Transcripts For BLOOMBERG Bloomberg 20240704

Breath. Reports about the scrapping yield curve control along with buying of etfs and all with rate hike potentially. Lets look at how markets and japan are faring. You get the sense regardless of the normalization of policy, markets believe the nikkei can run higher. The fundamentals are intact amid all this Corporate Governance improvement. We saw it decline in the morning session but it did close 2. 7 higher just yesterday. We see in the options market, for example, the contracts for the strike price above the 41,000 level. Those were actively traded. Regardless of the normalization we see today, we still need to see negative real rates persist. That will mean yields will take a while to climb in japan. Between the u. S. And japan, given the yield gap, that will put pressure on the yen. The yen has been well behaved. You feel the sense that the feds move will matter more for this currency pair. Lets take a look at how it has been faring since the past four months. Based on the implied volatility, it has been very tame. We saw the meeting in december and january where that moved a little, but that has been picking up. We will be honing in on the boj today. Haslinda it is about the boj but it is not the only game in town. It is also about the rba. Avril how can we forget . The reserve bank of australia. Hold is expected, but some pockets of the market believe it could soften the hawkish buyers, because of slightly looser labor market along with inflation easing. You can see on bonds, in the equity space, we are seeing markets in waitandsee mode regardless, we could see further pressure on the currency. The aussie. As we see the chinese economic weakness come through, it is under pressure given the slump in iron ore prices. That is where we are seeing cross assets in australia. What else in the asiapacific we are seeing, watching nvidia unveiling the ai processor. It more or less underwhelmed or failed to excite markets. The Semiconductor Stocks in the asiapacific, slumping. Chinese Developers Come on watch. News lines from evergrande accused of inflating its revenue so that is what we are seeing at the moment in the markets. Haslinda thank you so much for that. Lets get to where the action is. For the latest on the boj Rate Decision, Stephen Engle is at the Central Bank Headquarters in tokyo. We have been waiting for this. It is expected to be the first move since 2007. Stephen thats right. We will be waiting and we are waiting on the bloomberg terminal on our phones, waiting for headlines to cross. The policy statement from the bank of japan, the headquarters behind me, our last guest in the last hour told me it might be a little later than usual this time because of the widely reported changes to the negative Interest Rate policy as well as the reported scrapping of the yield curve control, as well as the scrapping of future purchases of etfs. There is a lot to go through. It may take more time. We are waiting here to hear that. This is a momentous occasion for Japanese Monetary policy. The first time a hike from the boj has come in 17 years at the end of an era of obviously negative rates. The questions Going Forward, what will be the post why sisi ycc policy on bond purchases . What will happen with Current Holdings of etfs . Lots of questions, although so much of this is baked in given the fact that there were those proprietary stories from the nikkei not only yesterday, but early this morning at 2 00 a. M. A lot is baked in but there are many questions. We will hear from the governor at the 30 local time. 3 30 local time. Haslinda how much clarity are we expecting today . Stephen interesting question. He still wants to show he has an accommodative stance and will not tighten too quickly. We dont expect any type of clarity from the governor on future rate hikes. Will it be one and done . We are not sure. Our last guest essentially said yes, it should be one and done but i doubt whether the governor will be basically telegraphing that. There is also the risk as well of being too dovish, because if he is, that could underline or undermine the conviction to a and negative Interest Rates. There is lots and lots of things , and a balancing act the governor needs to have today. Lets talk more about this with our guest. You were here with us in january. We thought it was going to be april. Was that the Wage Negotiations that pushed it over the edge to say it will be now, mark . Yes. The Wage Negotiations, the number came out last friday. That was 5. 3 , surprisingly strong. Forecasts were 4 . Last year it was 3. 6 , higher than those numbers. I think the boj will be convinced it is not the time to move. Stephen you are the former assistant governor of the bank of japan. How much of a struggle has this been over the last six weeks or so between the last meeting and now to make this decision . Kazuo i think watching the negotiation numbers, the atmosphere of society around the policy decisions potentially taking taken by the boj, they have to convince the general public how to the general public and politicians. This is the time for the boj to have enough information to be convinced that this is the right time to do that. Stephen you believe it is and will be one undone, there wont be more hikes the rest of the year. Kazuo depends on the wages Going Forward. Given the current we observed, it is hard for me to have a lot of subsequent hikes this year. At the