Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20170607

President en and the may be on different paths next year. We have world coverage here on daybreak asia. We will be live in San Francisco later on to talk about the latest person to leave uber. Betty we are counting down to james comeys testimony, the former fbi director. We will have an update shortly. This is daybreak asia, live from bloombergs u. S. And asia headquarters. I am betty liu here in new york where it is just after 7 00 p. M. Yvonne it is just after 7 00 a. M. Here in hong kong. I am yvonne man. Super thursdarsday is here. Not sure how i will keep up between the ecb conference, james comey testimony, and the u. K. Election. What you watching out for the most . Betty it has got to be comey. Saying yesterday, must see tv. I think the entire country will be glued one of the most anticipated hearings in decades on capitol hill. The markets did rebounded today. Not a lot, but we did see banking shares helping lead the index is higher. That writtene testimony from james comey, no big bombshell, but it read like a suspense novel. The question is, what is going to move the markets in the next 24 hours . Lets see how things are playing out in the asiapacific so far. Not as a risk on as we are seeing from the wall street session. 71 on the the kiwi at 96. A lot going on in australia, futures pretty timid. The aussie holding onto those gains from yesterdays relief rally when gdp came in line with estimates. The big move overnight was wti, biggest drop in three months, sliding beef below 46 a barrel. For theheading lower asx. Japan, lots of data out. Gdp, current account balance, we are seeing the dollaryen move 10 and lower, given more concerns about north korea firing its 10th the missile. 109. 76. Could be pointing to mediocre gains this morning. Take a look at all the action in the next couple hours. I will have to do an all nighter to keep up with everything. It looks like this written testimony from comey took a little bit of edge off of the wall street session yesterday. We will continue watching that. Tensions boiling over between government as india tackles record low inflation and the steepest growth in two years. Six month after launching an independent committee to oversee interest rates, the government is expressing frustrations the bank chose not to ease on wednesday. Six point 25 on the Monetary Policy committee. The government will give its own testament of the economy to the reserve bank. That is the number one thing. Whether it is done in writing, is immaterial. It is important input that views arebuse developing. Respectiveect jurisdiction. Ramy indirectly blaming saudi arabia for two terror attacks in tehran. Thatsaid it is meaningful it took place so soon after President Trump criticized iran during a trip to riyadh. As a global ratings place it on negative watch. The escalating dispute with its neighbors will begin its finances. Aa. R is now reassess by the next review scheduled for august 25. Chinas Foreign Exchange stock climbs for fourth month in may, the longest streak in four years. Reserves grew by 24 billion, 3. 05 trillion. The currency surged 1. 2 in may, the biggest monthly advance in more than a year. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am ramy inocencio, this is bloomberg. Stocks halting that today flight. Banks rebounding, crude fumbling. Down to 45 a barrel. A potentially significant event for investors. Here to give us the rundown is su keenan. Have a lot of stocks close off their low because of the power of the banks offsetting that sharp plunge in oil commodities. Lets look at the close. If we look at the big movers, they are all energyrelated. That has a lot to do with commodities being down. These were big drops, down as much as almost 6 . If we going to the bloomberg, we have a chart for you that lot th commodities being down. These were big sends conflicting signals as to what direction we might be going in for oil. Average foroving oil is below the 200 day moving average. We may have the death clause, it signals lower prices ahead. But if there is any snap up in the price, it could turn into a golden cross. That is a close these signals are. That would be positive. Although it does not look like it will happen, it shows how difficult it is to call direction. Betty what are the oil prices . Su we have seen it trading below 50. We have countered the supply curves. A big surprise in the inventory. Lets go in again to the bloomberg. What we see here is the signals, which is the death process i was talking about. The inventory we had was a sharp 3. 5 Million Dollar gain. This could just as easily have a positive goal for oil, as for negative. It makes it very difficult for traders to know how to position. Looks the traders said it as if fear oversupply is driving the markets once again. There have been indications drillers have been at it for 27 straight weeks. It puts supply concerns back on the map, even though there has cuts wouldsm opecs reduce the gluts. Look at where we are in terms of price in the shortterm. The nigerianbump, exports terminal and the diplomatic crisis in the mideast is banning all vessels from qatar. Mixed signals on where we go from here. But it makes for a very volatile oil trade. Yvonne we heard big heavyweights of the spoke this week, and colluding jim cho chanos. Bill gross warning asset prices are too high for risktaking. Su he said typically you would buy low, sell high. Highany are forced to buy and cross their fingers. Returns will be lower. If you want to sleep at night is,accept the market as it low volatility requires lower returns. Su lets go into the bloomberg again. An interesting conundrum developing. Alan greenspans conundrum back rate04, 2006, there was a year cycle, now we have almost the same thing. Slowing growth and inflation marking a return of this riddle. Especially after china, the secondlargest holder of treasuries, said it is ready to buy. Lets take a listen to another fund manager talking about how active prices and equities also are highly valued in that is of concern. It worries me a lot. Valuations, ift there is such a thing as the 11th decile, that is where they are. Bond bullse crazy and stock bulls have been doing well. But everyone thinks that will change soon. Yvonne it is interesting, bonduries the least bad investment at the moment. We will watch that bond rally. In the meantime, we take a look out of washington. Fired fbi director james comey set to testify to congress that President Trump asked him to end the investigation into the then National Security adviser mike flynn. His prepared remarks were prepared prior to the hearing. It lets bring in our National Security editor to track the developments out of d. C. Good to see you. What was the biggest take away out of the written testimony . It was a pretty dramatic day, even though congressional testimony does not tend to be exciting. This was the opposite. Comeys testimony was almost literary. Three things really stand out. One is that early on in a oneonone dinner at the white house, trump really pressed comey for a pledge of loyalty. Comey says that when this happened he just stared back at the president and they just looked at each other in an awkward silence. They eventually moved on to say maybe what comey could offer was honest loyalty. That is never really defined. He confirms the statement by the president on at least three different occasions he said the president himself was not the target of an investigation. President ompting the and his supporters to claim that he is vindicated in this case. We learned that trump forbearancesought on Michael Flynn or asked the fbi director to ease up on the investigation of Michael Flynn. That is one issue senators are really going to hone in on at tomorrows hearing in washington. Betty is any of this in peach of . Are any of these impeachable offenses . Bill i do not think there is a smoking gun. President of the the United States asked his top Law Enforcement officer to ease up on an investigation, that is the kind of fodder senators on both sides of the political aisle and lawyers are going to dig into. They want to see if they can get more details from the james comey during his testimony tomorrow about that. Byre is a separate probe led special counsel. Counsel, robert mueller, well get more information we are not ready to write privy to, right away. Betty do not miss our special coverage of james comeys testimony before the senate committee. It will begin at 9 30 p. M. Tonight if youre watching in hong kong. May be pulling an all nighter . Yvonne i might have to. More insight from our next guest. Former u. S. Ambassador to china joins us. ,nd the changing global order taking a chance on the world stage. This is bloomberg. Yvonne we are counting down to asias first major market open this morning. Watching moves on dollaryen, 109. 