Daybreak Weekend: Bank Earnings, UK Asset Slump, Nippon Steel
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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 at some key inflation data in the U.S., how it may impact the Fed's next move. I'm Tom Busby in New York. I'm Caroline Hepke here in London, where we are focused on a U.K. asset slump and what may come next. I'm Doug Krisner looking at the outlook for China's BYD, as well as the fallout from the blocking of the U.S. steel-Nepon steel merger.

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, and we begin today's program with a slew of economic data in the U.S. Consumer Price Index, the Producer Price Index, retail sales, all for the month of December.

How will all this data impact Fed policy? For more on how all this data may impact Fed policy, we're joined by Edward Harrison. He's the author of Bloomberg's Everything Risk newsletter. Well, Edward, for the first FOMC policy meeting of the year, the Fed has a lot to consider. But let's start with what we know already. The data we got this past Friday, a very unexpectedly strong December jobs report.

How many jobs added? The unemployment rate moving down? What does all that mean? Yeah, Tom, good to talk to you. I think what it means is that there's a lot of uncertainty about where inflation is headed. You know, the narrative in 2024,

for the large part of the year had been that inflation was headed down inexorably towards 2%. That's the Fed's target. But now we've stalled at this level that is too high. For instance, the data that come out this week in terms of the CPI, we're expecting to see a number like 3.3% taking out volatile fluid and energy, 2.9% overall. That's well above

north of where the Fed wants it to be. And so as a result, we're in an indefinite holding pattern. The Fed is not going to cut rates any further from here. Well, so the Fed is seeing all this inflation data coming out. That is their big focus now. The job market, less of a worry. We've seen it decrease a little bit, but still very strong. What about retail sales? Some other data we're going to get.

Yeah, I think it's an interesting question in terms of we got three days of data with PPI, CPI, retail sales. I would say that of the three, it's the CPI that the Fed's going to focus on and the markets are going to take a cue off of. Retail sales, the number is actually going to be expected to be lower than it was in the prior month.

But when you take out autos and gas, people are expecting it to go up. So it's kind of hard to parse out what the market reaction is going to be. Irrespective, given the jobs report that we saw last week, I think that-

the market's probably going to expect those numbers to be relatively robust. Yeah, people are working, they're spending money. And we've seen that with the National Retail Federation, looking at online, you know, these are at or near record spending levels. So

people are feeling pretty good. - Definitely. And you know, the jobs report, let me just go back to that for a second. We ticked down last week to 4.1% from 4.2%. That tells you not just that the labor market is doing well, but that the anxiety that a lot of people might have that

bad things are about to happen, they're not going to open up their checkbooks, is lessened. And so we should therefore expect that retail sales, especially in this holiday season, to be relatively robust. So that side of the coin, I don't think is going to be as much of a mover for markets because they know that the US economy is doing well. The real question is,

Is inflation stalled at this level or is it potentially even reaccelerating beyond this level to higher into the 3 percent range? And that's the big focus now for the Fed. And what would drive inflation? I mean, obviously, we always have the housing problem. It's not even an uneven market. It is just a problem.

where people cannot afford some of these homes. We have elevated rates now back up to 6.99%, according to the Mortgage Bankers Association. What other factors are driving inflation? So, you know, it's a very good question as to where the Fed is on all of this going forward, because it was interesting that our colleague,

Matthew Boesler, he spoke to people at the Fed and they talked about this, I would call rather obscure inflation measure that takes out imputed numbers. And he has a quote, I think, from Christopher Waller, who's very well regarded in the Fed. He said that inflation in 2024 has been largely driven by increases in imputed prices, such as housing services and non-market services, which are estimated. They're not observed direct.

And so he takes comfort from that, the fact that when you take those imputed prices out, actually inflation looks better. So what it says to me is that the Fed is going to be fine with inflation at the level that it is now.

They could cut still if inflation's at these levels and slightly below. It's if inflation starts to trend higher. That's where we get into problems going forward. So right now, it sounds like you're saying we may not need to see a reduction in interest rates right now.

Yeah, I don't think that... I think we won't see it for the near future. I think we're on hold for a long time, and we don't need to see it. I mean, the...

unemployment rate ticked down. We're getting almost 4% increase in hourly wages. Jobless claims are almost as low as 200,000 initial claims a week. Those are all very good numbers. It says that the economy is doing well. And actually, Jerome Powell, the Fed chair, told us as much in the last time that he spoke to us.

