Tracking the Yen's Impact on BOJ Policy
18:34 Share

Your customers are important to you, but they won't feel that way if they're messaging a clunky chatbot or waiting on hold. Please hold. Estimated wait time is 25 minutes.

Now, you can deploy a Sierra AI agent to delight customers and solve tough problems in real time. Always friendly. Always helpful. Always ready. Visit Sierra.ai to learn more. That's Sierra.ai. When you're making financial decisions for a company, growth is great.

until manual work slows you down. Enter Intuit Enterprise Suite. This next-level solution integrates and streamlines all business management tools, improving effectiveness while cutting costs and overhead, so your business keeps growing. Learn more at Intuit.com slash enterprise. Bloomberg Audio Studios. Podcasts. Radio. News.

Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. We had the S&P 500 falling from a record high, and you can blame Walmart. The retailer issued a disappointing forecast for the full year, and banks got caught up in some of that selling with JPMorgan Chase and Goldman Sachs.

each declining around 4%. In a moment or two, we'll hear from Vance Howard. He is the CEO at Howard Capital Management. But let's begin in Singapore. Joining me now, our friend, friend of the program, Bloomberg MLive strategist, Mary Nicola. She joins us from our radio studio in the Lion City.

Thank you for making time. I'm sure it's a busy day for you, particularly if you're writing about the Japanese yen. But before we get to the currency, I want to get to the CPI print. Core CPI in Japan rising at an annual rate of 3.2% in January. That's a little above forecast. Does it force the hand of the BOJ, do you think? Yeah.

Yeah, it just gives confidence to the BOJ to resume with tightening. So they've been talking for quite some time about being able to continue with tightening if they see some progress on inflation and if their forecasts come to fruition. Now we're seeing that happening. We're seeing that even if you look at PMIs this morning, they were still pretty robust, showing that the economy is doing well. Inflation's on the

on the right trajectory, they're reaching their 2% goal and their 2% target is more than well entrenched. And now they can start moving ahead with confidence on raising rates. So I think you'll start seeing that message really coming through from the BOJ

And it already has, but it just gives them more confidence. No doubt about it. And it's being reflected in the currency. I mean, we're on the strong side of 150 yen versus the greenback.

Absolutely. And I think that continues. And I think you see a much more pronounced strength of the yen against the likes of the euro, because especially with the euro, the interest rate differential is narrowing. And as long as that continues, there is going to be a lot of upside for the yen, especially against the euro. When is the next BOJ meeting that you really think is live in terms of a rate hike?

So March is completely is not being priced in by the traders. And I would agree because it looks like they're taking a more methodical and measured approach to hiking. But if the data continues the way it has been, I think that could make May very much a live meeting.

So we could see if this progress continues, we could see some of these rate hikes coming through sooner rather than later. How much of the yen strength can we chalk up to what we've been seeing play out in the U.S. bond market?

I mean, there's definitely a combination of the two, right? So obviously, the lower yields helps the yen. But of course, what we're seeing from the Japan side is really helping as well. So it's a bit of twofold situation for the yen. And obviously, the yields in the US drifting lower helps Japan.

but it's being accompanied by a much stronger inflation outlook, a much stronger GDP outlook, both of which cement the idea that the BOJ is going to continue hiking rates. So step back and take a look at what you're seeing across the region where you are, whether we're talking ASEAN, whether we're talking North Asia, or we're even talking about what's happening on the mainland in China.

How unified is the main macro theme right now, or is it not? Are we seeing kind of economies that are doing much better than others? I think it's more, especially in the equity markets, it's very much...

based on what's happening domestically. So, of course, we're seeing the rise in the surge in China and Hong Kong equities, largely on the back of this AI frenzy, this robotics frenzy that's really coming through. DeepSeek has really given it a push. Alibaba's earnings overnight adds to the momentum as well. So there's a really good combination there. And then, of course, you had Xi Jinping embracing the business community in China. A lot of these just...

augment and just solidify this rally. And of course, you're going to need earnings and earnings are absolutely crucial in terms of just showing that there's fundamental support behind this.

So for China, that's one story. But then you look at the rest of the region, there's still growth hasn't been great. You're seeing a lot of hiccups. Let's say, for example, whether it's Korea and Indonesia, they're starting to stall. The central banks are looking to also, they've maintained an easing bias, but they're quite concerned about easing too aggressively because of the currency. So they're in this situation.

tricky situation of trying to manage the currency, but also trying to manage growth. And until we get some clarity on where the trajectory of tariffs are going, I think they're going to be in that position for quite some time. Yeah, particularly. I mean, we know the story on tariffs as it relates to China. But when you think of a place like South Korea or even Japan, I mean, the risk that exporters would face under that situation.