80. North korea firing multiple unidentified projectiles, this is daybreak asia. Betty i am betty liu here in new york. Investors will buy more than 99 of a write off, raising 4. 3 billion for the banks turnaround plan. The second share issues since the ceo took over three years and three years ago. In april, credit ditched plans to list part of its lucrative operation. Yvonne toshiba fired a legal missive at Western Digital, demanding it stop what it calls harassment over the sale of their flash memory chip business. Toshiba claims it has the rights to auction off the units. In to avoid being delisted tokyo. Their concern the Chip Technology may fall into the hands of competitors. Shortselling is alive and well in hong kong. They are now betting against a furniture maker whose stock slumped 10 . The companys biggest twoday retreat since 2011. There were undisclosed liabilities and inconsistencies. Separately, geotargeted a group whose shares tumbled on that news. Yvonne hong kong becomes offset. One feature on the bloomberg we would like to bring to your attention is the interactive go function. An find it at tv charts you lot of can copy onto your own library. Become part of the conversation, send me and betty an instant message. This is for bloomberg subscribers only. This is bloomberg. Betty this is daybreak asia, i am betty liu in new york area new york. Yvonne allegations of harassment and discrimination, Corporate Culture amazingly reach even further. Our reporter joins us live from San Francisco. We were talking yesterday about these firings of uber. Now you report goobers head of business in asia has left the company. What happened . Troublingomewhat incident. Alexander, in business development, have the case file whose india rape victim uber driver was convicted of rape. He had her medical file. , theof the top executives ceo and head of business, both speculated about whether the rape really occurred and whether their competitor had been responsible for it. A number of troubling allegations around their handling and thinking about this case. What are we expecting next in terms of investigations . What does it tell us more of in terms of the Corporate Culture in uber . What is broken right now . Former u. S. Attorney general eric holder deliver this comprehensive report to his subcommittee of the board of directors. We do not get to see that. We were initially promised by morena huffington findings. It looks like we will get their recommendations. We do not know how much those will look backwards. It is not clear right now whether stuff like this india the koreannt, karaoke rape incident, whether these will be dealt with head on will be in this report next week. Or whether we will change executive structures but not necessarily a backwards looking review of what happened. Betty was there any kind of conclusion whether or not uber was framed in india . Eric it does not look like it, no. The point is more that they were wildly speculating. I do not think the evidence was strong and i do not think anyone would say today they would believe that. I think the story is more that they were looking for every , the true story. Atty seems we get more news on uber. Fired fbi director james comey is making headlines even before he arrives on capitol hill. His prepared testimony says President Trump demanded loyalty, preston to drop an investigation into it then National Security adviser Michael Flynn. We speak with a former senator, who was in china, there on business. Senator, thank you so much for joining us again. I am curious if you have been able to quantify all the news we have had on comey. What do you make of these revelations and what the democrats might do with this new information . Explosive, it is heard around the world. I am very aware of the upcoming comey testimony. It comes down to a lot of good questions asked by both republicans and democrats. Just what did the resident asked of comey . Did he really try to obstructed justice or not . Senators, house members, they will have to decide, are they loyal to the country, or they loyal to the president . Assuming there is a lot of evidence there was significant obstruction. Betty i want to read to you part of the his advanced testimony we got, which is partly the the crux of the matter. This is one of the memos comey wrote after his meeting with he said, i hope you can see your way clear to letting this go, to letting flynn go. He is a good guy. I hope you can let this go. I reply only that he is a good guy. Is this obstruction of justice . Or is this much more vague . It depends upon the totality of the circumstances. That is pretty damning. It depends what else was said in the context of other meetings comey had with of president. I saw somewhere the president had nine private meetings with comey. I am sure comey has lots of toos about those meetings, after that, the Intelligence Committee personnel saying privately. They received pressure from the president to back off on this russia investigation. Thet of this comes down to totality, how it impacts, a really seems to be the case. There is a good case to be made that there could potentially be obstruction here. Yvonne senator, it is fascinating. The president asking for loyalty, i need loyalty, i expect loyalty. He returned to the subject near the end of our dinner. Thats interesting to see comey felt the need to document these meetings and memorialize this oneonone dinnerware trump had tested is loyalty. It was so inappropriate. I do think he did not bring it up . Why was is not reported in real time, do you think . Explainhink he will that, i am sure that question will be asked. Yvonne it is definitely a tough one, for sure. What you think democrats and republicans want to get out of comey on thursday . If you were on the panel, what would you specifically ask comey . Max i would ask for the facts. What did the president say . Including his intention, what was your response . Question. E basic i would ask it to her three times to get all the nuances i could. Move on. Ets we want to talk about the shanghai cooperation operation that is happening right now. We learned a little bit about this. In india, there will be full members of this alliance, which is quite unprecedented, given these countries have such a history. What does this mean about how this relationship will involve, when it comes to the shifting world order . I am very concerned. I have served three years as u. S. Ambassador to china. During those three years, i thought china moving steadily, inexorably, toward building up their power. I merrily in asia, but to some degree in other parts of the world. Shanghaiolvement with organization and potential other members could make a big, big difference. Yvonne yvonne it is 7 30 a. M. Thursday this sunny hong kong morning. Betty it is beautiful and sunny, 7 30 p. M. Wednesday. A nice sunset we are seeing in new york. Markets closing a bit sunnier. 0. 2 from thisst rebound we saw after two days of declines. I am betty liu, here in new york. Yvonne i am yvonne man in hong kong. Youre watching daybreak asia as we have been reporting, fired fbi director james comey will Tell Congress the president asked him in february to end check to Michael Flynn for clearons, to see his way of letting this go. Comey will say he never agreed to the inquiry. He will also say the president demanded loyalty when they met on january 27. Fired anothers series of projectiles said to be short range cruse missiles. Launches fromple defense sources in tokyo. Japan says it will protest surgical medic channels. Say southom seoul korea is suspending further deployment of the controversial onad missile deployment environmental grounds. It means those yet to be deployed must wait. China is strongly opposed to that system, saying it risks upsetting the Regional Security balance. In europe, London Police have carried out a controlled explosion outside the new u. S. Embassy. But says it is not terrorism related. Some cars had been left unattended several days, days before the election. Election,e the security and terrorism have risen to the top of the agenda. They have yet to move into the new embassy. Consultancy firm eca says hong kong has overtaken tokyo as the election, security and terrorism have risen to the top of the agenda. Most expensive asiapacific city and is now number two in the world, behind only the end goal in capital. It is relatively more expensive. Tokyo stays at number seven globally, singapore dropped to number 24. Sterlings postbrexit fall makes london number one. It is cheaper than bangkok, as well as rio de janeiro. