kriti: good morning, welcome to "bloomberg daybreak: europe." i'm kriti gupta in london. the boj sticking with the world's last remaining negative interest rate, leaving investors guessing when that rate hike could come. governor ueda speaking in just half an hour. we will bring you live coverage. the u.s. and its allies and nothing a task force to protect shipping in the red sea as threats to vessels impact global trade. apple races to tweak it smartwatch software after a patent dispute forces it to halt u.s. sales ahead of the holidays. a lot to digest from monetary policy to the corporate story coming out of apple not creating a good risk on vibe, even though plenty of us are in the holiday mood. euro stoxx 50 futures in the green, higher by 0.2%. ftse 100 and s&p futures

virtually unchanged, speaks to this idea that we are amid thin holiday trading volume. slight outperformance in europe, some might call it autopilot. nasdaq 100 futures not seeing a lot of action. a lot of this is people have signed off for the rest of the year. thin volume, hard to assign a market narrative, but these are your numbers going into the european open in two hours. let's get a cross assets check because monetary policy is the main one we are watching. take a look at the 10-year yield, we are still below that 4% level, and that is going to be really important when we talk about how much the boj story is impacting the u.s. rate story. 3.93 on the 10-year yield, but what is significant is it is still below 4%. as you see that movement or lack thereof, you would think the dollar would show indication. the dollar weakness has been the

trend for the last eight sessions or so, nevertheless a similar one this morning, euro-dollar 1.0 nine, cable 1.26. brent crude getting a tailwind at a $78 handle, it is where we are looking for market reaction in terms of the red sea shipping updates, but right now fairly muted. i want to circle back to one of our top stories, which brings us back to monetary policy. the yen is under pressure, as that bank of japan has stuck with the world's last negative interest rate today, offering no guidance on whether it might scrap the policy. the yen falling to its lowest level in almost a week, 143 on dollar-yen. jgb futures higher after the decision. joining us for more is taro from our economics team in tokyo. really interesting as we hold our breath every single time. mark cudmore yesterday making the point that the boj,

disappointment and confusion often come to mind. when you are talking about the boj's policy hold today, what conditions do we need to see an end to this negative rate policy? >> the boj stands pat and i expect they will hold policy. there is a struggle in understanding their communication. but putting my foot into their shoes, for the boj officials, they try to initiate at the start of the potential exit probably happening next year. in early december, the boj officials in sequence talked about what if scenarios. they didn't say they actually considered the exit, but they talk about exit scenarios. it might be meant to suggest their first step for an exit communication, but probably the market was surprised by that.

based on the boj's communication, they really want to see how the next year's spring wage negotiation, which is the driver of base pay of regular workers. how it will turn out. and markets think in april the results will be released. but at the same time, the boj has to watch the result that is reflected to macro wage data which is not available until july. secondly, the boj has announced in this year's april meeting that they conduct monetary policy review. spending one year and a half. i think the conclusion of it will lead to further discussion of actual exit. the exit from negative rates will happen in the middle of next year. my call is in july.

it's happening, but not in this time, or january. kriti: when you're talking about this wage data, this pain in the real wage market, we have seen a continuous pressure on there. in terms of hints that governor ueda might give in his press conference we get in 25 minutes, what might he say question mark he made the point that the wage data was going to be watched. he talked about the inflation forecast. what is the going to be the canary in the coal mine for the japanese economy? >> the backdrop is the boj is extremely careful in its exiting. it's really hard for the boj to believe steady inflation is finally happening in japan. because it's a country which hasn't seen any inflation for

about 30 years. is equivalent to one generation. people don't expect inflation to easily happen, also, people don't expect their wages to grow annually. that's why the boj has to be extremely careful and watch the spring wage negotiation to be positive result. and so, that's why they have to keep the spring wage negotiation. the data release, the preliminary results will be released in march. but it's going to be up to the revision five or six times until july. the boj should consider the final result in macro wage data available in the summer. kriti: a lot to digest. taro joins us from bloomberg economics in tokyo. he is talking a lot about the wage data. what is interesting about the