All right. So we may see July. I know after Friday's blowout jobs report, people are talking now next rate decrease will be October. Exactly. October is the new number. And don't be surprised if eventually, especially if we get inflation,

any negative data on inflation that the market starts thinking maybe they pause for the entirety of this year. And that's going to be very negative for interest rates at the long end of the curve, also for mortgage rates as well. Well, our thanks to Edward Harrison is the author of Bloomberg's Everything Risk newsletter.

We move next to the new earnings season kicking off later this week. Some of the nation's biggest banks reporting their fourth quarter results. JPMorgan Chase, Goldman Sachs, Citigroup, Wells Fargo kicking things off on Wednesday. And for more on what to expect from America's biggest lenders, we're joined by Allison Williams, Bloomberg Intelligence Senior Analyst, Global Banks and Asset Managers. Allison, thanks for joining us. So what are you expecting to see starting this Wednesday? So there's three...

areas of focus with the earnings this week? First is the regulatory outlook. Second is the earnings impact of the macroeconomic outlook. And finally, what is the outlook for the capital markets momentum? And while the regulatory outlook is the most important structurally, we expect that we're going to get the least amount of new or helpful information on that front, while we expect the banks to

probably provide the most bullish information on the latter point, the capital markets momentum. And so let's take each of these in turn. To begin with, the big six banks are up 15 to 25 percent in the past few months, and that's largely fueled by sentiment. Estimates are up. They're up about two to two and a half percent.

for 2025. So some of it is the better capital markets outlook, as well as the economic and monetary policy outlook. But it really is, I think, the structural regulatory optimism that's boosting these banks.

From our standpoint, we do expect relief in the form of lesser new regulation in the coming years. We also expect relief from a watered down and perhaps pushed out Basel III rules, as well as antitrust scrutiny lessening under Trump. But we think that specific issues like Wells Fargo's asset cap

This is something that we don't expect to see a political benefit to. The bank is working through its issues and it has to show specific progress against sort of a set plan for the bank. And they still have some work to do. So are you expecting these regulatory changes to start on day one of the new administration?

We are not. And in fact, our view is really just that we're going to get less new regulation. So it's not going to be anything that we see day one or in the near term. And in fact, our view is just that things like Basel III could get pushed out further. And that's

really the benefit. Similarly, with antitrust scrutiny, it's really just that we'll see less action, not necessarily new or immediate action. And so turning to the economy and monetary policy, we expect that charge-offs tick up, but

but in general client trends are healthy and we think the outlook for both net interest income and charge-offs are supportive for profitability for 2025. Of course, CARD will continue to lead on loan growth and because fourth quarter trends tend to be the seasonally strongest quarter for that business, we'll have lots of positive commentary there. And so it's really those equity fees where we may see a sequential increase

We also think that we may see an increase in the M&A fees. That's an area that we are bullish on for 2025, not only because of the antitrust scrutiny, but we do think that getting past the election and in this current interest rate cycle that

there is a little bit more, there is a little bit better sentiment among CEOs and that will help to fuel some activity. Let me then ask you about the Federal Reserve signaling fewer rate cuts this year. And after this Friday's jobs report, it looks like a lot of Wall Street is betting on the next rate cut, not until October now.

What will that mean to growth and revenue at these lenders? So for the net interest income, we do expect to see stabilization this quarter. And then given where the curve has moved and expectations for the forward curve has moved, we could get more positive news on that front. In particular, we're looking to JP Morgan, who has sort of returned to this positive cycle of growth.

be in raise estimates have been rising into the earnings for that bank following bullish guidance in December. But still, there could be some room, we think, for them to be in raise again. And net interest income guidance is a focus for that bank. But really, for JP Morgan, what we're looking for is to see continued leadership in their overall profitability

just helped by the execution at that bank, as well as some of their leadership positions. Our thanks to Alison Williams, Bloomberg Intelligence Senior Analyst, Global Banks and Asset Managers. Coming up on Bloomberg Daybreak Weekend, we'll focus on a UK asset slump and what may come next. 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, we'll break down what lies ahead after President Biden's decision to block Nippon Steel's acquisition of U.S. Steel. But first, back in 2022, the U.K.'s gilt market was plunged into crisis sparked by the now infamous mini-budget of then U.K. Prime Minister Liz Truss.