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am a ramy inocencio, this is bloomberg. Yvonne not a good label to have. What we should be watching is trading gets underway in asia. Adam haigh joining us live from sydney. Adam, is this the con before the storm . Big surprises that might come from the ecb or britain . Good morning. The pound trading reasonable as we get into this election. The market is expecting a majority for theresa may. That is how we are looking going into this. There is still a potential for a surprise. Surprisest downside were we can see a big slump in sterling would be if we do not get one of the two parties, some kind of Hung Parliament situation. That is not the best Case Scenario which markets have been pricing as of late. The pound, pretty steady. Enjoying a good run up as we get into the election today. It will keep a close eye on that as the pound dollar crosses. Note the prize expected at this point. Surprise expected at this point. Betty what does it mean for the market . Interesting things coming out of australia. We have had an interesting run for the aussie dollar. It has remained surprisingly resilient for many investors. Is in the context of a lot of australian data looking gloomy over the last three months or so. There has been lots of uncertainty around how retail and the consumer is developing as us economy tried to shift away from a mining boom toward the private sector. If retail were to get hit, that would have fairly severe implications for spending habits and wages. We did hear some interesting comments from the rba around references to wage growth struggling. And the fact that we are seeing impacts coming from the housing market. Context will be having a look at the most recent data in australia. I caught the gdp number yesterday, surprising to the upside, given expectations were very low going into that. A veryeresting terminal, interesting chart we keep coming back to. It shows investors swinging away from where they were at the start of the year. The next move is likely to be a hike. Whereas now it is more likely to be a cut. It is not likely to happen in the next few months, but further down the line. Maybe as soon as december, a one in five chance of a cut from the rba. A fairly neutral stance from them at the moment. All eyes on that data, late in the session. Betty what looked like a routine meeting of Indias Central Bank turn to drama with government wanting a rate cut. The r. B. I. Holding steady. Kathleen hays here with more. Why are they now at odds here . Howleen it is interesting, headtohead battle with Prime Minister modi when he came into office. People believe in Central Bank Independence in this modern era but some governments feel it is appropriate for them to weigh in. Lets talk about what happened. They held the key rate steady. Why it is controversy controversial, the gdp has slowed down. They said the slowdown could be transient, temporary. That is what the Federal Reserve is saying about soft trade inflation in this country. What is more unusual, mr. Modis top Economic Advisor challenge to this. Lets look at what he said. I think there is a possible macroeconomic assessment in regards to what they are saying about inflation. The errors have been large and systematically onesided in overstating inflation. Our Bloomberg News team reporting them modi team requested meeting with every one of the r. B. I. Officials, and all those requests were turned down. Happened after the finance minister said, we would like to see lower rates but we will leave it to them. He spoke with Bloomberg Television earlier. It sounds today like he is continuing to say that there Modi Administration does respect to that r. B. I. s independence. The government will give its own assessment of the economy to the reserve bank, is an overdone thing. Whether it is done in person or writing is immaterial. It is important gives its input to the central bank. We always respect to that jurisdiction. He respectfully disagrees, perhaps. Economists saying, they are going to move to a softer stance soon. This, it is an interesting thing. One economist i talked to earlier today said, maybe if the finance ministry was not pushing on this point, maybe the r. B. I. Would have been freer to make a move to an easier policy. Inthey had moved today cutting a key rate at a time there are pushed by the government, maybe it would have looked like they were giving in. Maybe it backfired a bit. It certainly has. It brings the question of said independence, as well. R. B. I. Did cut its inflation forecast. Kathleen absolutely. They are not convinced enough by what they have seen in inflation and gdp to give the move today. Lets look at a couple of bloomberg charts that illustrate this. We have a chart looking at indian inflation. Is the see the core rate white line. It maintains a level around 4 and below the r. B. I. s target. This is partly what the r. B. I. Is taking issue with. Gdp has gotten weaker. This is something the finance ministry is stressing. Lets look at another bloomberg chart. The gdp was growing up over 9 , is now stopping at 7 . This chart shows you it is down to 6 . Growthrks slowing in gdp. What is the r. B. I. Saying about that . They are saying there are reasons why they expected to move higher again, like rising wages to fuel consumption demand. They expect the gdp to pick up. In terms of them cutting their inflation forecast and the knowledge and it will be weaker ahead, here is something they cannot with. The cpi in the first half of the year is 3. 5 . It has been seen at 4. 5 . A small reduction in components going into gdp. Think post, they do reminded is a they do think will reduce spending. Some indian banks are struggling with bad loans, corporate corporations that cannot borrow. Also very important, it was not just the finance ministry pushing. One member of the Monetary Policy committee did dissent. Isther thing to consider that next week, the feds meeting. At their expected to raise their key rates. Perhaps within their conversation, r. B. I. Members said, maybe we do not want to cut our rate just before the fed raises theres, because it could perhaps have an impact on capital flows, currencies, bond markets. R. B. I. Just got a lot more interesting, didnt it, yvonne . Yvonne it is or is interesting what comes up between the government and the central bank. Pimco says chinas risks are manageable. Japans economy will continue to struggle. Interesting as we look ahead to the final numbers. We hear from this is bloomberg. Yvonne 15 minutes away from the open in tokyo. Nikkei 225 pointing higher as we look ahead to finalized gdp numbers in six minutes. I amis daybreak asia, yvonne man in hong kong. Betty i am betty liu in new york. Pimco cautiously optimistic about japan in the shortterm. It sees the economy continuing to struggle. They said china can manage its risks. But does not see it ending there. Spoke exclusively to me at the bloomberg invest conference. Together at a recent seminar and talked about a lot of risks. They really are global in nature. China in particular is clearly a risk. Risk people are aware of. They are an economy going pretty historic transformation from an exportled economy to an economy driven by more internal growth. That has been a bumpy road. As investors, we need to a knowledge they are running into challenges. That is an area of focus. We spent time talking about china. Conclusions were that risks were manageable. We think that economy will continue to grow at 6 ish a year. Navigate some of the challenges they face. Betty is the risk less so than years past . Has the risk lessened in china . The margin of the risk has been reduced slightly. We think the reason for that is that policymakers are learning. They are learning about implications for a shift in their views toward their own currency, as an example. The problem is one of a valuations to we mentioned this earlier today. Back in early 2016 the Financial Markets were concerned about china and the lending. Today, markets are less concerned. Riskshat perspective, the have come down. Valuations are at a point where there is less margin for error. In general, we think investors are should be more cautious, should take a little bit of risk off the table if they are going to do anything in an independent environment. Great story is a that the chinese may be buying more u. S. Treasuries and that in theelp the fed unwinding of the balance sheet. What you make of that . Dan the very well may be the case. They are not alone in looking at the u. S. Treasury market. Market, versus other markets around the globe. There is value there, demand from china will be supportive of treasury yields. We continued to see Strong Demand from japan, and from europeans. In their markets they are looking at negative yields. Economy ise u. S. Reasonably strong and exhibiting end of cycle behavior, to a degree. We think yields will still remain relatively well contained. We talk about this for several years. We think chinas demand will be part of the reason we see relative stability in yields going forward. Betty how low can yields go in the u. S. . Dan very low. Betty 1. 