APAC Stocks Dip After US Selloff; Suntory Holdings CEO Takeshi Niinami
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Bloomberg Audio Studios. Podcasts. Radio. News. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. On today's episode, we'll bring you our conversation with the chairman and CEO of Suntory Holdings, Takashi Ninami. He sat down with Bloomberg Sherry on in Tokyo. But we begin this morning here in the States.

We saw heavy selling in U.S. markets today as President Trump continued to verbally attack Fed Chair Jay Powell. On social media, Trump called Powell a loser. And the president said that Powell should cut interest rates, the president adding he favors preemptive cuts.

Now, markets have been rattled by the president's words and deeds. His tariff policy clearly has been a major negative for markets. So has his undermining of the Fed's independence. Here is Bloomberg strategist Vince Signorella. What basically traders are telling you is, look, you know, regardless of the situation with the Federal Reserve and Trump putting pressure, the Fed has said they're going to stand pat for a while. So we're not seeing anything where there's an inclination to

that short-term yields are a little bit lower, but not on the fact that I think Powell or the Fed is going to cut, although odds have increased that a cut is coming in June. That is Bloomberg's Vince Signorella. For a closer look at what's going on these days in markets, I'm joined by Joanne Bianco. She is partner, also senior investment strategist at BondBlock's Investment Management. Joanne, thank you for making time to chat with me.

What did you make of today's price action? We had yields at the long end of the curve backing up, but at the short end, we were down about five basis points, I think, in New York trading on the two-year. Make sense of that for me. I think the sense of that is really that, you know, market anxiety is persisting and all the comments that are being made are just...

causing there to be more worries about if the Fed does cut rates right now, what would that do if inflation reemerges? It could be the wrong time to cut rates. Yet, you know, our economy could be weakening from all the tariff news and how that impacts the economy. So there's just a lot of moving parts. And

And that's causing investors to be very unsettled. And we're seeing that certainly in equities as well. So I'm wondering whether or not what we're seeing expressed in markets is the question of whether or not America is the preeminent destination for global capital. Do you think that's a little hyperbolic or do you think there's some truth in that?

I think it's too soon to say that, you know, we've lost our place here in America in that role. You know, things can change. And obviously this is not, you know, this is not going in the direction that I think a lot of people would like to see it go, but that it can also can change. Torsten Slocke, who you know is the chief economist over at Apollo Global Management, was saying today there's a 90% chance

How does that square with your thinking? I don't think we're that high in terms of our view about a recession. You know, just remember that, you know, the economy is starting from a very strong place, historically strong. And so, you know, we could have weakness without it being. I mean, yes, technically you go into a recession this year, but you

you know, the extent of that and how deep it is, is something that's still in question. So maybe not outright contraction. Okay. We can put that out there as a possibility, but what about something that appears like stagflation?

And that's the worry, right? That's what the markets are reacting to. That's why markets are as volatile as we're seeing them be. If you had to make a bet right now in the Treasury market, do you hide out at the short end of the curve or is there simply too much risk at the longer end these days?

So, yeah, we just think that the short end of the Treasury curve, it still offers attractive yields and there's just lower return volatility there. The intermediate to long end could provide the potential for price appreciation if economic conditions weakened. It's just that there's more volatility on the long end.

I was looking at a commentary coming out of Abu Dhabi today. Paul Singer, who you know to be the founder of Elliott Investment Management, he was at a private event and he issued a warning that the dollar might lose its reserve currency status.

We saw a little bit of dollar weakness today. I think we fell to a 15-month low if you look at the Bloomberg Dollar Spot Index. Are you concerned about the effect of a much weaker dollar on markets? Yeah, that is a concern. There's also a lot of volatility there as well. So that's another thing. We just have to wait and see how it plays out.

So it's worth remembering that one half of the Fed's dual mandate is stable prices. Many economists we have been hearing from and their warnings about how tariffs will likely produce higher inflation, that seems to be a real risk. Even before the trade war, I think the last reading on the Fed's preferred measure of inflation, core PCE, was above that 2% target. How do you understand the inflation story right now in the States?

I think the way that we understand it is that we think there's a very good chance that it re-accelerates again. And, you know, we're further away from the Fed's 2% target. Where does that leave you then in expectations for rate cuts this year? Is the market right now in discounting maybe three 25 basis point rate cuts way off the mark?

It seems that, you know, like we're seeing maybe the first rate cut coming in June, according to the expectations. But, you know, a contrasting opinion is that the Fed makes no moves at all in 2025. If they don't cut rates by June with the inflationary nature of the tariffs happening in this second and third quarter, it would be hard to see why they would cut rates at all.