boj is how much the currency pressure is factoring into their decision. you might say it is paving the road for other central banks. i will circle back to that as we get to comments from the press conference. let's dive into the equity reaction. avril hong is in singapore tracking it very closely. walk us through the market reaction in japan. avril: you talk about the yen and the jgb's, but let's look at the stock market trade. this is what we saw pre-decision, not much moves, but after the lunch break, we saw the nikkei surging as much as 1.3%. we saw it paring gains and closing up about 1.4%. we have a note from nomura that despite this gain in stocks in japan, it might be short-lived if during the presser, ueda doesn't come through with a strong message that there will be policy tweaks.

because then the fears in the market shifted towards the january meeting. let's look at what the underpinning the moves in the stock market. flip the board and look at export release counters in the country, the likes of toyota which erased declines earlier on in the session. japan banks going the other direction. steel stocks in japan also in focus because of nippon steel and how it is buying u.s. steel for 14.1 billion dollars, higher than market expectations. let's look at the continuing fallout from the attacks in the red sea. we see a gauge of energy stocks in the region climbing today. on a day where we're not getting that much movement from the gauge of stocks overall in the region, the msci asia-pacific flat, but we are seeing the south korean and japanese shipping stocks extending the gains from yesterday. kriti: a really interesting

dynamic when we're talking about the boj over to the red sea story. avril hong in singapore walking us through that story. she left off with shipping under the red sea under threat as violence links to the israel-hamas war undermines global trade. avril took us through the natural gas read through, bp and some of the largest oil companies pausing transit through that red sea and even the suez canal. paul wallace is all over that story in dubai. just how disruptive is this? or is this temporary? >> it is certainly a major disruption, essentially, we're seeing shipping traffic through the red sea all but grind to a halt. depending on how you see it, you could say that about the suez canal, too.

it's hard to think of a time in recent memory when such a major waterway like the southern red sea or the strait has been closed to shipping like this. the u.s. and its allies have lost control over that waterway. as to whether it is short-lived or longer-term, that's a key issue. the u.s. and its allies in europe and the region, the likes of saudi arabia and the uae, are really prioritizing this. this is not something they want to be long-lasting. it's a difficult issue. just how to deal with it houthis. it's not easy, whether the u.s. is mulling military action. but certainly not easy in terms of whether it would be effective. the houthis could be provoked to more aggressive action. diplomacy is also very tough.

this is a situation that could potentially last weeks, if not longer. kriti: one of the most striking pieces of this situation is the u.s. already has naval vessels in the region. there is a lot of questions about what are they actually doing there? joe biden doesn't have a great track record with foreign policy either. there is a lot of pushback in terms of how those resources are deployed. what else can they possibly do in that region to help out? >> interestingly, when lloyd austin announced it wasn't a new maritime force, but a bolstering of the existing one in the region, him and his aides use the words they would look to operationalize the one that already exists. they were admitting that the one exists isn't particularly effective at the moment.

in fairness to them, it has concentrated mostly on the strait of hormuz, this is a slightly different geographical location. the big issue is the houthis, as i touched on earlier, have a lot of leverage. saudi arabia, which borders yemen where the houthis are based and which has been fighting them almost a decade now, is very wary of provoking them. they have in recent years attacked both the uae and saudi arabia with drones and missiles. if anybody decides to take military action against them, they will restart those attacks. which could really roil oil markets. houthis have attacked saudi oil fields in the past, including a major attack in 2019. this is not an issue that's easy to deal with at all. kriti: if i remember the attack in 2019 had a much more

significant oil response than what we're seeing in the red sea at the moment. paul wallace in dubai, thank you for that context. he said there is market reaction even though it is muted amidst holiday trading. you can get a full roundup of stories you need to know on your addition of dave drake -- favorite terminal. get more analysis not only on the red sea, but the boj as well. there is a lot going on in terms of things that i would argue the market may be missing amid this thin volume. it has been slated as the most ambitious trade deal between the eu and a bellovin country -- a developing country. this is bloomberg. ♪

