The normal meetings, or they . Are they . Anna the meetings in vienna are getting a good deal of profile. Vienna is going to be the place to be. A lot still on the radar. We have opec tomorrow, the ecb, and the jobs report on friday. Tom now we have photos from japan. I believe video from japan as the Prime Minister, this is a retract, folks, he will a National Sales tax. Much of this was foreshadowed when he was with the president and leaders in g7 and hiroshima where he made very clear he was playing to a domestic audience. Some of this today is the delay of a National Sales tax and really a quite a blood abrupt blow to the fiscal side. To the bloomberg first word news. Vonnie in japan, Prime Minister shinzo avenue a is delaying Prime Minister shinzo abe is delaying the increase in sales tax until 2019. It would make it tougher for the japanese government to deal with the Worlds Largest debt burden. Another sign that chinas economy is stabilizing, for a third month the official factory gauge stayed above the dividing line for improving conditions. They are trying to keep growth above six and a half percent. More labor problems in france. Rail workers have gone on strike and up to 40 of highspeed Train Services may be interrupted. The president is trying to contain labor unrest before the start of the football tournament. Refineries have led to gas shortages. Executives of the airbus and siemens are coming out today against the u. K. Leaving the European Union, morning it will threaten manufacturing jobs. In lima, peru, thousands of protesters opposed to the president ial candidate took to the street. Is a former peruvian president who is in prison for corruption and authorizing death squads. Powered by our 2400 journalists and more than 150 news bureaus around the world. Tom range bound boring recently. You wonder if that will end with the anna, with the american jobs report. On this wednesday, futures are negative six, dow futures at 49. Oil churning. Vix, 14. 59, ae little bit of drama yesterday. U. S. Erman 10 year and the twoyear are in as well. There is brent under 50. Anna strength of the japanese currency i would note. More detail no doubt to follow as he continues to speak and i have seen a couple of ratings agencies talking about waiting for more detail before they decide how this is going to affect or revive the rating for japan. They see the credibility as being hit as what is being described as a uturn by the Prime Minister. Tom doing bloomberg surveillance in japanese, i jon harding tried to get me to learn japanese and i went down in flames. Lets go to the bloomberg terminal. This is our pmi. I do not know where these pmis came from. There is like 47 of them that come out at the first of the month. Here is precrisis where we are elevated above the 50 level, and the recent trend. Is not so much how high above the line it goes as the dividing line. Pmiitis. Anna edwards in london, tom keene in new york, and brian fowler is in japan. With the the headlines Prime Minister is clearly playing to the domestic audience. He will take bold economic steps and implement large scale economic stimulus. Please translate this for us. How will japan respond to the Prime Ministers announcement . Brian first of all, i would expect he will do pretty well in the elections next month. We think he is going to call a double election so that will be perfectly timed. Notice what he is saying, if you months he was saying he would not postpone the sales tax hike unless there were another lehman like event and now he is blaming the world economy. The external economies are at great risk so he has to do this. Tom i do not need you to give me your opinion as an economist, but when i look at the data i have trouble seeing that japan is doing fine. Which is it . Brian you are right to not see it. The Virtuous Cycle that he has been talking about where corporate profits rise and that leads to higher wages and that spurs more consumption, that is not happening. This is his attempt to kickstart that with a boost to consumer spending. A fiscal situation in japan is not going to be as tight as previously thought, so you could call that a fiscal booth boost. Are the ratings agencies liking to see ts . Some of them want a higher sales tax. Brian fitch is a bit skeptical. They have said they think this could be a risk to the commitment of fiscal consolidation. S p says they do not see this as a huge setback so a mixed picture from the ratings agencies. Vonnie im going to take over and recap some of the headlines because Prime Minister abe is speaking right now and says the Global Economy is facing large risks and that is why he is pushing the tax increase. Rod, boldey will take broad, bold economic steps in the autumn however he is not outlining with those steps are. He is talking about using the zero Interest Rate environment to the utmost possible and he will bring forward the construction of the linear bullet train, so this is the fiscal stimulus. I would suggest that there is no replacement for a sales tax increase. He has not said what that might be. Brian i think he is hinting about this autumn stimulus, will be a package. We know it is coming, we do not know how big it will be. Economists say it has to be around 9 trillion to ¥10 trillion. I think we will get the details ahead of the election and try to use that to win some more votes. Tom how alone is the Prime Minister . It was remarkable at the g7 meeting as he staked out his concern for the Global Economy and i believe was met with a thundering silence. Then we saw the drama of the visit to hiroshima by the Prime Minister and