Now, two years on, investors are concerned the country could be on course for another collision with the markets. Can the government assuage their concerns? For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Tom, we have seen a tumultuous week in UK bond markets. Over the past few days, long-term UK borrowing costs have soared and the pound has fallen. A rare

combination that can signal investors have lost faith in the government's ability to keep a lid on the national debt and control inflation. The current surge in debt costs also threatens to wipe out Chancellor Rachel Reeves' slim £9.9 billion buffer against her budget rules and to create instability ahead of an official fiscal update on the 26th of March.

For investors, it all makes for a precarious state of affairs. Averson Wye, a fund manager at M&G Investments, says that investors are concerned. I think what's looking different in the UK is that they have very little policy room to move. We know that borrowing is near record highs and we know that taxation is near record highs. And so it's very much a situation of

the Labour Party needing to be a bit creative in terms of where they get this extra revenue from. And looking at valuations over the last day or so, we are pricing in very similar levels to what we saw in 2022 and a trust backdrop. And of course, that was driven by unfunded tax cuts and more fiscal recklessness. But now we're looking at potential austerity. So we are looking at very different backdrops, but very similar guilt pricing.

That was Ava Sun Wai from M&G Investments speaking to me and Stephen Carroll on Bloomberg Radio. The government has offered reassurances, the Chief Secretary to the Treasury, Darren Jones, pointing out that UK gilt markets continue to function in an orderly way. And Bloomberg reporting that Rachel Reeves will prioritise public spending cuts over any tax increases if it indeed comes to that.

But the fate of the UK's debt market is something I've been discussing in more detail with Bloomberg's chief UK economist, Dan Hanson, ahead of fresh inflation data coming in the next few days. There's been an awful lot going on, hasn't there? And I think really the driver of all, well, there are two drivers, really. One is global inflation concerns and inflation.

you know, in deep integrated global markets, the UK is a small player. So what happens in the US matters for the UK. So, you know, we import a lot of what goes on in US markets, particularly in the gilt market. So that's the first thing. The second thing I think is that there is this ongoing concerns, I think is the right word, about the UK's fiscal position coming out of the budget on October the 30th last year.

um and the uncertainty about what chancellor of the east jecker rachel reeves will will do about it with a in the what is being called the spring forecast which is on march the 26th um reeves has been quite adamant at least up till now that there will only be one fiscal event per year and that or one event where spending and taxes are changed i should say um

And the hope was, at least Labour's hope or the government's hope, was that they wouldn't have to make any changes to fiscal policy at the upcoming statement. As things stand, it looks like they will have to make some changes. So there's been an awful lot going on, but it keeps us busy. So I think the key thing and the most interesting thing, at least for us, has been the shift in the expectations around borrowing costs in the UK. Yes.

Yeah, and so this is the gilt markets. Also, though, to pick you up on that point around inflation, we do get inflation data out in the days ahead. How are we thinking about the stickiness of inflation here in the UK and therefore what the Bank of England has to do? Yeah, so I mean, I don't think it's going to tell us anything we didn't already know. I think it's...

If you put the numbers together, we're looking for a modest rise from 2.6 to 2.7. I could see it coming in at 2.6 as well. If you really want to get into the minutiae of the numbers, there are a lot of volatile categories that can affect the CPI in December, one of which is the price of air travel. A lot depends on when the ONS collects the data. So there's a bit of uncertainty around the number, but the big picture, as you've rightly said there,

is that it will continue to signal sticky inflation. A 2.6 print or a 2.7 print would be above the Bank of England's expectation that it had in its November forecast.

So bringing it all together, it's going to continue, I think, to just sort of support the view that the UK has this special inflation problem, but has got a persistent or sticky inflation problem. And if you look at the outlook for this year, it's unlikely that inflation is going to drop much below where we are now. It's probably going to oscillate somewhere between where we are now and three or perhaps a touch above it. So we're going to be in that range, which clearly isn't 2%.

And therefore, interest rates in the UK may remain higher for longer and therefore the pressure on the government and government finances would remain. In terms of what the Chancellor needs to do, needs to say, what would convince investors? What do you think markets want to hear right now? Well, I think the answer, I mean, this problem is, going back to the answer to my first question there,

There's a global element to it, which is very hard to fight. It's very hard to do something about that. But there is a UK specific bit of it as well. And that stems predominantly from concerns about fiscal policy. So the remedy has to be around fiscal policy. And the question is, how do you rein in borrowing? And there are two ways of doing that. One is you raise taxes. The other is you cut spending taxes.