kriti: i'll come back to "daybreak: europe," kenya and the european union signed an economic cooperation agreement. ursula von der leyen met with kenya's president william ruto, as brussels pursues stronger economic ties with the continent of africa. for more, i'm joined by ondiro oganga. why is this considered the eu's most ambitious trade deal? >> it's because of some of the commitments the eu has made in terms of climate change and social welfare. when we look at climate, they are committing to implement the paris agreement, and work towards combating illegal logging, illegal fishing and wildlife trade. in terms of social welfare, there upholding the rights of

workers, gender equality and having several organizations and societies to advise them on how to implement this deal. when we look at the nitty-gritty, it will allow kenyan goods tariff free access to the european union, a market of nearly 500 million people. president ruto says this will not only increase of the earnings of farmers but create jobs in kenya. kriti: during his trip, ponder lien opened a german company's vaccine facilities in king golly, how important is this to raising some of that vaccine capacity? >> it is important because currently africa imports 99% of its vaccines. and 95% of it drives this. this facility is meant to ramp up vaccine production in africa from the current 1% to 60% in 2040. upon completion, the site will

be able to produce 50 million doses annually of covered vaccine, malaria, tb and 10,000 doses of clinical trials for diseases such as cancer. the greater goal is to ramp up production capacity. and sure there is access to vaccines. improve the quality of health care on the african continent while ensuring it is affordable for the majority. kriti: we should mention that biontech was the partner of pfizer when we talk about the creation of the vaccine in the united states. and the global rollout is coming to the rest of the world. ondiro oganga, thank you for that crucial update out of kigali. that is something that we will keep an eye on. some breaking news. we have numbers out of ubs, looks like sandy a -- cevian is going to see a bigger stake in ubs, they are talking about big financial moves.

a stake at 1.2 billion euros, a 1.3% stake, calling it significant value potential in ubs. they have been reports of this before but we are getting the official numbers out of cevian capital itself. something in terms of the market moves when the european open starts in under two hours time. another major story from around the world, egyptian president el-sisi has been reelected in a landslide victory, winning almost 90% of the vote. the country experiencing its worst economic strife in decades and facing another currency devaluation. i'm joined now from dubai by bloomberg's chief emerging markets economist. president el-sisi's term now extending to 2030, or his priorities going to be any different? >> he has a big priority, which is the economy.

he has three problems to tackle. the first one is the currency, which lost half of its value the last two years, and more devaluation is likely to come. there is the living cost in egypt, where inflation is over 30%. any movement in the currency will make the situation worse. the third problem is debt. egypt has high debt, and spends a large chunk of its resources paying interest, and this is another priority for the new president. the currency, debt and living costs are his priorities in the near term which will extend until 2030. kriti: when we talk about the currency, this is one of the big concerns from an investor standpoint. it has lost half of its value against the dollar the last two years, how much weaker can it get? >> markets are pricing another third of devaluation.

it is likely to happen, there is not much choice in terms of what egypt can do. there is shortage of currency in the economy, the banking system are basically out of dollars. basically egypt and still runs a trade deficit and has external debt to repay which requires more dollars to fund these things. the two crucial questions is how much the size of the devaluation is likely to come? markets are pricing about 36%. egypt can get away with less than that if it can secure external funding especially from the imf and gulf countries. the second question is the timing of this devaluation. that will happen when egypt secures some funding from abroad. kriti: certainly something we will be keeping an eye on. we were talking about the risk with shipping to the red sea as well. the suez canal is connected to the red sea, it is one of the largest contributors to government revenue, not to mention the egyptian economy. how important is this for egypt

in terms of finding a solution? >> the suez canal is a big contributor to egypt's finances. in the last year, it provided over $9 billion in terms of revenue. egypt cannot afford to lose this, especially when there is already shortages in the economy. you combine what is happening on the trade and the disruption to revenue from the suez canal, with more next-door in gaza, hardship domestically in the economy, it is not easy for the president in his new term. kriti: something we will keep a close eye on as the tensions become truly global. thank you for that crucial context. i want to bring you more breaking news. no shortage of it as we talk about what is going on between the european union, extending the tariff suspension between u.s. steel and aluminum, a dispute that has been ongoing since the trump administration.