Yeah, absolutely. And a lot of these companies have the US as one of their big markets. And

And both the two countries you mentioned also have big deficits against the U.S. So they are clearly going to be in the limelight and in the target for the U.S. administration if they have such big deficits. So I think they're still in a precarious situation. A lot of their leaders have called for them to be exempt from certain tariffs. Obviously, we haven't heard any feedback in terms of if they are.

But at the same time, especially for someone like Korea, Korea is a small open economy, and they are going to be extremely vulnerable to some of these announcements. You mentioned a moment ago the story on DeepSeek and what it has done in terms of the equity market situation.

not only on the mainland in China, but to some extent in Hong Kong as well. Here in the States, the Nasdaq Golden Dragon China Index, which obviously is a measure of the ADRs, those U.S. listed stocks in Chinese firms, we're up about 16% year to date in the Nasdaq Golden Dragon China Index. Nasdaq Composite is only up 3%.

I'm wondering whether or not the earnings that we're going to get next week from Nvidia will do anything to the story on AI-related tech in China. Is there a correlation there that we need to kind of be alert to? Well, I think what the deep-seek and robotics frenzy has really shaken things up in the U.S. to the core, showing that China can be a competitor in this space.

And now and especially because U.S. companies are spending so much money and they're questioning the valuations, especially when DeepSeek is doing it at a fraction of the cost. So why aren't the U.S. companies doing something very similar?

So I think what we're going to see is that if NVIDIA needs to have blockbuster results to really drag the Nasdaq higher, not to call valuations into question, because that's the key thing right now for the U.S., is that valuations are still very frothy. And then especially if you compare them to China, valuations are still very cheap. And of course, we've been in this situation.

environment where is China a value trap for so long, but if earnings continue to show that we're seeing a real turn in China, then they could actually show and bring the U.S. and give it a run for its money. So we had the ADRs in Alibaba up about 8% in New York trading, obviously playing off the very strong results

that we had for the latest quarter. What's the feeling about the Chinese consumer right now if you look at the Alibaba story? It's showing good signs. It's showing positive signs. But we still have to remember that there's a deflationary pattern and disinflation. If you look at Q4 GDP, we still had a negative GDP deflator, obviously impacting that deflation still persists in the economy. You're still seeing signs, especially in home prices, that they're still negative. So

The consumer hasn't really made a strong recovery yet. And I think a lot of investors are going to be looking to the March NPC meeting to see what really is the government going to do to turn this around. Because if you do have persistent deflation, that's still going to weigh on EPS growth. One of the things that we learned today that U.S. Treasury Secretary Scott Besant said,

We'll be speaking with his Chinese counterpart on Friday, later today, in the APAC region. One of the things that we learned in a conversation with the Treasury Secretary earlier is that he will be pushing China to do more to stimulate

domestic demand. Certainly, that's one of the key concerns for anyone who's been watching the economy in China. And Mary, you mentioned stimulus. We've got the two sessions meeting coming up in a few weeks. And I'm wondering whether or not the market is really putting a lot

on the idea that we're going to get much more in the way of domestic stimulus. I mean, that's what investors are looking for. So I think that's going to be the key thing because that's what's really dragging the Chinese economy down. We've seen in some of the monetary markets

data that there's been a fiscal push and the fiscal push is actually materializing and domestic demand is still very weak if you look at the monetary data for January. So there's still a lot to be desired in terms of consumption and how consumption is unfolding.

And that's still the key trigger. I mean, we've talked a few times about the Japanification of China. And of course, a big part of that is that deflation component. And deflation is going to stay in that scenario or the economy is going to stay in a deflationary scenario if you don't see a revival in consumption. So consumption is going to be absolutely critical.

for the NPC to really target and reinforce. Mary, thank you so much for joining us. It's always a pleasure. Bloomberg MLive strategist Mary Nicola there joining us from Singapore here on the Daybreak Asia podcast.

This was the cloud built for AI, a

A pleasing fast enterprise-grade platform for your infrastructure, database, apps, and all your AI workloads. OCI costs 50% less than other major hyperscalers for compute, 70% less for storage, and 80% less for networking. Thousands of businesses have already scored with OCI.

including Vodafone, Thomson Reuters, and Suno AI. Now the ball's in your court. Right now, Oracle can cut your current cloud bill in half if you move to OCI. Minimum financial commitment and other terms apply. Offer ends March 31st. See if your company qualifies for this special offer at oracle.com slash strategic. That's oracle.com slash strategic.