5 . Dan certainly 1. 5 . In a Global Economy that is not too bad. You have japanese ceos at three basis points. Are scenariostely where u. S. Yields can go below 2 . Type of shock to the global events, any geopolitical that leads to fears returning. We had fears as recently as early last year. It takes bond yields down to those types of levels. Absolutely possible. Betty a realistic scenario. It you mentioned about japan, clearly, there yields are extremely low and even negative. Turning ine tide is japan. We have seen that with recent data. Why arent more Foreign Investors attracted to japan . Dan the japanese equity market has done reasonably well this year. There is certainly some interest there. The economy is improving. But they are well aware well away from their inflation market. In the way of wage pressure. Some signs of improvement there. Is facing significant democratic challenges, does not have the benefit of immigration like other countries in a similar position. It will continue to struggle at inflation rates and rates comfortably below centralbank targets. Debt levels are not sustainable there. Unless you saw miraculous growth , some type of monetization activity, which some people feel going on now, referred to we are cautiously optimistic on japan over the short term. The japanese dynamic is not sustainable over the long term. We think something will have to give either on the rates are currency side. The question is just when. Yvonne that was bettys exclusive interview with dan ivascyn. You mentioned the tide turning for the japanese economy. Seems it is turning again. Gdp, a massive the miss, 1 growth annualized quarter on corner. The estimate was revised higher from 2. 2 preliminary number to 2. 4 . It was seeing a draw down here. Corner er on quarter on quarter. We thought it would help with business spending. That certainly has happened. We saw the final coming in a take higher than we saw, 0. 6 . Private consumption a bit of a draw them. Gdp deflators, still in negative territory. That is in line with estimates but down 0. 8 . Isty you said it, that quite some miss there. We focus so much on the 2. 4 number when the numbers initially came out. It was sliced more than half in the final round. We have the current account balance, crossing the wires. ¥1. 9 trillion is the number. That is exceeding what economists have estimated of 1. 6 69 trillionyen 1. Yen. Perhaps the whisper numbers have already come out, the whisper numbers were anticipating this this bigiss. Mess. Miss. The yen significantly weakening. We can see that continue big mess. Here, the dollar right at the high of this initial early session. Not a good surprise after you mentioned ivascyn agreeing it looks like the japanese economy is turning. , thee one more thing nominal gdp numbers coming in. At that was also a miss, now in negative territory at 0. 3 . , the boj willned maintain that easing stance. You can get a roundup of the story and many more to get your day going in todays edition of daybreak. Subscribers go to dayb. It you can also customize your setting so you only get the news on the industries and assets you care about. This is bloomberg. Yvonne this is daybreak asia, i am yvonne man in hong kong. Betty and i am betty lou in new york. Airbus may be thrown a lifeline for their struggling superjumbo. Emirates are in talks about buying 20 more airlines after airbus discusses limiting production to less than one a month. Worth 8. 7 billion before a discount. Sources say the carrier has not decided how many planes at once. Yvonne air china is capitalizing on the growing mainland appetite for switzerland and its companies. It is introducing a direct flight from there to zurich. The move follows orders in switzerland, chinas Chemical Corporation purchasing magenta. Betty boeing is ramping up the marketing of a plane, hoping to grain gain ground on airbus. They are trying to light up customers. They are said to include united, indias jet airways. 37 uses 5 s the new 7 less fuel. Plenty more to come with age first major market open moments away. Yvonne lets bring in Sophie Kamaruddin, watching the openings in australia, japan, korea. There was a miss on japans it gdp. The nikkei 225 looking to recapture the 20,000 level. The kospi looking resilient even tests multiple missiles. A mixed threat at the open for asia. There was a tumble of 5 overnight. To seeg on the board what stocks we are watching in asia, keeping an eye on defenserelated shares. Lets show you the korea airspace defense. We are watching sony shares in tokyo, the stock has an upside potential of 39 . Bhp on the radar in sydney as the worldwe are watching sony sn against miner could have a new chairman as early as next week. A brief look what we are watching when trading gets underway in australia, japan, korea, just moments from now. Yvonne disappointing news from japan. Economic growth slowed in the First Quarter, coming in at less than half expectations. Betty asiapacific shares set for a mixed open. Investors are waiting for this huge market moving super thursday. Yvonne thats right, the next 24 hours brings us james comeys testimony, u. K. Election, and the decision from the ecb. Betty paying a price. Bill gross says u. S. Markets are at their highest risk level since the 2008 financial crisis. Yvonne this is the second hour of daybreak asia, coming to you live from bloombergs u. S. And asian headquarters. Im yvonne man in hong kong. It is just after 8 00 a. M. Betty just after 8 00 p. M. In new york. I am betty little. The gdp i am betty liu. The gdp numbers from japan are a bit of a shock. Yvonne a bit of a reaction in dollaryen. It turned negative at first with north korea concerns of the missile, multiple ones launched this morning. That quickly erased. About to break the 110 handle for the end. For the yen. Lets get reaction with sophie. Sophie we are seeing the nikkei 225 at about one third of a percent at the open. Take a look at the cause the, marginally take a look at the kospi. This is a mid news that north korea had test fired several in thes, but the kospi face of geopolitics. Several key voices have noted concerns about risk in the markets, that perhaps investors are being too complacent. One is saying it is pretty scary when it comes to the apathy he is seeing. Both also sounding the alarm when it comes to rising risk. Take a look elsewhere when it comes to currency. The aussie dollar is lighting about. 1 , but looking steady around . 75 ahead of the australian trade balance for april, due out later this morning. We have iron ore trading at a july low, so that could be putting some pressure on the aussie. We do have it at about 5425, iron ore futures in singapore. Take a look at the bond space. Aussie bonds lower in line with treasuries, which assigned uptick in the 10 year yield to 2. 17 . Pimco says the yield could fall to as low as 1. 5 , agreeing with gross that treasuries are the least bad bond investment. One outlier today, south korean bonds catching a bit. Looking at what is going on with oil. Crude is Holding Losses below 46 a barrel after losing over 5 overnight, the biggest tumble since march as u. S. Stockpiles soared the most since 2008 last week. You can check this out you can check this out on this chart on your terminal. An unexpected rise after the eighth straight week of gains. You can see that in the chart on the terminal, the surprise uptick, ascending near crude to the prices were seeing now. That is partly driven by the surge in rocky imports, offsetting the drop in saudi imports. I want to check on currency majors here. We do have the pound looking steady ahead of the u. K. Vote after hitting a 2k after hitting a twoweek high. The euro is expanding its rebound. Atlast check, the dollaryen 10996. Betty thanks so much, sophie with the reaction in the markets. Lets get to the first word news with rosalind chin. Seoulnd reports from say north korea have fired another range of test missiles. They say multiple launches were confirmed by test sources in tokyo. They say they were filed over the ec. Seoul say south korea is suspending further deployment of the controversial fad missiledefense system on environmental grounds. President moon jaeins office says that does not mean those already on site should be withdrawn, but those yet to be deployed must wait. Some are strongly opposed, saying it risks upsetting the Regional Security balance. S P Global Ratings cut qatar is one term rating qatars longterm rating by one notch, worrying the dispute with neighbors will weaken its finances. It is now doublea with it shortterm rating affirmed. S p will reassess the impact of the depomed it row by its next review on august 25. Saysan investor bill gross u. S. Markets are seeing their highest risk level since the financial crisis, with investors paying dearly for the chances they take. Of the bloomberg investing your conference, he said centralbank policies and low rates were artificially hiking rates. He says investors are buying highend hoping. Tell investors it is a changed world, returns are going to be lower. If you want to sleep at night and accept the market as it is, low volatility requires low return. Sophie global news 24 hours a day, powered by more than 2600 reporters and analysts in more than 120 countries. I am rosalind chin. This is bloomberg. Yvonne we mentioned earlier, japans revised firstquarter gdp numbers have disappointed. The economy spending just 1 on an annualized basis, well below economists estimates for 2. 