there was a summit in washington, d.c. that yielded nothing. they are talking about an extended dispute until 2025 for u.s. products that have to do with steel and aluminum. for now, the clock stopping for apple. the u.s. tech giant racing to comply with a patent ruling days before a ban on u.s. sales of its smartwatch. we have that story next. this is bloomberg. ♪

kriti: welcome back to "daybreak: europe" i'm kriti gupta in london. apple will stop selling the latest versions of its smartwatch in the united states on friday due to a patent dispute. racing to tweak that software. peter, how big of a deal is this for apple? >> this is significant for

apple. apple has had to pull the apple watches from its online store. also, is going to take them out of 270 physical stores. this is the series nine and ultra 2 that monitor levels of oxygen in your blood. the international trade commission ruled apple is violating patents from a california company called masimo and needs to stop importing those. apple is raising to work out some sort of solution. the biden administration is reviewing this decision. in the meantime, apple decided to stop selling them through their own outlets. it is contentious because apple is allowing other retailers to keep selling these watches because technically it doesn't have to stop them, too. masimo still disagrees with that decision, so we still have some dispute going on here. kriti: very quickly, how much

longer does this go, peter? >> apple is racing to work out some sort of solution. they are making software changes to the watches so they will be able to get these onto the market. masimo says software changes will not be enough to overcome this patent ruling, they think they're need to be hardware changes, so we have some more decisions to go until we find out what happens. kriti: something that will have global repercussions given that apple is at the end of the day the most valuable company. coming up, live coverage of the bank of japan's press conference about to begin. we will bring you live headlines as

kriti: good morning and welcome to "daybreak: europe" i'm kriti gupta in london. the boj sticking with the world's largest remaining negative interest rate, leaving investors guessing when a hike could end up coming. it all pressures the yen, we will bring headlines as governor ueda speaks shortly. the u.s. protects vessels in the red sea, as threats impact global trade. plus, apple racing tempers tweak -- racing to tweak smartwatch software as a patented be forces it to hold sales ahead of the holidays. we are standing by for comments out of the bank of japan. let's talk about what we are seeing in futures. this idea that you are seeing a little bit of optimism in the continent and the u.k. higher by 0.1%. slight pullback in u.s. futures. nothing to put too much of a

narrative to because we are seeing lights, thin trading volume. cross asset, when you look at the market for been the 10-year yield, 3.94, staying low the key 4% level pay lessee with the governor of the boj has to perhaps change the bond market. the fx face not doing much either. green on the screen for euro-dollar and cable. 1.26 on the cable figure. brent crude of trading at a 78 handle, higher by 0.2%. these are sanguine markets, to what extent do we see dislocations? we are going to be looking at governor ueda's comments. the boj presser due to start any minute. we will bring you live headlines as we get them. in the meantime, let me bring in our executive editor paul dobson, he will bring us live analysis. he is up for the challenge, so i might.

paul, pleasure to have you on the program, good morning from london. let's start with what we expect from this conference. your initial thoughts on what we're about to hear. >> good morning, kriti. the market expectation for this meeting was the bank of japan would give off some little signals that it is moving towards doing away with its negative interest rate policy. and we will get rates back to zero, and begin looking at lift off well. so far from this statement, we have heard none of that, so this is an opportunity within the press conference for ueda to give a market signal. the question is will he be forceful enough to convince the market that january could be when there will be a move? the market consensus looking for april as the most likely date. but also, wary of the idea that