And it sounds like the noise is coming from the government, at least. It sounds like cutting spending is going to be the way the government goes to bring things back, sort of steady the ship, if you like, to put it. Because at least when you think about the budget and the backlash to the rise in taxes that we had, it seems very unlikely to me.

that they will raise tax further because of the backlash to the rise in payroll tax that we had, and also because of the manifesto or commitments that were made during the election that income tax

employee national insurance, not employer national insurance, employee national insurance, corporation tax, value added tax, none of those things will rise and they account for upwards of 70% of the tax take. So it's very difficult to see how they would go near the tax base again. It feels like they'll go for spending cuts. What are the risks of stagflation for the UK? I think they are in the near term, we're sort of

Back where we were in this 2022-2023 period, obviously the inflation picture is completely different. We had 11% inflation in the UK. I know we're above target, but it's very different at 2.6% compared to 11.1%, which was the peak. So that's the first point. But on the other side of the stagflation story...

the jobs market does look like it's loosening now, and by... well, it's looser, certainly, than it was in 2022, 2023, and it is loosening. You know, the Bank of England said at its December meeting that the labour market is in balance, so sort of any further loosening from here means there's spare capacity in the labour market, unemployment is rising. That presents a really difficult trade-off for the bank, because you've got this inflation picture, you've got this potentially weakening labour market,

And the bank is charged with targeting inflation. It doesn't have a dual mandate like the Fed, so it can't lean on one side of another side or the second part of the mandate, if you like.

So I think it's going to be a difficult period for the bank. My thanks to Bloomberg's Dan Hanson, our chief UK economist. Well, while Rachel Reeves and the government grapple with their response, the Chancellor may not have much time as business leaders grow increasingly frustrated. Neil Carberry, the CEO of the Recruitment and Employment Confederation, says that patience is running thin in the wake of October's budget changes.

Well, look, the fiscal position is really difficult and it looks really difficult going out year after year from here. The ability of the UK to do long-term economic policy making is what's at issue here. I think this government coming to power has tried to move more in that direction. As you say, there's a long run to judge it, but I think we need to see more of the tough choices fronted up in the open rather than pushed into the background.

We mentioned that your survey is scrutinized by the Bank of England.

How much of a headwind are interest rates at this point? What are you hearing from your members about traders' expectations that the BOE is not going to go nearly as far as some had expected at least three, six months ago? Well, we watch this really closely because a bit of a foible of the way the temporary labour market works is, you know, if I place someone as an agency as a temporary worker, I pay them this week, but I get paid in a month or three months' time. So, effectively, I'm acting as a short-term bank employee.

for clients and clearly therefore temporary labour supply is a lot more expensive now than it was five years ago. We definitely think that the capacity of the temporary labour market to supply and to meet the needs where companies may be sitting back a bit and going permanent, not confident about creating permanent jobs is being affected by

by cost of capital. And we think that's happening on investment decisions inside client businesses as well. What do you really think that the government has to say this week to people like you, to the businesses that you speak to? I think there has to be a real opening up on the next year to 18 months. What are you asking your business and how are we moderating that? Because if you look at things like the Employment Rights Bill,

That's coming up time and again as a potential threat in our world, in the labour market, and yet it's unformed at the moment. We need government to give commitments to things like protecting the gig economy and flexible labour in the zero-hours contract rules, because right now a lot of firms are saying, well, I'm not hiring permanently because I don't have the confidence, and I'm now not hiring temporary because I don't know what happens in that world after the bill.

Neil, how does it break down in terms of sector by sector, industry by industry? You're pointing to the challenges and the softness now, the weakness in the labour market. Where is that most acutely felt? So we've seen a really tough, long period for construction. Actually, the trend in construction, while still negative, is slightly better now than...

than last year. It's usually quite a good sign in terms of leading indicator on the economy. I thought there was a shortage of construction workers. Indeed. And then the only areas where we're seeing vacancies growing at the moment are marginally in hospitality.

and then particularly in what we'd call blue-collar light industrial logistics. And if you think about that sector, that's a real area of shortage. That was Neil Carberry from the Recruitment and Employment Confederation speaking to me on Bloomberg Radio. The UK has been among the hardest hit by the rout in global bond markets. We'll continue to follow investor concerns and the speeches planned by the Chancellor in the coming week.

I'm Caroline Hepka here in London. You can catch us every weekday morning for Bloomberg Daybreak Europe, beginning at 6 a.m. in London. That's 1 a.m. on Wall Street. Tom. Thanks, Caroline. And coming up on Bloomberg Daybreak Weekend, we'll look at what lies ahead after President Biden's decision to block Nippon Steel's acquisition of U.S. Steel. 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. With President-elect Trump set to take office in a little more than a week and tariffs at top of mind, what's the outlook for China's biggest automaker? Let's get to Doug Krisner, host of the Daybreak Asia podcast, for more.