4 growth from the previous period was 0. 3 , exactly have of what economists anticipated. I want to bring in the head of asiapacific at asia at the market group. We are joined by Hoover Institute Research Fellow long he john. I want to start with the big miss out of japan. Does this change the story . We are expecting firmer footing, sixth straight quarter of growth, and we have hit the skids. It is disappointing. Despite descent export numbers that prompted us to upgrade our growth forecast, it has not translated to gains. Consumption was partly ms in the gdp numbers. That challenges to what extent the improvement in economy is going to translate the cpi gains , especially in the backdrop where dollaryen has set sail to start higher and oil prices have not come off. Yvonne is this good or bad for dollaryen right now . If you have slower growth, what does it mean for inflation out of japan . We think dollaryen will eventually had higher. Part of the reason is we think boj is going to stay on a more accommodative stance. Relative to what we are seeing with the fed. The boj is not going to change its policy on shortterm rates. Yvonne sort of status quo in japan. What has not been status quo is the relationship between u. S. And japan, between trump and abe. We have top so much about trade ties and tensions. How do you think that in with the closer relationship we are seeing between u. S. And japan and how that might translate into economic benefit . President trumps relationships with foreign leaders are about personality and pragmatism. That is what drives the president s foreignpolicy. To a degree, the close relationship he seems to have with abe may mean the two countries are going to look for further ways to cooperate on these Major Economic issues. When the u. S. And japan have talked about trade, negotiations have broken down for the same sets of issues. The question is, is this personality match that trump and abe have going to overcome those . Betty are you surprised by this personality match . Not surprised. They both enjoy playing golf, that always helps. What we are seeing is a much more pragmatic u. S. Foreignpolicy. You saw this when the u. S. Went to the middle east and struck deals to bring investment into the United States largely for u. S. Defense equipment. You saw a lot of the shedding of this almost moralistic veneer that has been on u. S. Foreignpolicy in favor of a more pragmatic approach. I think that will help the u. S. Japan relationship. Betty what do you say about this . Trade policy is less of a concern for the market. There is a lot more pragmatism, not just with abe but also other countries. That reduces some risk in the markets. We have to worry about other things, like politics. Yvonne i read this report a couple weeks ago about north korea and how the market seems to overlook geopolitical risks. We have seen this before coming out of the north. You think there is more substantial concern here when it comes to that . It is more unstable, a more uncertain regime. We dont know exactly what the policy reaction function is going to be. He has been accelerating his missile launching program as well. At the same time, uncertainties around the new administration with trump and what the Foreign Policy will be. You have a change in Technological Breakthroughs in north koreas capability to deliver nuclear missiles, Nuclear Weapons across missile delivery systems. Those are three ingredients that raise uncertainty. The market does not know how to Pay Attention to it. In becauseto price it is hard to know what will happen. So much uncertainty. It is something we need to all factor in. Fundamentally, the other issue is in the u. S. , we have tremendous policy uncertainty as well. For all the discussion about donald trump and how potentially he would drive Economic Growth with tax reform, here in the u. S. , we are seeing tremendous uncertainty about whether the president can drive that agenda across the finish line. That is going to have an impact on u. S. Markets, because so much of what we assume is that this stuff is going to get done, animal spirits are going to be awakened in the economy. We will see if that ends up happening. Right now, there is so much more extracurricular activity the president is worried about, we are not focused on policy discussion. Betty quickly, we just saw north korea fire another missile, multiple missiles. How do trump and all they and others Work Together to try to contain north korea . So far, it has been similar to the obama administration, in terms of trying to engage north korea multilaterally by looking to china. That is where trump has gone. The question is, is that going to be enough . So far, the North Koreans have tried to demonstrate strength in the face of trump approach, similar to its predecessor. Betty stay with us. We are going to talk much more about the markets, the economy. , dont daybreak asia miss our exclusive interview with tim draper. He joins us at 9 40 hong kong, 11 40 sydney. This is bloomberg. Yvonne betty this is daybreak asia. Im betty liu in new york. Yvonne im yvonne man in hong kong. Toshiba has fired another legal missive at Western Digital to stop what it calls harassment over the sale of their flash memory chip business. Toshiba claims it has the right toauction off the unit offset losses at its Nuclear Business and to avoid being delisted in tokyo. Western digital is concerned Chip Technology may fall into the hands of competitors. Betty Credit Suisse investors will buy more than 90 of an offering, raising 4. 3 billion for the bank turnaround finance. Share issuesecond since the ceo took over two years ago. The funds will complete a business overhaul and expand fund management. In april, Credit Suisse listed part of its swiss operation. Yvonne shortselling is alive and well in hong kong. Carson block is now betting , whose a furniture maker stocks fell 10 and was suspended yesterday with the companys biggest twoday retreat since 2011. He says his short is based on undisclosed liabilities and tax inconsistencies. Betty lets continue our conversation with our guests, the Hoover Institute Research Fellow with us in new york. In hong kong, joanna, the head of asiapacific economic and Market Analysis at citigroup. Lets start with you on the u. S. And the event everyone is watching tomorrow, the comey testimony. What did you make of what we have seen so far, the advanced testimony . We are asking our russian reporter, is any of this impeachable . Probably not, in the sense that we would expect a smoking gun to be there. Betty and we did not get that. We actually saw a very detailed account. I think it is quite riveting writing. James comey should consider writing a book. It is a remarkably written piece of literature, in terms of the description of the relationship between two men who have interacted in an awkward fashion. You have donald trump pressing comey to be more friendly, more chummy, comey backing off repeatedly. There are almost exact for from several almost exact verbatim quotes. The two men had former conversations than james comey had with barack obama, really intriguing. I dont know if there is new news. We know that trump wanted comey to stop the investigation into Michael Flynn, we have known that all along. Trump has always said flynn mentioned he was not under investigation. That seems to be relatively clear as well. ,etty quickly on the testimony like you said, it reads like a novel. A few moments later, the president said, i need loyalty. I did not move, speak, or change my facial expression during the awkward silence that followed. We simply looked at each other in silence. The conversation moved on, but returned to the subject near the end of our dinner. He is very specific with the way he writes. Is that weird to be demanding loyalty like that . Certainly the president has the right to demand loyalty from his appointees. One of the reasons the fbi director receives a 10 year appointment is to insulate