it could come sooner. if there is no signal anything could happen is it is january, then we will get further yen weakness, currency analysts talking about 145 as the next stop off point. kriti: right dollar-yen about 143.7. governor ueda began speaking. the conferences in japanese, we will bring the translated headlines as we get them. so far, he has had japan's economy is recovering gradually. we will bring the live headlines as we translate them. let's talk about the currency picture. you mentioned 145 being the line in the sand, with a wells fargo strategist talking about 135 going into spring. is that a fair number to look at in the other direction? >> currency strategists have continually expected the yen to strengthen against the dollar for the past couple of years,

and have been thwarted in those predictions. not least because of the surprising strength of the dollar we saw last year. now again, the consensus is more of a bullish view based on two premises. one, that the bank of japan will begin its exit from the extraordinary monetary policy in place. two, that the fed will pivot to easing and that will weigh on the dollar as well. there is some contention that even if the boj stays completely wary, dollar weakness should be enough to pull the yen towards that 135 level. if we get the boj turning more aggressive in terms of its exit from monetary policy stimulus settings, then there is every chance that over the course of the year we could push towards that 135 level, or even beyond. and c, finally, a good momentum picture for the yen in terms of a strengthening view. kriti: just as we talk about the

yen, more comments from governor ueda saying they are paying due attention to the fx market's impact on prices, but will patiently keep up monetary easing. he is talking about uncertainties in the economy, saying they remain very high not only for prices. i will bring this right back to you. the boj historically has been the guinea pig for monetary policy. we have seen this when it comes to yield curve control, and talking about quantitative easing being a buyer of last resort for corporate debt, something that has been adopted around the world from precedents that the boj has sent trade when it comes to the fx market, what precedent are they setting for the rest of the world? i will add that when we talk about the ecb nowadays, we often talk about the euro as well, paul, the president? -- precedent?

>> what the boj has taught us is if you keep monetary policy easy for an extended period, the exit becomes that much more of a challenge. it's not just about managing those market flows and being careful, as we are hearing ueda setting his stall up in the press conference along those lines. it is that shift in mentality. we have had a whole generation of people basically used to to no inflation, very easy monetary policy and borrowing rates. and to change that to a mindset where you are going to see inflation, you're going to need to be saving your cash for the future. you will maybe want to spend more money and think about that as well. it's a flip for a lot of people. that probably will be one of the enduring legacies from this period if the boj manages to successfully exit the stimulus. kriti: we will see if there is

signs of that. as you were speaking, we are getting interesting comments. governor ueda saying they will ease further if needed without any hesitation. at the same time, you are seeing the market going a little berserk, dollar-yen 143 point2, heavy volume for the dollar. if you look at the chart, you saw a massive surge in the yen. i wonder how much of that is positioning, although perhaps these comments created that reaction, they are seeing positive comments on wages next year. let's go to the wage story. it is market consensus that we are talking about strength in the japanese labor market perhaps turning a corner. when we get that data in the spring, is that the trigger to end yield curve control in japan? >> that's absolutely key to everything. whether we can see a second year of strong wage growth in japan, which would show it is becoming

more entrenched. and that shift in people's mentality. the wage negotiations take place in the first couple of months of the year, so time will tell. it is interesting that the boj did remove its reference needing to see more strength in the labor market. now we are hearing ueda talking about seeing signs of that confirmation being delivered. then yes, the market could take more of a signal that the boj is getting people ready for this moment where it moves away from negative interest rates. kriti: when we are talking about this wage data, the consensus is in the spring, taro kimura talked about more wage data that may not be complete until july. the risk of the boj being late to the game when it comes to changing policy -- if spring is

the game changer, what are the odds it gets delayed even further? >> we know they like to be cautious. in some ways, the boj is a little bit looking over its shoulder, or looking at what the rest of the central banks are doing. they are seeing inflation coming back in check. the fed is getting ready, the ecb getting ready for a pivot towards lowering interest rates gradually. their view is in the second half of next year, but the market expects it sooner than that. if inflation slows around the rest of the world, and the boj hasn't used this window to get off the negative rate floor, then there is a risk that it leaves it too late. that could create big fluctuations for the economy. there is a tightening window may be of opportunity for them to do it. which is why i think analysts expect q1, or april at the latest.