most, one hike would be all we get for the rest of the year. Possibly there is no hike at all. It is still possible scenario. Haslinda if it does have one undone, if it is one and done, what impact might that have on financial conditions . Kazuo financial conditions, they will not change much because of the overhaul of the divisions. And the market framework. The boj carefully paved the way for todays decision so even though scrapping etfs and everything else, the existing condition has not changed so much. Haslinda after what we see today, what further steps are needed for policy normalization . What are we expected to see from the boj . Kazuo obviously Monetary Policy everywhere in the world is aiming for price stability. In the context of boj, 2 deflation would be the first, most important question. So far i have been seeing a little bit short of 2 with pressure. I think the boj will continue carefully assessing what will take place, particularly wage hikes is already enough. How do wage hikes translate into the broader boj will look at for the next few months . I think that will be a key question. Probably we will have a more comprehensive picture and information. Stephen how much of a delicate balancing act does the governor have to have in the press conference at 3 30 . Doesnt want to be too dovish that it undermines essentially the conviction to exit negative Interest Rates but he doesnt want to be too hawkish. Maybe the fundamentals of the economy are not there. Kazuo exactly. I think he has to take into consideration the current financial conditions. It doesnt make a lot of difference to that. If he is too dovish, that could weaken the yen further. If he is too bullish that could raise pressure on Interest Rates. I think he will have to balance these conditions. It is a hard task. Stephen why hasnt the yen appreciated much . Hasnt moved at all. It is staying fairly we got one 49 fairly we at 149. Kazuo you have to look at the Federal Reserve story. We are expecting rate cuts this year. That would be important element compared to that situation, the Federal Reserve. Haslinda how do you think the boj views the weakness of the currency . Kazuo for the last 12 years, weakening of the currency has been unpopular among the publics of the boj doesnt want the yen to depreciate much further. The boj knows they cant control the yen. So they will try to walk the tightrope in terms of the impact on the exchange rates. There will be challenges arising in terms of communication. Stephen mommasan, if we assume they will scrap the yield curve control, what is a post ycc Balance Sheet policy look like . Kazuo from the boj officials, the discontinuity of financial conditions including Interest Rates. The boj buying ggp regardless of the scrapping of ycc, it will be the same as they have been doing so i think they will keep holding some ggp ggp. I think it will be around the same for the time being. The investment policy is part of the decision. Stephen thank you so much. Stay here because we havent gotten the decision yet. We will be coming back to mommasan as soon as we get the decision from the boj. It could be a little longer than usual but we will be here waiting. Haslinda no stranger to the weight. Former bank of Japan Assistant manager minister. You can turn to the terminal for more boj coverage. Get commentary and analysis from bloombergs expert editors. Still ahead, Market Analysis with federal capital. Why they think easy money has been made in japanese risk assets. First, the rba looks to extend its rate close for a Third Straight meeting. We will look at what to watch and policymakers comments. Here is one big interview we want to tell you about. We will be speaking exclusively with president of the philippines ferdinand marcos, jr. About rising tensions in the South China Sea and the countrys delayed southern sovereign wealth fund. Keep it here with us. This is bloomberg. Thanks to avalara, we can calculate sales tax automatically. Avalarahhhhhh what if tax rates change . Ahhhhhh filing sales tax returns . Ahhhhhh business license guidance . Ahhhhhh crossborder sales . Ahhhhhh item classification . Ahhhhhh does it connect with acc. . Ahhhhhh ahhhhhh ahhhhhh [alarm beeping] amelia, turn off alarm. Amelia, weather. 70 degrees and sunny today. Amelia, unlock the door. Im afraid i cant do that, jen. Why not . Did you forget something . My protein shake. The future isnt scary, not investing in it is. Youre so dramatic amelia. Bye jen. 100 innovative companies, one etf. Before investing, carefully read and consider Fund Investment objectives, risks, charges expenses and more in prospectus at invesco. Com. Haslinda im back to Bloomberg Markets asia. Awaiting the boj decision. Will they make a move . Ueda proposing changes to policy and the days leading up to today, we have heard from a lot of media and japan proposing the change is coming at this meeting. Lets get insights and bring in paul allen. Lets start with the boj. Reports suggest changes coming. Change had better becoming if they dont want to set off some strong market reactions. It has been so well flagged. Will they drop yield curve control today as well as getting rid of negative rates . How do they manage the yield curve control . All of that becomes more important, you would think, then the negative rates side of things. Especially providing they make it clear that as they have flagged before, one rate hike doesnt mean there are more to follow in the near future. That is the scenario that the markets have been expecting and what has helped drive up stocks, keep the yen contained and also, japanese bonds trading without too many eruptions. I would be surprised if they dont deliver something along those lines. Surprised the boe surprise and the boj often go handinhand. Haslinda it is so well flagged, yet some are bracing for some kind of madness. What could go wrong to cause market eruptions . Garfield getting at the statement first, the governors appearance aside, in a statement, do they do enough to make it clear what their plans are Going Forward . Have they provided a straightforward yes, we have negative rates . Maybe they are moving towards 00. 