Tom, 2025 may be the year the Chinese carmaker BYD becomes the dominant player in the global market for electric vehicles. Already, BYD has nearly overtaken Tesla to become the world's largest seller of EVs. For a closer look now, I'm joined by Danny Lee, who covers the Asia EV space for Bloomberg News. Danny joins us from our studios in Hong Kong. It's always great to have the chance to visit with you. You're so...

plugged in, so to speak, in the EV environment in Asia. We can talk about the BYD story in a moment, but can we begin with kind of getting the big picture on the EV market in China? How competitive are things right now? The landscape is really quite cutthroat, and we've seen that play out over the last couple of years with price cuts being dished out.

across the marketplace and every carmaker has been forced into a position because of the best-selling carmaker BYD. But there is a real sense that if you're not cutting prices, you are going to sink very, very quickly. And given the fight for what little market share there is because of the dominance of BYD, everyone's fighting for a smaller amount of

that buyers are going to drive. And ultimately, those who lose out are going out of business. And we've seen a few failures in 2024 as a result of this squeeze on the market because we see more drivers gravitating towards the more popular vehicles

EV brands out there, whether it be a BYD to a Zika to a Zhili. These are all moves being done to try and consolidate positions in the marketplace. And we see the more successful EV brands coming to the fore now. And ones that are coming to the fore in China are actually starting to have an impact at

outside of China and that's where the worry extends to because of the success of the Chinese EV space overall. So when you talk about consolidation, is that really a euphemism for saying there are fewer participants in the market right now, fewer companies manufacturing or are we actually seeing kind of merger and acquisition activity?

We are largely seeing more of a consolidation through the failures. Where we do see, though, the effective M&A activity is where the biggest losers have ultimately been the foreign auto brands, where we've seen Volkswagen lose more and more share. We've seen General Motors also sink quite significantly over recent quarters.

And even Stellantis, who has pulled back on the China market of late, but then decided to do a deal just like Volkswagen. They're all looking for deals with Chinese EV partners, particularly ones who have a limited track record in terms of their history. But because of what cars they can produce with the technology and the offering that is so attractive to Chinese consumers.

We've seen a lot of M&A worth billions. And so this is where we've seen this consolidation or gravitation towards foreign automakers trying to partner up because if you can't beat them, you join them. And so this is where they feel their money is best put to work. So, Danny, what is the role of the government here? I know that there are a few trade-in programs which have been vital to building out the market.

Is that just the way that business is done? You accept the fact that the government's going to continue to support these manufacturers? The view is from the industry that

They do want to see some government support for the consumer to encourage cars to be bought, electric cars specifically. And given the investment being made by these Chinese automakers, billions has been spent over a multi-year period. There is just an anxiety that if consumers start to wane on EV purchases, which would be hard to think given that we are seeing monthly sales of EVs

compared to overall sales hitting over 50%. Now, if any slippage does come, that would have a negative effect on the overall sector. But China sees the overall benefits of supporting sales to ensure that there is healthy competition and a strong marketplace because

Ultimately, that extends to the carmakers in China benefiting and they can translate that success globally. I was looking at your year ahead for the EV space in China. You can see it on the Bloomberg terminal. And one line that struck me is that BYD essentially remains the brand to beat. What makes BYD so special?

Well, BYD has always been able to use its financial might year after year now to continually be ahead and to set the agenda, particularly when it comes to prices. But because its car lineup is so affordable and they have so many models and variants, we are talking prices.

in excess of 170, 180, even more now, potentially up to 200. So whatever the price point, the choice, the kind of power you want or capability of vehicle, BYD is covered at every price range possible, frankly, and for many vehicle types, now that it also includes a supercar and a pickup truck.

So it has anything for everyone and it's that kind of proliferation which means it can be all things to all consumers and that's where other car making brands are having to catch up. So we've been talking really about the domestic market in China and I'm curious for the entire EV industry in China how critical it is that these companies begin to develop markets offshore in foreign jurisdictions.