So, I noted a little while ago when you and I were talking before we actually began recording that the cost of protecting high-grade credit in the CDS market right now is the highest level that we've seen in over a week. And obviously, you take that kind of protection against the possibility of default. The closer we get to the end of the year, let's say, after the Fed begins cutting, if you're right, in mid-year, we get the first 25 basis point rate cut.

Do you see building default risk right now?

Well, we're in such a good place in the investment grade and even the high yield market in terms of debt maturities that have been refinanced over the past several years that there's very low level of debt coming due for the remainder of this year. So from that perspective, we're not concerned that we're going to see a huge spike in defaults this year, even if the economy were to weaken. Right.

- Are you tempted to look at credit markets offshore right now, particularly in Europe? - I mean, we look at all opportunities, and it's just in terms of seeing if we think that you're being paid for the risks that you're taking. - So where are you finding opportunity? - Well, we think there's a lot of opportunity in the US markets in fixed income. Primarily, you have to pick your spots,

But the reason that fixed income is like a good place to be in volatile markets like this is because of the coupon or the income component. It cushions volatility more than stocks or other assets.

You know, specifically, that's why areas of the U.S. Treasury market, also investment grade and high yield bonds have have value, in our opinion, because of the coupon income component and how attractive yields are at this point. So that seems to me when I hear that like a buy and hold strategy rather than playing the bond market for capital gains. Do I have that right?

I mean, it's a combination of strategies, but, you know, certainly stay invested in this market environment is what we are talking to clients about. We'll leave it there. Thank you so much, Joanne, for joining us. Joanne Bianco, Partner Senior Investment Strategist at BondBlocks Investment Management, joining us here on the Daybreak Asia podcast. Want to understand trends shaping the global investment landscape?

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You'll love the presentations you can easily design with Canva. Your clients and co-workers will, too. Love your work with Canva presentations at Canva.com. Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. Late Monday, Japanese Prime Minister Shigeru Ishiba said Japan will not concede to all U.S. demands in trade talks. He cited the need to protect national interest.

Now, those remarks come as a second round of trade negotiations between Tokyo and Washington are expected to get underway in the coming days. Suntory Holdings chairman and CEO Takashi Ninami said the current situation regarding U.S. tariffs is really concerning. Here he is speaking exclusively to Bloomberg's Sherry Onn in Tokyo.

He's also a senior economic advisor to Japan's prime minister and chairperson of the Japan Association of Corporate Executives. Always great to see you, Tak. You wear so many different hats that it's such a good time to speak to you. Thank you. Thank you for having me. Tell me, how concerning is the business environment right now? Very much concerning. The reason is if the current tariff negotiation continues as it is,

We will be perhaps impacted negatively, perhaps from 1% to 1.2% against GDP negative.

That's for Japan? Right. So that's really concerning, especially like Hiroshima where Mazda is operating. They would lose a lot of jobs. So we have to be really anxious and we are. And we're not even talking about the U.S. economy, which could also obviously face inflation. Are you seeing any changes in your business? Yes, I think definitely consumer confidence has been waning tremendously.

And consumers are not spending willingly nowadays, so they go to the economy instead of the premium products. So that's really concerning too. You're already seeing the shift in consumption trends towards affordable products. Exactly, that's right.

thing right now is that president trump really wants these tariffs in order to bring investments back to the united states in order to bring supposedly jobs back to the u.s how difficult is it for businesses to make those commitments in the u.s market when it's so uncertain well under the current situation where this economy might go into the recession it's harder and harder right if the economy

is good just like before. Around the time, the U.S. productivity is pretty high, above 2%. That's why U.S. attracted investments from the world. If the situation continued, we would have a strong appetite to keep investing in the United States. So current tariff situation is losing the appetite from the

other countries to the united states so this is a really you know killing the appetite from the world to the united states so um we are losing the appetite to invest in the united states as a matter of fact if the economy goes into the recession right basically what's happening is that at least for now these tariffs could be backfiring on the health of the economy exactly

The logic from the Trump administration is that he wants to change what they call unfair trading practices. Are you concerned long term that this might be an end to rule-based globalization, free trade? Not really, because Japan and other countries are promoting CPTPP, for example, and RCEP.

And China is another locomotive to promote the free trade. So whether it's a good thing or not, I think we will be promoting the free trade in, for example, APAC, including perhaps eventually India. So without the U.S., some countries, including Japan and China, we want to promote free trade.