1 for the shortterm rate. What are they doing with the yield curve control . Is it something simple which outlines, yes, we no longer have a yield target of any sort, but we will continue to buy bonds in the market in order to avoid wild fluctuations, to prevent moods getting divorced from reality or Something Like that . If they simply get rid of negative rates and leave Something Like yield curve control, getting out of that will be studied, likely to be studied in coming meetings without giving too much in the way of guidance, that is the sort of thing that could set off very strong moves in the yen initially, because probably if they get the decision out in time, bond futures wont be trading, let alone cash bonds. But we will see. That is one of the other difficulties. Because they are taking their time with the decision, they could come out after the lunchtime break is finished or close to when it finishes. That has traditionally helped, adds a disruption in markets on the day. Haslinda all, paul, it is also decision day for the rba. It is about the messaging. Paul that is right. We arent expecting a move unlike the bank of japan but we are expecting the rhetoric, in the minutes of the last meeting we heard a rate increase was on the table for the reserve bank of australia. But they didnt wind up going down that path. It did illustrate what priority inflation is for the rba and that was reflected in their decision at the last meeting. In a statement, inflation is a priority, right now 4. 1 but the number in january, the monthly indicator was 3. 4 so it is at least heading in the right direction. Still outside the reserve bank target. Other things to watch around inflation, or unemployment also coming in a bit higher hotter than usual in january. The conversation around the possibility of a technical recession and australia is a live one. That will be something for the rba to consider. As for the decision, no change, 4. 35 percent but the language will be important. Haslinda it is still tricky for the rba. It is stuck between the boj and the fed. Garfield sorry. Can you repeat the question . Haslinda this is tricky for the rba, it is stuck between the boj and the fed. Garfield you mean the rba is stuck as well because its economy is actually performing worse than a lot of other economies. There is that pressure towards may be, they have done enough on the rate hike front, but then come on the other things, they dont really want to go down that path until they are clear the fed will go down that path because of the potential impact on the currency. So to some extent, the rba may actually be happy with the fed and the boj taking so much of the focus right now on the other hand, precisely because of that, their hands are kind of tied. They are definitely stock stuck with a very difficult art if they want to shift policy. By the same token, beating stuck on the policy front means the extra focus on what they say, they could readily Say Something that is interpreted as signaling they are more dovish than they intend to be, especially if that is compared with what is going on with the fed. Haslinda paul and garfield reynolds, thank you for your insights. The rba, said with its decision at the bottom of the hour. Boj meantime, we are still waiting. Just a tad higher versus the u. S. Dollar. Plenty more ahead. Keep it with us. This is bloomberg. Haslinda a big day for markets. Expecting the boj with its decision any time now. The rba set to come up with the decision at the bottom of the hour. Asian equities slipping before those decisions, in particular that of the boj where authorities are likely to bring an end to the worlds longest negative rates regime. It is trading lower for the nikkei 225. The yen, a tad higher versus the u. S. Dollar. A trillion dollar plenty more ahead with the rba decision minutes away. Keep it here with us. This is bloomberg. No matter what youre up against, we have your back. We are united way. We are neighbors helping neighbors in communities around the when disaster strikes we get you back on your feet. We help children build brighter. Weve been here for over 135 s but now our work is more. Join us. Join your neighbors. Join united way. Haslinda we are awaiting the rba Rate Decision due just moments. We are expecting the rba to stand pat for a third meeting. It is expected to keep rates at a 12 year high as australias economy shows signs of slowing further. Unemployment also trending higher. The Property Market remains pretty hot. It is expected to, up with a pretty hawkish tone. Some expecting a slight tightening bias. Recent data has been consistent with progress towards the rba target. All of this against a black door up a backdrop of sticky inflation in the u. S. We are awaiting the fed decision. Powell and friends have said they are not in a hurry to cut rates anytime soon. Taking a look at where we are in terms of how the index is doing, currently up by about zero. 1 . The aussie dollar at 65. 