kriti: we have got to leave it there. thank you for that instant analysis. we continue to monitor the bank of japan conference on the terminal. tliv for full commentary and analysis. the rest of the headlines coming from governor ueda. we are seeing yen volatility pick up as he is speaking. important to keep in mind that governor ueda is saying the chances for hitting that 2% target are rising. they want to see wage gains spread to services as well. we will bring full context, coming up. this is bloomberg. ♪

kriti: welcome back to "daybreak: europe," i'm kriti gupta in london.

the bank of japan press conference currently underway as we hear from governor ueda. it is in japanese, so we are translating it or you. ueda saying they will ease further if needed without hesitation is not music to the market's ears. the market consensus is you will see the wage data in the spring be the trigger to be the end of yield curve control. they are talking about positivity in the trend in some of the data. they say the chances for hitting that 2% inflation target are rising. remember, japan has had a long history of being in a deflationary environment. the demographics of the country really don't help, but inflation was initially welcomed in a way that it wasn't around the world. ueda saying they want to see wage gains spread to prices, and the prices of services. real wage gains have been under

pressure a long time and are the pressure of the policy states. the purchasing power of japanese citizens taking quite a hit. you are seeing governor ueda not relying on quote a single data set for policy direction. the market putting heavy emphasis on wages. in their last boj meeting, they talked about the inflation forecast going to 2024 and 2025 being significantly higher than what the market had inspected. governor ueda reassuring the market that they will pay attention to not just the data but hearings as well. a quick check on the markets. dollar-yen 143.5, it was almost at 144 earlier one governor ueda started speaking. dollar strength of the moment but you are seeing volatility as some of these trades shake out. i want to broaden out the conversation because remember, the boj marks the end of what has been a couple of days of

central bank-palooza for lack of a better term. 2024 could be the year of rate cuts. i want to bring in a true expert. jamie rushes the chief economist for the mea region. talk to us about the prec edent the boj might be setting for the rest of the world. we had paul dobson talking about this. the idea that we are talking about currency intervention and weakness in the yen being a bigger threat to the global economy then what the boj is doing for their own country. it feels like we have heard similar rhetoric from christine lagarde with euro-dollar at 1.20, for example, your take? >> the japan economists on our team's impression is they are more cautious than people have baked in. yield curve control will live longer until we can see strong signs that inflation is picking

up. if inflation doesn't pick up in this environment, when will it? so they only have one shot at this policy maneuver, so we are expecting them to be somewhat cautious in their approach. kriti: talk to us about other policy tools being used. when you talk about the boj, that boj famously invented qe, and by extension qt. at the time it was invented, very experimental, do you think it is still working? >> the large stock of assets on central banks' balance sheets is squeezing long-term yields still. his acting as a downward influence across the world. when he think about what the start of monetary policy looks like, it is easy to forget that we did all these asset purchases. when you look at short-term interest rates, policy looks super restrictive, when you look at long-term rates, that may not

be the case. we think because qt is still in place, that's one reason why advanced economies have held up so well to the hiking cycles we have seen. kriti: it feels like we are talking about wages over the entire world. they are talking about it at the boj. why are we not talking about it to the same extent? let me bring you context. governor ueda noticeably has said wage data in the spring will be crucial. the markets are pinning all of their hopes on that data. if you look at the united states and europe, the labor market is quite tight, a payrolls number of 200,000 in the united states, back to normal pre-covid era data. but if you look at history, rate cuts have come far before the labor market has ever actually required it. your colleague in the united states made that comment. why are we focused on the labor market if it almost feels irrelevant to the rates story?

