeah, absolutely. I mean, I think they're quite happy for a bit of strength to come into the yen, take it well away from those levels.

that caused so much trouble in recent years and so much money spent on intervention. So I don't think at the moment that's like the key hot topic concern for the central bank at this time or the policy makers. Really, I think the key point here is what kind of deal can Japan cut?

with the US on these trade tariffs. I mean, some of these tariffs are really hitting key industries in Japan, regardless of the exchange rate. Obviously, it's an important aspect of it.

But in terms of these tariffs, I mean, 25% on Japan's auto sector. That's a huge shadow hanging over Japan's economy going forward. That's around 10% of GDP, 8% of the workforce employed by the auto sector.

You know, can they withstand that kind of pressure? So we were talking a moment ago about the inflation environment in Japan, and I'm wondering whether the government is still considering cash handouts as a way to help consumers deal with this sticky domestic inflation story.

This is a very good point because if the central bank can't aggressively raise interest rates, that means you're going to have inflation kicking around for longer and voters are sick of it. They want something to be done. There have been subsidy measures for electricity bills and gas bills and stuff.

over recent years, but they're wanting more. And as you've got increasing tax revenue, people are thinking, you know, what's going on? You're getting all this extra tax money and we've still got high levels of taxation from a consumer's perspective. They're thinking, why don't you lower the sales tax

on a temporary basis give us some relief while this inflation trend is continuing. And we've got a national election for the upper house coming next month. And I think this is going to be a key point with a lot of the opposition parties saying, hey, look, lower the sales tax, give consumers a break. For the central government...

That is problematic. You've got debt that's more than twice the size of the economy. You've got this volatility in the long term, super long end of the bond market. Are you wanting to, you know, pay your way with extra spending through more debt issuance? No, you don't. So they're going to have to come up with some other measures.

Let's talk about Prime Minister Ishiba's meeting in the coming week with President Trump. That will happen on the sidelines of the G7 in Canada. What are we expecting? Well, first of all, you know, these meetings, you know, nothing's kind of set in stone. If they don't meet, I think that would be a setback.

for Ishiba. I think we're seeing a lot of momentum going forward. This is we have negotiators, Japan's top trade negotiator is on his sixth visit to DC this week to try and get closer to the line on some kind of trade deal. I think that the two leaders probably will meet and they probably will have some kind of statement. Now, whether it's a deal, perhaps

with nothing much fleshed out but grand statements about we've done it, we've reached the deal, or whether it's just a statement saying significant progress has been made in trade talks, I think there probably will be some kind of joint statement.

So you were talking a moment ago about the tariff story as it relates to the automobile industry in Japan, which, as we both know, is enormous. Let's not forget steel, right? And we have those steel tariffs in place. And in the last week...

Commerce Secretary Howard Lutnick was saying that the deal between Nippon Steel and U.S. Steel will be done reasonably soon. Do you have a sense of what this possibly may entail, what it could look like? Well, I think there's been all manner of question marks about what this is and how much investment is going to the U.S. The investment figure looked very similar to the buyout figure.

What we do see is we've got this kind of golden share arrangement for the US government essentially to have a veto on key decisions. So this is something that Donald Trump is putting forward as a great success for his administration, no matter how much it looks like something close to a buyout. I think there are key provisos that have given the optics a much better look.

for the US administration. So if Prime Minister Ishiba is really trying to strike a favourable trade deal with the US right now, is it in his best interest not to get too involved with the China side of Japanese trade and perhaps...

put that off for the moment and focus more on the relationship with Washington? I think for Ishiba at the moment, it's got to all be about the relationship with the US. Now, of course, for all the players in Asia, threading the difficult path between

how much you deal with these huge trading partners, the United States and China, is a real head-scratcher. You look at South Korea, for example, I mean, you know, they're reliant on both economies heavily. You know, how do they navigate that? Japan's in a similar position, but I think at the moment the big companies

Scary thing standing in front of you is this wave of tariffs and how you try and get concessions on that topic. We were talking a moment ago about the potential for cash handouts to consumers in Japan. We've got an election just around the corner. And I'm wondering how people are feeling right now about the Ishiba government. Well, he's got some shoring up to do of support. He's had this minority government.

He's been kind of, you know, walking a very difficult tightrope since that election last year where the general election, where the results lost, stripped him of a majority in parliament.

He's been having to cooperate with the opposition parties to get legislation over the line. So he's really in need of at least a better outcome than he had last autumn in this election. And this inflation dynamic that we've been talking about,

is, you know, acting against him in his face. We've also seen a hot topic of rice prices. Rice prices have pretty much doubled in recent months. And for consumers, this has really been like your staple for meals every day is twice the price of

Are you kidding, Mr. Ishiba? We want to vote for you. Are you sure? So he's got to somehow in the intervening month before that election convince voters that they are getting assistance from the government. The government does have a plan for growth and how to deal with Donald Trump.

and they will bring rice prices down. We'll leave it there. Paul, it's always a pleasure. Thank you so much for taking the time to help us understand the macro view of what's going on in Japan as we look ahead to this meeting in the coming week of the Bank of Japan. He's Paul Jackson, Bloomberg Asia Economy Editor, joining us from Tokyo. And I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast. Tom?

Thank you, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now.

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