59 versus usd. We are waiting for the rba Rate Decision. Expectations are it will stand pad for a third eating in a row, on the back of the economy sharing signs showing signs of some weakness. A hawkish tone is expected from the rba on the back of the pretty hot property sector. Paul, lets get your take on what is happening and what is expected from the rba. No change, which is no surprise. The cash rate stays at 4. 53 for a Third Straight meeting, a 12 year high. Now the tricky part begins, picking through the statement to figure out where we are heading next. Here are some of the highlights from the statement. The board of resolute and determination to get cpi back to target, echoing some of the remarks we saw at the last decision, that inflation remains a priority for the rba, running at 4. 1 at the moment. But the monthly january figure was down to 3. 4 . It is heading in the right direction. The rba also saying, to that point, inflation continues to moderate but remains high. The wage growth level is consistent with the inflation target as well. Services inflation, however, remains elevated. Services inflation is moderating at a more gradual pace. Some words on household consumption, remaining particularly weak, something the rba expressed concern about at its last meeting also, that there was some uncertainties around household consumption. Take a look at how the market is responding. We are seeing modest gains on the asx. It has been a pretty quiet day there. As for the aussie dollar, we are seeing not a great deal of change, which suggests this has gone along the lines the market was expecting it to. Haslinda thats right, but what are some of the biggest concerns of the rba right now, paul . Paul there is the question of where they go next. It was not until we got the minutes that it was revealed the hawkish bias was in place. Now we just have a reiteration of the language that inflation does remain a priority. There are risks here too. We heard commentary earlier today that, look, if the rba is seen to be too dovish, that could counterproductive because we would see speculators returned to the markets, assets would get bit up. Of particular concern was the housing markets in australia. Still pretty hot. Australian property still very expensive. If there is any hint Interest Rates might be coming down, that could fuel a stampede back into the Property Market. We could see rents rising again. That would stoke inflation. And all this hard work the rba had done up until this point, getting inflation under control, could be put at risk. That might be some of the reasoning we are seeing behind this hawkish rhetoric. As for what is next, we might learn more in just under an hours time, because the reserve bank of us really a holds press conference is now after its of australia holds press conferences now after its decisions. There will be an opportunity for the media to have questions as well. The next Rate Decision is not going to be until may. We will not have anything until april. May the seventh will be the next time we get something from the reserve bank. A week after that, it is the budget. We might be getting stimulation from the fiscal side as well. Haslinda lots for markets to mull over. Tanks for that update. Lets take a look at how markets are faring with her colleague in singapore. Yeah, we are taking a look at aussie dollar, but also what we are seeing in stocks and bonds down under. It looks like a bit of a pickup on the back of that hold from the rba. Flip the board. We want to take a look at a gauge of the risk sentiment. We are seeing the aussie versus the yen. That has been climbing. Something to keep an eye on as we are keeping the lookout for what could get from the income japan from the bank of japan. We have Japanese Equities back from the lunch break, and that statement or report from nhk about how governor wait a is handling that we can policy. We see the nikkei still in negative territory. Is that countdown on to what we get from the Japanese Central bank . Haslinda avril, thank you for that update. To get inside perspective, our next guest says the easy money has already been made in japanese assets. Lets bring in hams i you hamza ayub, head of farro capital. Lets take a look at how the boj lets get you on the very latest. Give me a moment while i drag in the headlines on the boj. We have the boj scrapping yield curve control, also set the yield policy rate to 0 to 0. 1 percent, in line with what markets have been expecting. The boj scrapping the yc see and has set policy rate at the 0 to 0. 