him or her from politics of the time. The interesting thing is that trump is expecting out of comey the same measure of loyalty he expects out of his other political appointees, not something we have seen before. That disclosure is interesting but not entirely surprising. Yvonne the bombshell question is, how are they going to view this . We have heard reports they will stop short of saying it was obstruction of justice. When Senators Press sam, do you think he will be forced to respond or dots the question . I think he will dodge. He is very conscious that there is an ongoing investigation, the special counsel robert mueller, former director of many security agencies in the u. S. , is heading the special counsel investigation. Former director comey is going to be very conscious not to interfere with that investigation. Anything comey could say that could cross the line could get in the way of what mueller is trying to do, so i dont think you will see comey give us a lot more than he did in the written testimony. Yvonne joanna, we talk about the three big things happening in the next three hours. In the next day. Ecb, comey, england election. What is the game changer . The market is cautious. Given the written testimony, the risk has come down a little. We still have to watch the u. K. Election and outcomes, but having said that, i think comey for now, we still have to wait to see what happens at the q a, but basically there is no major smoking gun. I think that could provide relief. Yvonne do you stay on the sidelines, do you hedge, do you put the money into e. M. . Still quite positive e. M. We had a bit of retracement from the dollar weakness, but once these risk factors, way, the demand for yield and kerry. We still have an issue that Global Inflationary pressures are not severe to warrant huge pressure on Monetary Policy. Yields will stay low. I think demands for kerry will still be strong. Yvonne is it getting complicated because we have seen lackluster energy and Commodity Prices . Some impact, Commodity Prices, especially oil, particularly important for em we have had a retracement, but it has not collapsed. Betty speaking of Monetary Policy, we did an interview earlier today with dan iversen from pimco, who talked about the fed, who said dont be surprised that by next year, you might not see janet yellen at the head of the bed. At the head of the fed. Some have talked about john taylor being a possible fed chairman. Do you think that is a real possibility that President Trump is going to appoint somebody else . Entirely possible. The president has not always have the kindest things to say about janet yellen. He has taken the view there are certain things he she has done that he disagrees with. You could go in a different direction. I think john taylor would be great. Im somewhat biased because he is a colleague of mine. The question is, how much of this stuff is going to happen in light of the self named cloud trump called it a cloud, if you saw comeys testimony the cloud that hangs over the administration, how much is going to get done in light of the fact that so much bandwidth is being devoted to this investigation. Betty i was surprised about him admitting there was a cloud over his presidency. That was an interesting moment, the president recognizing that. You hear so much from him about how positive he is. Recognizing there is this cloud. Stay with us and also johanna in hong kong. Staying on comey, we will have special coverage of james comeys testimony before the senate Intelligence Committee on Bloomberg Television and radio beginning at 9 40 tonight in hong kong. This is bloomberg. Betty this is daybreak asia. Im betty liu in new york. Yvonne im yvonne man in hong kong. Joanna, head of asiapacific and Market Analysis at citigroup. Were getting insight from lanhee chen. Lets kick off with china, johanna, because we are expecting trade data the comment and our. We have seen the common in an hour. We have seen a slowing of growth. Do you think the Global Demand story, doesnt continue . I think it continues, but the cycle matures. We had a strong base effect uplift in the First Quarter, the tech cycle particularly powerful in asia. Tech exports almost 40 of total exports for east asia. Now you are seeing the pmi manufacturing index, pretty much rolling over for a lot of asian countries. Positive stories in terms of the euro area pmi manufacturing, Still Holding up, japan Still Holding up. We should expect a slowdown given the strength in the recovery. Yvonne to show what johanna was talking about, we have seen the peak with pmi going into contractionary territory and the china ppi prices also heading lower. Take a look at the trump trade, that is fading. That makes for a good backdrop for em equities. Is this a signal of strength . We see pmis rolling over. Or is it a sign of weakness . Not good if the u. S. Economy does not pick up. One important cycle that will help or sustain trade recovery is a more sustained Business Investment revival in the u. S. We are seeing that in europe. In the u. S. , it has been disappointing. Policy uncertainty and what is happening with trump provides a cloud on the outlook for policy. U. S. Is not the only driver of the manufacturing cycle. There are other drivers, like europe. These cycles mature. It is normal to expect a slowdown after a big jump. Betty what do you make of what we have seen with the strengthening of the chinese currency and stabilization . Where are we going to be by the end of the year with the u. N. . That is partly driven by policy. That china is introducing a countercyclical adjusted factor in its fx model. Us to be assigned that they want more stability and strength. That certainly helps the dollar asia story, the ems story. The market is still worried about a chinas slowdown on the back of the financial regulatory tightening. Unlike in 2015, we dont have to worry about the amplification of financial shop, because china is leaning against the wind. Betty lets talk a little bit is the u. S. , is trump seating the global stage to china . There is no question. The problem with withdrawing from the tpp, one of the first things his administration does, one of the only meaningful things they have done on trade is to cede the ground to china. The chinese are very savvy about this. One of the reasons you see a burgeoning relationship between xi jinping and trump is because he realizes trump is willing to give them this ground without contest. In that sense, it will work out well for the chinese. It is problematic for longterm u. S. Economic growth. There is no question a robust trade policy is important, and withdrawing from tbp was the wrong direction. Betty lanhee chen from the hoover institution. Also to johanna chua, head of asiapacific economic and Market Analysis at citigroup. Yvonne coming up next, taking on a gloomy outlook. The economic challenges faced are the eventual winner of u. K. Election. This is bloomberg. Yvonne 8 30 in singapore, half an hour away from the open of trading. Im yvonne man in hong kong. Betty pictureperfect. Im betty liu in new york. You are watching daybreak asia. Lets get to the first word news with rosalind chin. Rosalind fired fbi director james comey will Tell Congress insident trump asked him february to end checks into then National Security adviser Michael Flynn, requesting he see his way clear to letting this go. In testimony, comey will say he never agreed to end the inquiry. He will also say the president demanded loyalty on january 27. Japans revised firstquarter gdp numbers have disappointed, the economy expanding just 1 , well below economists estimates for 2. 4 . Expansion from the previous period was. 3 , half of what anticipated. The only bright spot was business spending, rising from 6 , narrowly beating estimates. Tensions are boiling over between r. B. I. And emerging government as india tackles record low inflation and weakest growth in two years, six months after launching an independent committee to oversee interest rates, the government is expressing frustration the bank chose not to ease on wednesday. The vote to hold at 6. 25 saw the first ever dissenter on the Monetary Policy committee. The government to give its own assessment of the economy to the reserve bank is a dumb thing. Whether it is done orderly or in writing, it is immaterial. It is important input that the Economic Division of the finance Ministry Gives input the central bank. Ultimately, it is within the authority of the central bank to decide the race. We respect the jurisdiction. Rosalind and chinas Foreign Exchange stockpile climbed for its fourth month in may, the longest streak in almost three years. The pboc says reserves grew by 24 billion, topping 3. 05 billion. That follows a rally in the yuan and tighter capital outflows. The chinese currency surged 1. 