with a vengeance. the bank opts for more stimulus. fund findsl pension domestic stocks to boost growth. rbs back in the black, despite setting aside 400 million pounds for a four x probe. -- forex probe. counting on acquisitions. russia agrees to resume deliveries to ukraine.

welcome to "the pulse." live from london. i'm francine lacqua. our top story. in a surprise move, the bank of japan has expanded its monetary stimulus program. the move boosted stocks but sent nhe young tumbling -- the ye tumbling. this is a two-pronged attack. the bank of japan and also the pension fund trying to boost growth and take more risk. >> it certainly shocked us. the awe came afterwards in the markets. two things going on. the fed is taking its liquidity out of the system. to feel likeoj it has to make up the difference. we has some pretty ugly inflation numbers in japan. 2%wing that the boj's 2-year

inflation target was wildly optimistic. you have a moment where prime kurodar abbe and governor are getting together. a lot of foreign investors are "eh." that was a reaffirmation they are on top of the case. it is a sugar high. they are dealing with the symptoms of japan's malaise, not the underlying sickness. we need to see the prime minister comfort with structural reforms. which we have heard a lot of talk about but very little action on. >> it seems that this is a boost to the markets but will it do anything for growth? we need to make sure people start spending. is one of those bringing the gone moments. what central bankers do. governor kuroda showed that he

has game. the weighty markets are reacting, look at the yen, the is looking atrld japan, this is what he ones. the issue is tomorrow and send it when people realize that we have more money coming into the system. a lot of money has not ended the malaise. make japan more competitive -- lucent labor markets and empower women. japan more entrepreneurial. we have not seen that. da-nomics.remains kuron it is a monetary phenomenon and we are waiting for the structural part. was about trying to change the subject and the direction of reform. the problem is tomorrow morning. >> thank you. there in tokyo.

to put everything in context, we talk about the japan pension fund. it is quite impressive. the amount of money it manages is the size of mexico's economy. it could buy exxon, toyota, and apple and have change. that is why we put it hand-in-hand with what the bank of japan is doing. corporate news, rbs returns to profit. third-quarter profit beat estimates. it set aside 400 million pounds to settle a ca currency rating probe. obe.currency rating pr -- currency rigging probe. backere a chance it goes in private hands?

>> it is going to be slower than expected. it has still got a lot of problems. we see becoming the investigation being one of those. there are other items that chief executive is worried about. i.t. failures, an investigation into that. there's likely to be a settlement involved with that. orexn terms of the four seeing many banks setting aside money. it is a good precaution. that are beingns taken now because the banks are starting to have clarity on the amount of money they need to spend on the settlement. we have not had that in previous quarters. we now had that sense and that is why the banks are provisioning now. there must be a feeling that the settlement is coming soon. important is the u.k. recovery to the strength of rbs?

>> vital. it had a lot of bad loans because of poor economic performance, customers in arrears on their mortgage. they're able to write back provisions they had set aside for bad loans. as well as key drivers to performance. are waiting for is when rbs can go back to private hands. from now until then there are many pitfalls. these probes and we may see more costs going up. >> it is certainly something that remains an issue. they are trying to cut costs as much as possible. we are reducing the size of the investment bank. that is something you see weak performance with. having tomething or address. >> thank you for your time. staying on banks, citigroup has revealed it is facing a criminal

probe into the bank's fx business. it took a $609 legal -- it took a $600 million legal charge. cooperating with officials and regulators. bnp paribas beat estimates, sting of her the u.s. sanction violations. still waiting to hear if the u.s. department of labor will grant a waiver that will allow it to continue serving clients after sentencing. caroline connan spoke with the cfo. >> i would qualify these results as a good performance. both in business and geography. inis on the back of growth fixed income, international retail, and specialized insurance ande security services. also noteworthy is the cost of risk, which went down by 9%.

we've closed to deals. another ince and poland, we are very pleased. finally, there's also a balance sheet that is rock solid. certified by the ecb and the aqr. you easily passed the ecb stress test. was notyour fine accounted in the stress test. does that mean your capital ratio is more stretched? 10.1% is you see what you get. the template 1% includes everything. , thecludes the aqr analytical review of the balance sheet. it includes the acquisitions and the fine. what we have now is template 1%, it includes everything -- what we have now is 10.1%, which

includes everything. >> the french, italian, and german economies are slowing down. look at investment going on for structural reforms. that is in negative territory. an indicator that you would like to see pickup. of the the bellwether banks, you see that he pickup is not really materializing. one of the things which could thely be instrumental is teltro. it is focused and contingent on that indicator picking up. that could be working well. we are reviewing how this can work. we will be participating in the in supporting growth going forward. >> your french revenues are down