1 range. Pretty much in line with what was expected by the markets. The yen weakening versus the dollar immediately after that, and the boj also says it will keep buying bonds. Just a recap of those headlines, the boj has done exactly what the market expected it to do, getting rid of ycc, also an exit from negative rates. Lets get insights with hamza ayub, for folio manager at farro capital. Portfolio manager at farro capital. Your thoughts on the move today. Hamza hi, haslinda. In short, we have not seen any major move from the boj, if i were to sum it up in one word. It is beating expectations overall. We are seeing that in the yen at this point in time. Overall, we still have to get in the weeds of the boj as to what they are going to talk about for forward guidance, whether they are going to change the inflation target, and what kind of communication we get from the boj. At this point in time, it is nothing too drastic overall. Haslinda you said the easy money has been made, so how do you continue to make money in japan . How do you play japan right now . Hamza what we are doing at this point, if you look at Japanese Equities over the last one or two years and we look at this drastic upside in Japanese Equities, mostly in yen, in dollar terms, they are probably in line with s p. We feel that here onwards, given the research and what we have seen in japanese valuations, and given we are at the point in time where things will normalizing japan also, the way to make money in japan is basically doing more bottom up. But we have been doing is obviously a longterm and demand. We continue to play that. Second is we do feel that a subset of those funds will be dividends in Japanese Equities, which will increase significantly over the next one to three years. Likely the market is underpricing that, so that is another way to play it. Those are some of the things we are looking at overall. We have seen your today more than 18 in Japanese Equities. Last one in local currency terms, huge returns. We have come to a point where everyone is now very positive in japan. It becomes a consensus stream. But now it is time to take a step back and look at the Bigger Picture and go more bottomup. Haslinda now that we have seen the move from the boj, are you expecting any repatriation, or is it going to be dripdrip . Hamza that is the elephant in the room. There is Interesting Research by the st. Louis fed about the overall Balance Sheet in japan. And the huge amount of carry trade. In some ways, the gross amount is around 20 trillion. We have japan is a net lender to the rest of the world. On the asset side, we have 50 in foreign securities, 4 trillion to 5 trillion. Which means that whether this will get undermined, at this point in time, many have6 [indiscernible] because we have not seen and the reason is normalization, gradually by the boj. We continue to expect the overall territory of the country to be in place. Hence there will also be gradualism by the bank of japan in terms of Monetary Policy. Haslinda comes up hamza, hang tight, we want to get to our colleague at bloomberg intelligence. Stephen, take a look at where the yen is right now. Unless my screen is wrong, it is pretty much unchanged from where it was this morning. Yeah, i think the result is actually in line with the nikkei story before the decision. They sort of hiked the policy rates to zero point 1 . They scrapped all the etf pressures. It is basically in line with the story. The markets are not too satisfied with that. Thats why you see the dollaryen moving. At the end of the day, the dollar yen is about u. S. And japan yield, still about the fed instead of the boj. The fed has hike rates by less than 25 points, but for the fed, it is still about when the fed is going to cut. If they cut, it is going to be 25, more than what the boj has hike. Going forward, posten kerry still matters, so unless the fed start cutting rates fast and furious, it will otherwise be hot for dollaryen to drop sustain us will drop sustainably haslinda . If you had drop sustainably. Haslinda where will the yield end in 2024 . Below 1. 46. Assuming the fed cut rates by three times or more than that, it is likely going to end right below 1. 40. Haslinda steven chu at bloomberg intelligence, thank you for your insights on the yen. Lets get back to our guest, comes up hamza. If youre still with us, time and time again, the boj has said it is not going to be consecutive rate hikes. How do you treat that . Hamza interesting question. At farro capital, we basically manage portfolios multiasset. The way we look at japan at this point in time is in the global scheme of things. We feel there were only three Market Movers right now when you look at Financial Markets globally. One is the u. S. We can come to that whether the fed will change or what kind of communication we will see from the fed. The second thing is china, how they are. Theres a lot of concern on the growth model. The third one is japan. The reason japan, again, the huge carry trade. It already has a positive International Investment position. A lot of this money from the carry trade goes into risk assets of other developed markets. Maybe the u. S. , maybe europe, and also some emfx currencies where there is huge territory going on. What this could do, if there is a bit of a risk due to the change in forwardlooking Monetary Policy in japan, and if this carry trade gets undermined, the kind of bidding it would have on global Financial Markets, and how do you protect your portfolios in that situation . That is the question, instead of looking at the other side of the coin and seeing how we can maybe play yen dollar or try to eke out small gains, i guess the elephant in the room is how do you protect your portfolios if something breaks on the Japanese Monetary policy side. That is the main thing we are worried about. Haslinda hamza ayub, thank you so much for your insights. Not all questions have been answered. Lets get back to Stephen Engle, who is at the Central Bank Headquarters in tokyo. He much what we anticipated. Why cc gone ycc gone, the end of negative