president of the united states. How alone is he among World Leaders that the economy is on the verge of a large rest . Risk . Brian we could see this coming and we kind of thought that he was going to use his chance with the g7 leaders to offer this and get their approval and support, and it sounds like they were not really willing to go along with the storyline. He is going to push ahead anyway and that he is that is why he is blaming the risk of the Global Economy for forcing him to make this move. I think he is alone. G7re is some believe in the i do not believe he is entirely alone but he has not got the whole g7 with his version of how history is being written. Anna he is blaming the global external environment but is talking about the biggest challenge as being labor reform. How is he doing on that one . Brian that was the third arrow he was he has been talking about for three years and nothing really happened, so he is right to be talking about it. If he does get the mandate that we expect then he will take that up once we get into september. That could be coming and that would be big. Tom thank you for immediate perspective, brian fowler in tokyo. The Prime Minister continues in japanese and we will have the english headlines across the bloomberg terminal. , i promise toou create environment for sales tax hike. I will take economic measures to support domestic demand. I would say it is a very domestic statement. Vonnie Japanese Equities falling. He is also saying he is going to push investment into childcare and elderly care, equal pay for equal work. Tom the state of the union. 9. 10, the yen, 109. 10. Stronger this morning going nomics. Abe we will turn to the american economy, jobs day, and the opec meeting in vienna. Bob doll will join us. Anna welcome back, this is surveillance. I am anna edwards in london with tom keene in new york. May be new report signaling a slowdown in the euro area economy. According to the foreign market economics, it has expanded in the slowest in a year and companies are hsbc cutting a number of Senior Investment banking jobs. Firstquarter profits fell 15 at the investment bank. The ceo has outlined a threeyear plan to cut thousands of jobs. Will sellftbank almost 8 billion of its stake in alibaba and use the money to pay down debt, and boost its cash position. They are the largest investor in alibaba. Anna thank you. Lets bring into the conversation Gemma Godfrey, founder and ceo of. Abe is giving a big statement as a result of backtracking on his sales tax increase. He is saying the risks being faced are different to that of man shop. At the time of the g7 crisis meeting he was trying to get the other leaders on board to say this was like the lehman crisis so that would give him cover on the sales tax. Do you see the parallels or has he had to back down because the parallels do not exist . Gemma the big risk of him backing down is that he is very popular and if he is not able to push this forward, will we ever see the sales tax hike . Will they be able to push it forward later on . Maybe or maybe not. Japan is struggling with one of the biggest debt burdens and it does push they can further down the road. That is why investors are starting to be a little bit more skeptical and concerned about japan. Saying the also biggest concern is developing economies including china. Moderation seems to be one of the words i heard, muddle through, bumpy landing, all of these phrases i have heard in describing china. How much of a worry is china at the moment . Gemma this is always inevitable. The speed at which china was growing, we were not going to do that so theres always going to be a moderation. It is about managing expectations, and what we should watch for is greater efficiency and productivity in china. We have seen a lot of talk about easing and they are active, aggressive, and accommodative and their Monetary Policy that will they let Zombie Companies fail . Tom when i find interesting is how he manages the message and if you look at the different backandforth on the domestic front. What does it mean for the International Outlook on japan, particularly as seen through japanese yen . But can you frame a dash to 100 . Gemma it is probably their only effective tool to get inflation back into the economy because they are not seeing any Wage Inflation or a resumption of consumption. Therefore, they are likely to allow a falling currency as a tool. Agree, and it is not your fault or my fault. The bottom line is he is managing the message. There is no other way to put it. I do not understand this omics. Where aben is the success . Gemma he is also not convincing the community. It is like the story of the little engine that could. Japan has a massive uphill struggle and there is a lot of skeptic is him skepticism. Andle are still underweight there are valuations on where they should be, but that does present an opportunity that there may be pockets of profit within the corporate sector because they have been focused on using their Balance Sheet more efficiently. Tom i just want to point out, you are singlehandedly strengthening the yen as we speak. We are going to be at 104 by the time she leaves. 109. 70, she is dazzling. We are going to continue our discussion. The Prime Minister speaking in japan, very much a domestic speech. We are seeing the ramifications of a 109. 