Well, for EV companies and for auto companies by and large, there has been a push to drive sales in any way possible. Because of the way in which the domestic Chinese sector has been so cutthroat, you know that by selling abroad, you can attract customers.

bigger margins, significantly bigger margins in some cases. And so we have seen many Chinese carmakers go abroad as far as Brazil to Mexico, Southeast Asia has been a big, a big kind of melting pot of activity. So it is important that you diversify. And BYD has understood that in a way in which it has rapidly expanded

to well over 100 countries by this point in the past three years or so. And so it's important to have some balance so you're not reliant on the Chinese domestic market overall because maybe one day those subsidies will have to be weaned off and sales can't keep growing forever, although there is a good kind of momentum for the next several years to come.

Danny, thank you so much for spending the time to enlighten us on the Chinese EV space. And you can read Danny's piece on the Bloomberg Terminal, Chinese EV Makers 2025 Goals Belie Tough Year Ahead. He's Danny Lee. He covers the Asia EV space for Bloomberg News.

And now we turn to a spat in U.S.-Japanese relations. President Biden blocking Nippon Steel's deal to acquire its American rival, U.S. Steel. Now, Nippon says at this point it's not considering alternative plans to the takeover. And yes, both companies have filed lawsuits to rescue their merger. So should we assume this deal is dead?

Well, let's take a closer look at the state of affairs in the saga. I'm joined now by Gerold Reedy. He is Bloomberg opinion columnist joining us from our studios in Tokyo. Thanks for making time to chat with us. Let's begin with your understanding of Biden's rationale for blocking the transaction.

First of all, do you understand it? Does it make sense? The rationale absolutely does not make sense. And I think that is the most difficult to understand part about this deal. You know, we knew that Biden opposed the deal. We knew that this decision was likely coming.

But I think what was shocking here was to see it put, you know, so starkly in writing that, you know, the wording of Biden's executive order, that he has credible evidence that Nippon Steel might take action that threatens to impair the national security of the U.S. You know, we're talking about a Japanese company. Japan is, you know, the U.S.'s

I think it's most important ally at this point in time. And obviously, you know, it's security. The U.S. is Japan's security guarantor. To say that a company based in Japan presents a national security threat to the U.S. just doesn't make any sense at all.

I find it particularly interesting because from what I read, many people who advise President Biden were actually in favor of this deal and they wanted him to kind of give his blessing, to give his approval. At the end of the day, we know he blocked it. And I'm wondering whether some of this had to do with the fact that Biden would like to be seen in his legacy as a pro-labor president. Do you think that's plausible? That obviously seems to be, you know, the main factor. And

And to a certain extent, that's understandable from Biden's point of view to say that there obviously are political considerations for him in this matter. As you say, the reporting behind the scenes seems to indicate that the people who are in charge of deciding whether it represents a national security threat or not came down on the side of that it wasn't. And indeed, we're trying to persuade Biden to go back on this deal.

Because, obviously, it is, as I described it, is a slap in the face of one of the U.S.'s most important allies. So how is it being read in Japan right now? What is the Japanese press saying about this? I think it is, as I say, interesting.

The fact that it was coming was expected. I don't think anyone really expected this deal to go through. I think in Japan as well, you know, as well as in everywhere, really, it is a little bit of a matter of, well, we'll wait and see. President Biden only has a couple more weeks in office and then we're going to have somebody else in the White House. So I think there is a little bit of an attitude of like, well...

let's see what happens for now. Obviously, President-elect Trump has also said that he has opposed the deal, but it wouldn't be surprising or it wouldn't be the first time, shall we say, if he went back and did the opposite of something that he had previously said. So I think there is a little bit of a let's wait and see what happens in a couple of weeks and then we'll decide. What do you think failure of this deal, let's assume for a moment that it does not get done, what does it mean for U.S.-Japan relations?

I think it will have consequences, not just necessarily the failure of this deal, but the way that it is presented. There are already, you know, we are in a bit of a different mode in...

you know, not just in Japan, but in Asia in general at the moment, especially with, you know, Trump coming back to the White House, potential, you know, new leader in South Korea in the next couple of months. And also we have in Japan, we have Prime Minister Ishiba, who is he takes a different look at regional security in Japan's place in Asia and Japan's place, you know,

vis-a-vis the U.S. to many of his predecessors. And I think especially compared to his predecessor, Kishida, and obviously to Shinzo Abe, I think this will be a black mark on U.S.-Japan relations going forward, just the way that it's described today.

I don't know if this deal in and of itself will have, you know, massive consequences. Gerold, it's always a pleasure. Thanks for making time to chat with us. He is Gerold Reedy, Bloomberg Opinion columnist, joining us from Tokyo. I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast. Tom?

Thanks, 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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