rates as well. Stephen no surprises here. Hopefully will get more clarity at 4 30 when the governor addresses the media and will get more clarity on the post ycc Balance Sheet policies and the like. The exact hike of 10 basis points we expected. They are scrapping the yield curve control, and they are also going to pare back their purchase of etfs. That was all reported before. Also, they stated they are going to maintain a more accommodative stance on Monetary Policy. Lets bring back in our guest, who has been patiently standing by, former boj assistant governor. No surprises, right . No surprises today. Stephen what do you want to hear from the governor . Obviously how the boj is going to look on the indicators. And how it is translating into broader hikes. That will be the key indicator that we see in Monetary Policy Going Forward. The second thing is how and when the boj will consider its Balance Sheet. Today it indicates the Balance Sheet size will roughly remain the same because today we continue buying at the same amount they are now doing. Stephen so there is no tightening there. No tightening at all today. Stephen when they put out the statement that says essentially the expect accommodative financial conditions to remain, how do you read that . Its a very broad concept, because right now the Interest Rate is around zero and the official rate is 2 , more than 2 , which means that we still are in negative territory on real Interest Rates. Even with some of the Interest Rate hikes, we could be set with accommodative policy. But i think the code from the boj from that kind of expression , it is that we are not rushing in terms of Monetary Policy for the time being. So there is nothing in this statement that indicates there will be further tightening. Exactly. I think mr. Ueda will be asked about that this afternoon. He will probably retain ambiguity about what they are going to do. I think the boj will address the situation by saying they are keeping accommodative Monetary Policy conditions, but he does not say when or what. Stephen is ambiguity what we need right now, or do we want clarity, that we are in an Interest Rate hiking cycle . Given the situation of the level of the raised pressure on how it is going to transfer i think still ambiguity is something that has to hold. Stephen and inflation, they feel pretty confident it is going to stay above the 2 target. The statement says the cpi increase likely to be above 2 through fiscal year 2024. We dont have any more clarity beyond that. The wage increases were a good step forward, but again, the underlying weaknesses in the economy, is there not . A lot of that inflation was as well from the weak yen. A lot of retailers have Pricing Power in areas where there are a lot of tourists. Is as sustainable . Tourist account for only 1 of the whole gdp, and consumers are still very cautious about spending. Consumer spending has been in negative territory for the last three quarters. I think the boj would love to see a translation to strengthen Consumer Spending Going Forward. That would make the inflation more sustainable. Even though the boj is likely to have a 2 threshold 32025, 2026, actually, still i think the boj will have more evidence that they are really right about that. Stephen how significant is it that they have come through with what was reported, that they will no longer purchase etfs that have been in place since 2010 . It has been in place since 2010, but at the same time there was a big overhaul back in 2021. For the last three years, boj did not purchase etfs aggressively. As a matter of fact, as far as the rate is concerned, they did not edit it at all for the entire last year. I think the transition would be smooth. Stephen i think my colleague haslinda has a question. Haslinda im just wondering, is there a risk that we could see 2 inflation sooner than expected, and the boj finds itself behind the cuff . Kazuo i think that is a very good question. If the 2 threshold is sustainable, i think the boj will find itself soon behind the curve. But i think the truth is that the boj are still not sufficiently confident about the 2 . They say it is likely, but not really so. The boj will still have to ascertain whether the personal becomes sustainable in the broader sense. Haslinda how might be boj respond if it finds itself in that position . How might the boj respond if it finds itself in that position. Kazuo excuse me, i couldnt hear. Stephen what should the boj do if they find themselves in that position. Kazuo ok, the boj has to look at the indicators of the economy and prices very carefully. Of course, communication would be very important. Depending on how things come in japan, the boj has to start sometime this year, possibly talking to the people that are raising Interest Rates faster than many people are thinking now. Stephen what conditions are needed to start paring back the amount of purchases . They are keeping it consistent. I had a guest earlier today say there should be tightening there. Kazuo there are two arguments. One is that the boj should tighten much more in terms of price inflation. The other argument is that the purchase of jgb right now is distorting the market. That aspect is much more important. The boj is now conducting what is known as a review where they are reviewing the unintended consequences of the purchases on the market. I think on that front, the boj will come up with some kind of a solution soon. I