64 yen. David bloom of hsbc, on the United Kingdom. David bloom on switzerland. This is bloomberg surveillance. Tom good morning, everyone. Surveillance in new york and london. The Prime Minister speaking in japan. Ministerthe prime talking to his nation. Anna edwards is going to talk to us about a morning mustread. Anna all of the focus on japan and we are talking about a two percentage point increase. Lets talk about the morning mustread, larry fink speaking at the Deutsche BankGlobal Financial conference yesterday. Here is what he had to say about the Asset Management industry. Agree thereslly going to be a massive shift more into passive so we believe it is going to create a huge consolidation in the Asset Management industry. Gemma godfrey joins us. This is something you have been talking about for quite some time, regulatory costs driving consolidation would not be a surprise. Gemma the greater use of passive is interesting. Onlyood thing is that not do people and up getting diversification and broad exposure, but even high net worth, it is not just for the retail market, it gives them access to the market in a lowcost way. Anna is this good for clients also . If you are passively involved in equities you are maybe having to construct your own portfolio. You are having to make those decisions for yourself. Gemma Warren Buffett said to look at, track the s p and he believed it would outperform the hedge funds. 60 tracker has delivered return in the basket etf about 20 . The second question about advice and guidance being able to help people allocate the assets, this is where consolidation comes in. It is all about delivering a Service Versus pushing a product. Technology and different platforms using this to solve their problems. Tom where are fixed income asset and it meant fees going to be . When you have the low nominal yield, where do they go . Gemma the fixed income market will be under intense pressure as they are working on low market margins and we are talking about a low rate environment so that becomes a volume game. It means that you really have to deliver these types of products and the kinds of solutions that customers really want, and you can capture the market because there is a massive market of people who are looking to protect and grow their money. Tom Gemma Godfrey with us this morning. Coming up, a conversation with the german deputy economy minister, Matthias Machnig. Tom good morning from london and new york, anna edwards with us this morning. Right now to our bloomberg first word news. Vonnie the United Nations is asking for iraqi troops and Islamic State fighters to spare children in the battle for falluja. Estimates 20,000 children are still trapped in the city. Prime minister is offering rare praise for a peace plan from saudi arabia. The plan is 14 years old and would require israel to withdraw from most of the west bank and other territory captured in 1967. More pressure on venezuelas embattled president. Have come out in favor of a recall referendum. Venezuela is suffering through its worst recession in decades. Is blasting reporters for questioning him about donations to veterans groups. Than 100 checks to veterans last week as he was being asked what happened to money taken in, in january. California governor jerry brown has sent a message to democrats quit fighting. He is backing Hillary Clinton and says her lead is insurmountable. She has the best chance of stopping donald trump. News 24 hours a day powered by our 2400 journalists and where than 150 news bureaus around the world. Tom the oecd meetings are happening right now. Not opec. This is the consortium out of paris. It is on among other things, the european economy and that means led by the german machine. Matthias machnig has had a political and industrial career in germany and he joins us. He is a deputy economy minister. What is your number one to do list at the oecd meetings . What does germany want to get out of these meetings to sustain Economic Growth . Matthias the most important question is how can we stimulate more investments . That is the most important thing. Germany is on a growth path for a couple of years but the most important thing is our investment folder is too low. Average and that is also true for a couple of countries in europe, so we have to look at what we can do to stimulate investments in the next years. There are a couple of fields that are very important and decisive. Digitization, energy, and other thing. The second thing is, we will have a big debate on digitization. Use thewe have to do to push of digitization for restructuring our economy to leverage productivity . Wealso have to look, what do have to do to build a level Playing Field between new Business Models and existing Business Models . These are my two key questions on the oecd meeting. Tom i think what people want to know, where is the Silicon Valley in germany . Do you need to regulate and monitor and chastise google and facebook, or just as importantly, do you need to join america in a digital whichreneurial tone, would be a Silicon Valley within your germany . Matthias we have made huge progress if you look at berlin. Berlin today is the city in europe with the most entrepreneurship, especially in digital. That is not as big as of course Silicon Valley but what we have to think of is, digitization is more than the Silicon Valley. It is more than platform econ. That is why we started the process within the German Economy with german countries, what we call industry 4. 0. How can we use the potential of digitization for services, for projection that is more than platform economy . Irc iic with the with the u. S. Consortium, how can we Work Together to bring these different approaches together . Tom one of the great mysteries is where germany needs the euro. Brief us on this. Do you want a weaker euro . Is that critical to the success of germany