I'm Alpine skier, Michaela Schifrin. I've won the most World Cup ski races in history. But what does success mean to me? Success means discipline. It's teamwork. It's the drive and passion inside of us that comes before all recognition. And it's why Stiefel is one of the fastest growing global wealth management firms in the country. If you're looking for success, surround yourself with the people who will get you there. It's

At Stiefel, we invest everything into our advisors so they can invest everything into their clients. That means direct access to one of the industry's largest equity research franchises and a leading middle market investment bank. And it's why Stiefel has won the J.D. Power Award for Employee Advisor Satisfaction two years in a row.

If you're an advisor or investor, choose Stiefel. Where success meets success. Stiefel Nicholas & Company, Inc. Member SIPC and NYSE. For J.D. Power 2024 award information, visit jdpower.com slash awards. Compensation provided for using, not obtaining the award.

Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. So today, the U.S. equity market dropped from all-time highs. That came after a disappointing forecast from Walmart. And then on the call with analysts, Walmart execs seem to acknowledge there are still quite a few uncertainties related to consumer behavior, as well as global economic and geopolitical concerns.

So the Walmart story only added to the concern about U.S. economic growth following that disappointing read on retail sales in the States last week. Let's take a closer look now with our guest, Vance Howard. He is the CEO and portfolio manager at Howard Capital Management. Thanks for making time to chat with us, Vance. Can you give me your read on the American consumer right now? How do you see things?

I think things are very positive. I mean, even with Walmart's news today, there's a lot of, you know, tornadoes swirling around right now that, you know, are causing a lot of angst for investors. And I think that's the reason you saw a little bit of a drop in Walmart, which is a very good company. And I think with this 6% pullback, I think you've got a buying opportunity here. But, you know, you've got sanctions that are starting to kick that have been implemented. I'm not sure if we've seen the full effects of sanctions yet. We clearly haven't. Unemployment, you know, stable, but it's range bound. It's really not up or down, but it continues to go sideways.

I think you should be bullish on this. You know, we've had a great start to January and even to the middle of February. The market's up nicely year to date. So I think there's really nothing to complain about just because you have a drop in one stock.

I wouldn't be too concerned about it. But we also heard from Rivian, the automaker, talking about the risk of tariffs, the drag that that would create on its business. You're not concerned at all about tariff policy going forward? I think tariff policy is going to create volatility in the market. And, you know, I'm an active trader, Doug. You know that. You've known me for quite some time. So, you know, movement, you know, creates opportunities for guys like me.

I think it creates opportunities for investors and traders to move, both folks. But one thing you need to look at, Doug, is you got to look at the trend of the market. And you know, you've talked to me numerous times about the HCM buy line. That is our proprietary trend indicator, and it's still positive. It's very positive, actually. So any pullback we see as a buying opportunity until the trend changes. So you've got to get your head to what's actually happening in the market. And the market's looking pretty strong. It continues to move higher. You're up

you know, what, two or three, 4% on the S&P year to date. That's an amazing number for the first six weeks. I think people should be incredibly happy. In terms of Fed policy, we heard from one Fed president today indicating that maybe two rate cuts are still in the cards this year. Is that the way you see things?

I don't know if I see two, but I definitely see one. You know, the Fed's been pretty clear that they're going to hold rates stable for a little bit longer. And I don't think that really hurts anything or affects anything. I think we'll see some pressure on the Fed to make a move probably to drop rates because I think that's the way Trump would like to see interest rates go. I think that's the way we'd all like to see interest rates go. It would help mortgages. It would help the

you know, the housing market would, you know, pop up a little bit because we had a little bit of a drop in the housing market. So that would be beneficial. But I'm not too concerned about rates. I don't think that they're being too big of a drag right now. And, you know, there's a lot of other issues out there that I think are causing some angst with investors. And I think over the next two, three, four months, we'll work our way through these. And I think you'll probably see a pretty healthy market, especially the last two quarters of 2025, I think could be really dynamic. And one of the reasons for that, Doug, is the amount of cash that's on the sideline with

6.8 trillion dollars in money markets, one of the largest cash buildups I've ever seen in doing this for 35 years. I have to ask you about gold and maybe you're not a player in bullion, but we did hear from Newmont Mining after the bell.

We're talking about $1.40 per share that was 34 cents above what the street was looking for. There has been so much positivity around gold, and I think part of that story is concern about inflation. First of all, would you use gold as a hedge right now?