think on that ground, boj will start reducing progressing by the end of this year. Stephen how significant is this decision and they statement we have gotten so far right now . It does not feel like they are going to be any kind of bazooka. It is not huge tightening. The market with the yen has not reacted tremendously. It is going to be the next steps Going Forward. I think this is a path we have been on a long time, the transition to a more normalized Monetary Policy easing. I think the boj is very careful moving forward, stepbystep. This is just one small step. This is still long growth boj is going to try for Going Forward. I think the communication among today, it is also very important. Stephen so you are there, you have a question for governor wait a governor ueda. What do you ask him . Kazuo no matter how you ask, i think he will come up with a very good answer. Stephen what do you think this decision today reflects as far as the Overall Health of the japanese economy right now . You basically with through a revision, avoided a technical recession, but still there is underlying weakness. The bojs feedback is a good thing, but at the same time, real economy growth is another thing. The real Economic Growth is still unique, and the productivity growth is a keyword for achieving higher growth. It is not really a boj policy, but the more broad Economic Policy may be driven by government. That is the key to drive that kind of momentum Going Forward. I think the board is now when the court with the government and the boj. Stephen a lot of people are looking at the yen. It stayed stable at about 149. I have not checked it in the last 10 minutes or so. Maybe haslinda could bring it up next. If the fed starts signaling that they are about to pivot to easing, how far can the yen potentially, given that we are now exiting negative rates here, how could potentially the yen strengthen . To what levels are we talking about . Kazuo there are a lot of variables we have to look at. The pace of the rate cutting of the fed, that affects how quickly the boj is going to normalize. Also, the underlying strength of japans economy is another key. It is difficult to say what is going to take place. But i think in the next two to three years, i think the next is probably higher yen, because i believe the Manufacturing Base is now restored or being restored in japan. I think people eventually realize japans competitiveness is actually getting stronger over the past 10 years. The deficit is going to shrink. I think that kind of situation combined with more normalized Monetary Policy bring us to the 130, 1 20 level within two or three years. Stephen 120 to 130 within two or three years. Haslinda has another question. Haslinda to follow up on the yen, what would it take to go to the 120 level in a shorter period than anticipated . Kazuo well, i think todays decision is already priced in, not just in the foreignexchange market but also the broader financial market. The boj does not have a reason to move the ends so much, so people are taking profit. Some internal dynamics might be taking place right now. What i do not think there is a clear reason why the bojs decision today is really impacting the foreignexchange market. If anything, i think the remarks by mr. Ueda this afternoon may be an interesting event we have to look at. Haslinda do you see 10year gps when do you see 10 year gg ps going to 2 . Haslinda when do you see 10 year yields on the jgbs . Kazuo that is an interesting question. It depends on the inflation Going Forward. If 2 inflation dynamics are firmly established in japan, i think the jgb 10 year yield will quickly move up to 2 . But inflation from 2 is a very big question. The boj and other economists, including me, have to carefully look at the price inflation. But we believe the target inflation is good for six months or so. After five or six months and it is established around 2 or more, i think the bond will quickly move up. Stephen i mention about the current rate of the japanese yen u. S. Dollars. It has weakened after this statement at 149. 69. Do we get back into the scenario where there could potentially be further weakening past 150, and then you were talking about intervention . What is the danger zone, the line of acceptability . Kazuo can we were at 149 point 60, 150 is in reach. If we are at 149. 60, 150 is in reach. At the same time, it does not trigger intervention at this moment, because only a few weeks ago we had already 152, said to the extent that the yen will raise gradually to 150 or 151, still, the governor of the boj is just watching the situation, how the situation is going to play out. If the yen quickly change, the government might consider intervention. If it goes to the 120 or 130 range, it weighs on profitability. The concern is the reverse. The yen could move up. Corporate could earn a lot of money. Thank you so much for extending your time outside the bank of japan. We got the Rate Decision, they are exiting policy, scrapping it yield curve control. We will get more clarity from the government. A momentous day. Exiting negative rates. We are focused on the fed making a decision on wednesday. It is expected to stand, but the messaging is whether or not we make the cuts and expectations. That is it from Bloomberg Markets asia. Next is daybreak middle east and africa. They will bring you the very latest. When it comes to the markets, trepidation ahead of the fed decision