>> it is completely true that labor market variables tend to lag the rest of the economy, so we should be expecting unemployment to tick up three months after weakness in the economy materializes. that said, inflation has been so high, and inflation expectations have been so loosely anchored that central banks don't have the confidence to cut meaningfully until they see concrete signs things are slowing in the labor market. it is that context which is missing, the fact that inflation expectations are the risk, and that's why they need to see this labor market cooling. kriti: to what extent is that going to show up in the price story? the idea is economics 101. when you are talking about higher wage data, and more people asking for more money to do their services, that will reflect in consumer prices. no surprise about it.

something governor ueda and his colleagues are monitoring, except i want to bring this breaking headline as we talk about the wage data, he said the quote more challenging to marks in the last press conference, he is walking them back. saying they were only general comments. his supporters might add that governor ueda is at the core an academic. he will talk about all possible scenarios without throwing his weight behind one of them. now he is talking about the wage inflation cycle rising, and data suggesting cost push inflation is peaking. when it comes to the global read through from wages into inflation, is that more so the focus than commodity driven inflation? >> as we have shifted beyond that period post-pandemic, where demand for goods was rocketing, therefore spilling over to commodity prices and creating outward pressure on global

prices. we have certainly moved beyond that. we are focusing on domestically generated inflation pretty much everywhere. when it comes to wages, one thing that is important to recognize is the pace of wage growth as consistent with inflation is now slower than 10 years ago, because productivity growth is lower. that's the only sustainable source of wage increases. we should be looking for slower wage growth even in historical norms to be consistent with the inflation target these days. kriti: i love that you talk about productivity growth. you are saved by the bell because i was about to ask about ai and productivity growth. larry fink at black rock saying ai is the solution to the world's labor market problems. our chief european economist talking about the global ramifications when you talk about the move from what you're seeing at the boj to the rest of the world, the ecb and fed. i want to recap headlines ueda ueda from governor ueda.

he is talking about challenging job remarks, talking about the inflation data, saying you can't yet see hitting the 2% goal with certainty. they need to see more data to have confidence did this is again walking back comments, but he said just 10 minutes ago they could actually be hitting that long-term 2% target. again, some positivity, but with a little hint of caution. it feels like that's the way the market is navigating it. 143.5 on dollar-yen. plenty more analysis. this is bloomberg. ♪

kriti: welcome back to "bloomberg daybreak: europe." governor ueda still speaking at

the bank of japan's press conference, talking about what he is monitoring when it comes to things that will change the japanese yield curve control policy. he is saying he can't yet see hitting that 2% long-term inflation goal with certainty. even though we have been running hot for a little bit of time, but walking back some of the optimism he started with trade saying it is not a certainty, but things are headed in the right direction. he is saying they want more data to have enough confidence to make that call. saying it is hard to say one enough will be there in terms of monitoring data. he is talking about the federal reserve, that the rate cuts will have various effects on japan and it is inappropriate to rush policy change because the federal reserve is. in the last meeting, he specifically said that the long-term selloff in u.s. yields, that 30-year spike we have seen because of the

liquidity issues we were seeing, and the fiscal deficit concerns, were having an inflationary readthrough on japanese assets. he is talking about trying to isolate the boj from the pressure from the federal reserve. that is something central banks around the world have tried to do. at its core one set of data the market is watching. i want to bring you a terminal chart on your terminal talking about real wage data. the market consensus is that in the spring you will see that wage data change their policy. look at how much pressure japan is facing. that data negative for 19 months now. the question is how much further can it go? about a year ago, this same chart looked a lot like what you are seeing in the united states, that is not the case but this is at the core of what you are seeing with the boj and what they are considering in terms of dealing with these wage problems. as you see the yen we can, we

are at 143.6 right now, the market consensus is between 134 and 136 is where the dollar-yen will hit in the spring. i will caution you to jump that call simply because our economist in tokyo said yes, the wage data in spring matters, but the full set of data comes in july, so to what extent do we see that get pushed back? governor ueda has said we are not in a rush, the spring is not a guarantee. that is something markets are getting antsy about as the volatility in dollar-yen spikes as we get those headlines. plenty more analysis ahead and full monitoring of governor ueda and his comments. stick with us. this is bloomberg. ♪

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