Can the rest of the world carry the global economy without the world's biggest economy? I think so. I think so. This time, a lot of countries got understood that the U.S. is not the country to support the free trade. And the day U.S. denounces the free trade,

I mean, bringing the bad situation to the United States. But the free trade creates the, you know, good job creations and, you know, world trade in history. Lots of innovation happens. So I think Japan should be a flag bearer of free trade and that we will.

Does this make you more skeptical about long-term business in the United States, or is this just a blip because of the Trump administration? Well, depends on how president will cruise U.S. economy. And I still believe that the U.S. is the center of innovation. So very attractive for us to invest. But at this moment, if discontinues, I don't think very attractive. So we have to find

Interesting that you're not mentioning China. Is that because they will take a hit from this trade war?

I think my worry is because of the current tariff policy of the U.S., China will change the direction of their goods to other countries. That will create perhaps disputes with those countries who will receive lots of goods.

So because anyway, China has to export. So I like to ask China to maintain the current free trade because of their leadership. But they have a huge excess of products in the country and they have to export. Otherwise, they can't keep hiring people. So that's their weakness at this moment to lead the world. But I hope

China will understand about their position to keep the free trade. They have to be another flag bearer of free trade in the world. The trade imbalances that could get worse because of the ongoing tariff. That's why India didn't join also. When it comes to the negotiations themselves, we know that Japan and the United States are talking right now.

What should be on the table for discussion? What can Japan offer in this transactional arrangement? Well, first of all, we have to definitely think about how we can bring the U.S. automobile. I mean, whether Japanese consumers buy or not, but we have to perhaps deregulate the safety standards.

to fit the U.S. automobiles if it's really safe. And second thing is we need rice, for example, now. So we can import to some extent like minimum access. So that will not ruin the current rice production system in this country, which is at the foundation of the policymakers anyway.

So and the package of the weaponry purchase from the U.S. Anyway, we have to buy weapons from the U.S. so that we can upgrade our deterrence capabilities. So that is so important.

And finally, we should have the joint projects in the U.S., Alaska gas and shipbuilding. I think we can talk about lots of joint projects in the U.S. What about Treasury holdings? The government says that they're not going to use that as a negotiating tool. I don't think so, because Japan...

doesn't want to retaliate at all to any kind of action from the U.S. because we like to keep the alliance with the U.S., and

Japan is always showing their faith, always being with the United States in terms of security. But in terms of trade, they like to work with China as well. So we have to draw a line between economic security and regular trade. Regular trade, we should promote the relation with China.

We should promote the relationship between Japan and China for Japan's benefits. In terms of free trade, except security issues.

Because Washington right now, what we're hearing from the government is that perhaps they will try to incorporate some clauses where training partners of the United States are also limiting and pushing back on Beijing. You don't think that that should happen? Well, it's a matter of the economic security. Semiconductors, those which are related to the security itself.

But other than the security issues, we should promote the relation because China is our neighbor and the world is intertwined. So China is a key part and we can't forget the fact.

The Japanese yen could also be on the table. President Trump doesn't like weaker currencies vis-a-vis the U.S. dollar. What will that mean to your business if we see more appreciation from here? It's another headache, too. We can't change the landscape of Japan's economy right away by reducing the interest rate, for example. That affects definitely yen dollar value.

But we have to be resilient to be able to respond to that kind of a strong request because our real interest rate is negative, about 1%. We are not manipulating, but they might say, hey, Japan is manipulating. So we have to be ready for that. In that sense, we have to leverage this external pressures so that we can reform Japan by...

I think definitely we have to reduce the number of companies because we have too many. So

I think consolidation and metabolization, I think we have to proceed by leveraging this strong pressure from the U.S. Do other Japanese CEOs share that vision of potentially using this as a catalyst to bring more corporate reforms and changes to Japan? And is the government doing enough? 50-50. And some know that we make use of external pressure. And in history of Japan's economy,

This worked. So we have to have the, you know, cautiously optimism to change Japan to the better landscape from 30 years sleep. That was chairman and CEO of Suntory Holdings, Takashi Ninami, in a conversation with Bloomberg's Sherry Ahn here on the Daybreak Asia podcast.

Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krisner, and this is Bloomberg.

Is this a negotiation or the new rules of the game? It could be either. It is up to the president how he wants to negotiate. A deal is going to be made with China. Nothing's over yet. There's been a lot of confusion up to now. A 90-day pause is not an eradication. Where is this leading to? Trust Bloomberg Television for all the context and clarity you need.

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