I don't know if I'd use gold as a hedge. I think right now, like I said, the HCM buy line is positive. Stay long this market. I wouldn't be too worried about gold. I tell you, if you want to trade something that's somewhat of a hedge, look at Bitcoin. Trade Bitcoin. That's been a pretty decent hedge. And it's been a very active tradable investment mechanism for people, especially since they came out with the ETF on Bitcoin. But as far as gold goes, you know, people, the gold bugs always want to run those up. But

you know, they're often wrong. So I'd be very cautious on gold. It's a hard commodity to trade. Mega cap stocks have been a big favorite for this market for quite some time. And I'm wondering whether or not you feel you've just got to be exposed to those big names.

We own them. I mean, everybody owns them. And yeah, you're right. You can't really be in this market without owning the magnificent seven or at least pieces of them. But here's some good news, though. Did you know that 48% of the broader market is now outperforming the indexes? So that's a really positive sign that things are starting to move out. Small caps are doing better. Mid caps are doing better. You're seeing names pop up on news channels like yours, Doug, where

that we didn't hear about a year ago or two years ago that are making a lot of money and they're really producing some great returns and they're producing some great products. Are you seeing any value in the bond market these days? Very little. And if you're going to trade the bonds, I think you need to be looking at the convertible bonds, something like a CWB. That's the ETF of the convertible bonds. We do own quite a bit of convertible bonds right now. They've done well year to date. I would be more looking at the convertibles than I would in the 10 or the 20-year treasuries for sure.

We had pretty impressive numbers from Alibaba early today. It's going to be very interesting to see how these shares trade in Hong Kong. Do you want to be exposed to markets offshore right now to companies like Alibaba in China?

I'm having so much fun with our domestic markets, Doug. I'm really not too very interested in going overseas right now. I think there's a lot of instability over there, a lot of questions that are going on. Ukraine, Russia, you've got Europe that's a little bit, I guess I'd say a little bit unsettled. It's some of the comments that Trump has made with Putin. So I think you're staying here in our domestic markets. I think you can make just as much money, if not more. And I think you've got a more stable, you know, a more stable environment to buy stocks and to own stocks in.

It's interesting, Vance. Today, the price action led to a conversation around a possible pullback for the equity market. Now, we really haven't seen a meaningful correction for some time, have we? So I'm wondering maybe in the short term, whether the U.S. equity market is a little vulnerable here. What do you think?

I think that we could be, but you've also, you know, the Q's broke out a little bit. The S&P broke out a little bit. If you're looking at the Q's, it needs to break above about 541 on the Q's for a solid breakout. But remember this, Doug, is don't ever short a dull market. And this is definitely the past two and a half months has been a dull market. The VIX is dull. It's just been going sideways. I'd be really cautious on being too negative because if we do get a solid breakout, we get one piece of great news on inflation or we get one piece of great news that

you know, something's working with the Trump administration with their deregulation that they're implementing, you could see the market really pop. And I think if you see it pop, I think you're going to see a lot of shorters get hurt. And I think they're going to be scrambling to cover, which will push the market even higher. Interesting point. Vance, thank you so much for making time for us. Vance Howard there. He is the CEO, also portfolio manager at Howard Capital Management, joining us 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 stories 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. ♪

Feeling buried in a never-ending to-do list that comes with running a business, managing orders, tracking expenses, it's a lot.

That's where Amazon Business steps in. They've got smart buying solutions like Spend Visibility, a cloud-based system to track your buying patterns so you can optimize your savings, and Bulk Buying, so you can continue to save costs on select products with quantity discounts. Smart, right? Let Amazon Business take care of the admin so you can focus on what really matters, growing your business. Check out Smart Business Buying at AmazonBusiness.com. A Business Prime membership is required to access Spend Visibility.

This podcast is supported by BetterHelp, offering licensed therapists you can connect with via video, phone, or chat. Here's BetterHelp Head of Clinical Operations Hesu Jo discussing who can benefit from therapy. I think a

A lot of people think that you're supposed to be going to therapy once you're like having panic attacks every day. But before you get to that point, I think once you start even noticing that you feel a little bit off and you can't maintain this harmony that you once had in relationships, that could be a sign that maybe you want to go talk to somebody.

There's always a benefit in talking to someone because we can all benefit from improved insight about ourselves and who we are and how we behave with other people. So if you're human, that's like a good indicator that you could benefit from talking to somebody. Find out if therapy is right for you. Visit BetterHelp.com today. That's BetterHelp.com.