2 in may, its biggest monthly advance in more than a year. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Im rosalind chin. This is bloomberg. Betty time to see how the asian markets are shaping up on thursday morning. Here is Sophie Kamaruddin. Sophie we do have asian stocks lower by. 33 . Take a look at tokyo despite a disappointing firstquarter gdp read, calling into question the gd the sustainability of the recovery. Closerseeing the yen at to 110, providing support for the nikkei 225, up about. 1 . Thanks, exporters leading the charge, financials up about. 7 today. We have got to keep in mind the First Quarter gdp is the fifth quarter of expansion for japan. Taking a look at some of the stock for our viewers. Tdktronics component maker today adding 4 and over 11 points to the nikkei 225. We have volumes at doubled up 30 day average for the stock. It was raised to a buy at city. Shares trading at the highest level since august 2008, Oasis Management saying the stock has an upside potential of 49 , pointing out good Corporate Governance at the company. Toshiba climbing for a third day as it tussles with Western Digital. Take a look at what is happening in seoul. We have the kospi deepening the days losses, down about. 33 , set for a third day of declines. Energy stocks, the biggest drag, down 1. 2 . Cosmetics movers, we have a cosmetics maker contributing to the drop in terms of points. That perhaps could be related to some of the news out of south korea, reportedly looking to suspend the claimants of the u. S. Thaad missile system. Stocks with exposure to china such as amorepacific getting hit , given some of the lash out we have seen from china regarding the missile system. Betty thank you so much, Sophie Kamaruddin on all the factors playing into the asian markets. What about the European Market . The big issue facing europe comes to a head on thursday as the European Central bank tries to thread its policy needle between a strong economy, weaker inflation, and u. K. Voters choosing between candidates promising a lot at a time when brexit makes it hard to deliver much of anything. Bloombergs Global Economics and policy editor Kathleen Hays here. The world is waiting to see how mario draghi finds his way through this hot mess. Kathleen exactly. Those are technical terms. Here is what is going on for him. The economy has gotten stronger in europe. At the same time, inflation is weakening. How can mario draghi come up and not acknowledge stronger growth . If he doesnt, it could hurt his credibility. But mario draghi is saying, if we start thinking about stronger growth, people think we are getting ready to reduce stimulus. Here is how mario draghi gets out of this. Come back to inflation. In euro cpi down to 1. 4 may. Lets make this clear by looking at a bloomberg chart. 21. Have got btb32 you see core inflation taking it on the chin, down 2. 9 . Headline targeted by the ecb down to 1. 4 percent, target just under 2 . They had a temporary rise because of high energy prices, but now it has pulled back again. Is sort of the lifeboat for mario draghi as he policymakers, to make a decision at their closely watched press conference. What people are figuring that will underscore this is there going to cut their cpi forecast. Here is what our Bloomberg News team has learned from ecb officials in terms of how that is going to look. If you look at what they were forecasting in 2016, 2017, 2018, you can now see last year, look how they thought, inflation is going to get stronger in 2017, then stronger in 2018. It wont be at our target, but higher in 2019. Now they are going to be looking at something more steady at 1. 5 for the next years. The analysts are saying is it kind of buys mario draghi more time. As inflation weakens, they are cutting their forecast. They dont have to signal immediately and risk credibility. He is acknowledging the fact gdp is finally rising in the euro area and confidence is at a near decade high, all positive. He is acknowledging the fact gdp is finallyfor the first time sie became president of ecb, mario draghi is expected to say there are balanced risks for the euro area economy. The one thing they will not do, everyone seems to agree no change in foreign guidance on bond buying. That will take longer, particularly in the face of week inflation. Yvonne what could potentially move markets beyond the u. K. Election . You have got two candidates who want to be Prime Minister at a time when the prospects of the economy have dimmed on brexit. A lot hanging on this election. Kathleen just think about it. Neither one of them really invented brexit. Theresa may was a proponent. Jeremy corbyn was a weak antibrexit person, some analysts say. The bottom line is, whoever wins, the economy will be a big issue. U. K. Growth, when you look at gdp, the weakest in the group of seven, growing 0. 2 in the First Quarter. Step has been this kind of to volatility, but overtime that trend does seem to be a loss of momentum. A lot of Different Things going on. We have got the weak pound lifting import prices. That hurts consumers. They spend less. It boost inflation. Wages arent rising. If you look at how businesses boat, the how businesses vote , lets look at a bloomberg chart. Btv2219. U. K. Business expectations are at their lowest since 2009. What was happening then . The u. S. Was in the Great Recession and it was spreading to europe. And juicing question when you look at this an interesting question is how theresa may has slipped in the polls. What part has all these issues facing the u. K. Economy, compounded by brexit and the drop in the pound, is that one of the things weighing on her . She has been campaigning and talking about a brexit boost, billions of pounds in investment for businesses, transportation and housing. While Jeremy Corbyn is saying, this is an opportunity to end the conservative governments emphasis on austerity and rebuild the country that works for everybody. A lot at stake. As we said at the beginning, the ecb decision is not going to be much of a decision, very cautious. What u. K. Voters do . Doesnt this remind you of brexit in 2016, then Donald Trumps election . Depending on how it goes, this could have a lot of reverberations in global markets. Yvonne we have almost come full circle. Thank you. Didettpackard ceo says she not back President Trumps bid for the white house but he now deserves the benefit of the doubt. She says she supports some of trumps policies, but not all of them. As you know, i was on the other side. As a lifelong republican, i endorsed hillary clinton. , i saidsident trump won to our employees, i wrote a note that said, President Trump has won, we need to give him the benefit of the doubt. So we are. When we think there is something that is not in our best interest or the countrys best interest, i will speak out. I thought we ought to stay in the paris climate accord. The next generation of industry around, clean energy and others, is important for the United States. It does not impact our relationship. People can disagree, and we disagree on this particular issue. Tim cook told me he thinks the president decided wrong on paris but plans to keep an open dialogue because he thinks it is important for america and the company. Whatis your strategy and are the number one things on your priority list when it comes to discussions with the white house . We are in favor of tax reform. We think the ability to repatriate cash overseas at a much lower tax rate is important. We think a lowered Corporate Tax rate would spur growth in the United States. We are not for the border adjustment tax. That is very difficult for companies that import a high degree and work on relatively low margins. Retailers, a lot of technology companies. We think that is not in our best interest and in the best interest of the United States. We just make it clear where we stand on issues. Very respectful, civil discussion. That is what this country was built on, the ability for civil discourse and to disagree without being a great. Betty that was emily changs interview with hewlettpackard enterprise ceo meg whitman. Up next, in the midst of an mma boom, how japans Corporate Culture is leading to bad deals. This is bloomberg. Yvonne this is daybreak asia. Im yvonne man in hong kong. Betty im betty liu in new york. Japans overseas m a activity shows no signs of slowing, up 42 in 2017 over the same period last year. Our next guest believes a large reserverves cash will continue to drive japanese acquisition activity despite 18 billion in sour deals already this year. He is a mergers and acquisitions partner at a law firm. He joins us now from tokyo. Thank you so much for joining us. We keep hearing about this, these companies in japan with huge cash piles, shareholders getting set up. They want to see the money getting put to work. What is going to convince the company to look at mergers and acquisitions or overseas versus going in and buying back around stock buying back their own stock . There is definitely a higher degree of accountability being demanded from Japanese Companies regarding the use of their excess cash. They are not putting it to use in capital spending. In low growth environment japan is definitely going to continue to drive overseas m a acquisitions. The growth story is one that is making the Companies Look overseas. Domestic Consumer Spending continues to be low, deflation continues to feed into that problem. Overall, the story is not going to be to focus inwardly, domestically. Betty i want to point out a chart we have here. Lets bring that up. Im sure you are familiar with it. It shows back in 2016, where that money went. It went to europe, european countries, the eu, the u. K. , followed by north america. You expect that pattern to continue . Thats actually surprising. Has beenlly, the u. S. A destination for most of japanese m a activity, followed by europe. I think with the brexit situation in europe, it is going to promote a certain degree of uncertainty going into europe im sorry, u. S. Has always been considered relatively stable and welcoming of japanese investment. I would continue to think that both europe and north america would lead on the data going forward. Yvonne even with the uncertainty happening in the white house and the Trump Administration . I think so. There is, regardless of the political situation, the underlying business fundamentals are strong. Japanese companies are looking for more value added. Getnology, i. T. , trying to higher up the productivity curve. On all those counts, the u. S. Still has a lot to offer. Yvonne there seems to be a lot of perceptions when it comes to Japanese Companies. They overpay, they dont like too much confrontation, and they are very slow to cut their losses when things get tough. Do you think there is more discipline now on that front . I think this is going to be an issue that will continue to challenge Japanese Companies. We ought to put this in context and remember that these largescale Company Acquisitions are relatively recent phenomenon, about 1015 years perhaps. Japanese companies are still relatively inexperienced and unfamiliar with how to do these deals. There is a scarcity of available targets, so that puts pressure on companies to complete deals. The decisionmaking is very highly centralized, with very low board oversight, compared to the United States. Betty i am curious about the impact of more and more overseas m a activity, the merging of companies, acquisition of outside cultures. How is that changing Corporate Culture in japan . There is a lot to be said about the difference between Corporate Culture. I think a lot of the challenges come from differences in organizational culture. Japanese companies are run very differently from their western counterparts. I mentioned that decisionmaking tends to be highly centralized with low board oversight. I think more diversity in the board room and senior ranks would help improve that situation, by helping with the decisionmaking process, enhancing the information processing. I think more board oversight over senior managers would help with Risk Management on transactions and cultivating leadership with foreign management skills as opposed to foreign business skills and bringing that inhouse would be a huge help. Betty it is wellknown that japanese ceos and executives are not as highly paid as those outside japan. Is any of this going to impact compensation at some of these companies . Possibly, but we ought to bear in mind that Japanese Companies do not have equitybased compensation cultures, huge component of ceo pay in the u. S. , as we know. Until that changes, it could be very difficult to just increase the cash component of these salaries in japan. ,vonne before we let you go taking a look at the dollaryen right now, hovering around 110. Is that still an environment for Japanese Corporate to expand offshore . Im sorry, could you repeat . Yvonne the dollaryen, we are seeing quite a bit of strength in the yen. , ourat going to impact Japanese Corporates going to be buying assets offshore . I think it has potential, definitely, to help. A strong yen is always good in japan. It provides enough cushion for acquisition. On the other hand, even in a tough yen environment, there could be opportunities what impact m a activities in japan on the Foreign Exchange front is volatility. Japanese companies can manage with low yen, weak yen, strong yen, but going up and down makes it difficult. Yvonne great to have you, nobuhisa ishizuka, partner of mergers and acquisitions joining us live from tokyo. You can get a roundup of the stories to get you going from. Odays issue of daybreak bloomberg subscribers go to dayb on your terminal. You see the triple whammy when it comes to the comey investigation and testimony, ecb, u. K. Election. It is also available on your smart phone in a bloomberg anywhere app. You will want to have it for these big events. You can customize your settings to get the news you care about. Make sure to check it out at dayb. This is bloomberg. Yvonne this is daybreak asia. Im yvonne man in hong kong. Betty im betty liu in new york. The disney that Virtual Reality start up john is expanding in china, teaming up with an Electronics Maker and building a studio in beijing. Tom mackenzie is there to investigate the challenges of making vr massmarket and how plans tos how jaunt turn a profit. We are building a technologybased company in shanghai focused on developing and creating some of the most amazing of your content for a global audience. We are also building a studio in creatingwhere we are so we can work with the hollywood of china. Tom what are the hurdles you need to get over to get vr to the level where any consumer can go out and get involved with it . Hardware has got to improve. The hardware is clumsy. It does not give you the freedom. You have vibe, you have a cord around your head. If you are using a phonebased system, it is not very comfortable. It does not give you the degree of motion, no interactivity. Googles daydream and what microsoft is coming out with is a step in the right direction in terms of bringing more functionality and also bringing costs down. The other part is content. The content has got to up its game. Right now, the average length is about five minutes. How do we get itfunctionality ag costs down. Longer . How do you make the experience more compelling so that people look at vr and appreciated above where they appreciate tv or cinema . The third piece is the business model. How are we going to make money through br . That is something we are exploring. Tom give us an idea of how much money has to be spent to get us there. Money,nt know the exact but i can give a historical perspective. In the early days of internet when nobody was making money, people were learning. This is a part of a platform, and ecosystem, that people are investing in that i believe if you go in early and pick the right winners for partners tom is there a risk of a bubble . I think the bubble already happened. A lot of people were talking about a vr winter in china. A lot of people have exited the market. Those of us who stayed are firm believers. We have a strong conviction that this is the direction we want to go, and there is a very Bright Future in the vr market. Jaunt ceoat was the speaking with tom mackenzie. Time for a quick look at what is coming up on bloomberg markets. We have got china data and the u. K. Election. Rishaad it does not come from these statistics, it comes from the import export office. It could come out anytime the next few hours. We are going to be joined by and getting a sense of what that tells us about the Global Economy. As you mentioned, we have got u. K. Elections. Yvonne what is going on there . Rishaad theresa may is going to scrape it in, according to the latest polls. Also looking at investing in asia. That is all on the way. David what was it like when you came here . Did people make crocodile dundee jokes . James people would say to me, is it true that all australians wrestle crocodiles . I would say, well not all of them. David people throw things at the walls, scream and yell. James i think if you are the seventh of 12 children, you dont want to be the thrower. David are you in favor of repealing doddfrank . James that is a terrifying thought to start again. What will replace it . The world doesnt want the large banks to be unregulated. David you have been a ceo for seven years. That is pretty long. James what are you telling me . [laughter] would you fix your tie, please . David well, people wouldnt recognize me if my tie was fixed, but ok. Just leave it this way. Alright