2.2%. what are your concerns about the french economy? by lowce is being phased interest rates, which is that is weighing on it. there are some regulations with to it that have been since 2014. you have to focus on your clients and efficiency and reap riskenefits of our management to a low cost of risk. joining us in paris with more. he spoke about the massive u.s. fine. that ourin problem is type of the $8.9 billion fine bnp got in the u.s., they are facing a dollar band on some oil transactions.

that is the problem in 2015. the cfo told me he's not planning to abandon these activities. each site will have to find a solution. bnp is working on a solution for dollar clearing for each site. as you are mentioning, bnp is waiting for a waiver for department of labor to continue serving clients in the u.s. a says it is normal that process is taking time. there is the remediation period that could run until 2016. the dollar clearing activity is something that is at the very end of the process, remote from the client. bnp is now planning to hundred million euros to improve compliance. the cfo told me the situation is not preventing the bank from oning buought

acquisitions. larger acquisitions might be complicated, i time when regulators do not want to see large banks. >> thank you so much. caroline connan on the latest with bnp paribas. on terms forreed storing natural gas exports to ukraine. this and a standoff that could have left ukraine facing heating shortages over the winter. joining us now from moscow with the details. is there a risk of this gas deal breaking down? >> it looks pretty firm. it has taken so long to get where we are today. of the science have an interest in it breaking down. there were some difficult compromises and i think you will find that this deal will stick. >> what side made the most concessions to get these negotiations through? i would say it was fairly

evenly spread. the russians have agreed to restart supplies after getting payment of only $3 million for past debts. they have said they were owed $5 billion. that is still subject to arbitration in stockholm. that had been a sticking point. have agreedrainians to the russian terms. the price is a little bit below the $385 at the russians were seeking. the eu has had to take on some responsibility by acting as a guarantor, and a sense, of ukrainian payments. >> does the deal opened the way to a wider settlement with ukraine? >> there were statements made overnight by european leaders, angela merkel and francois hollande, telling russia that they hope this would lead to the

implementation of a minsk agreement. these were agreements that yielded a cease-fire in september in ukraine and are supposed to lead to some kind of an overall settlement. unfortunately, that process has barely moves forward. cease-fire,the there is fighting continuing. much less than before but you cannot say it is a full cease-fire. there is a potential spark for more confrontation that could come this weekend when the rebel regions will hold elections. the european union has denounced them as illegitimate. some press reports that the eu might consider further sanctions. much, bloomberg news in moscow with the latest. we will be following this to update you. coming up, the bank of japan's halloween surprise.

should investors be spooked? ♪

>> welcome back to "the pulse." streaming on bloomberg.com. to the top story of the day. shock and all in japanese market. japanese stocks at a seven-year high as the bank of japan

announced further easing and the nation's pension fund doubled its goal for domestic holdings. let's break it down with chief economist at mitsubishi. abenomics on steroids. give us a sense of how this is going to work. abenomics has not quite work. they needed to do something so that the markets had a bit of life in them. >> in washington they say nothing succeeds like policy failure. we are seeing that in japan. abe economics has not worked. seeing more of that same type of monetary experiment. not a verys is important decision has to be taken by the end of the year on whether to implement the sales tax increase next year. this is a bit of face-saving compromise between boj and abe. in exchange for further

stimulus, abe can go ahead with the sales tax increase. >> the bank of japan is a real suprise. >> most people expected this to happen. to with thee pension fund, which is a political move. the pension fund is huge, the biggest in the world. it is as big as the mexican economy in terms of the value of money it can manage. a political decision. they are taking more risk by buying stocks instead of bonds. >> that is to boost the returns of the pensioner. get -- who going to was not going to get much if the bank kept investing in jjb's/ 5% will go into the japanese stock market. we have to be conscious about hyping it up. the million dollar question

is exactly what you are saying. talking about the tax increase. when does it start filtering through the real economy? nobody really knows. >> we are not seeing inflation. we're seeing an underlying rate of about 1% that will follow next year. the global situation has inflation falling. 'sdo not believe today halloween surprise is going to change that dynamic. currency markets are very sickle. if we see further downward in u.s. bond yields, the yen not be staying at these levels. >> it is coverage for a couple weeks, has the third arrow been put in place? >> we are not seeing much in the third arrow. economic renaissance in japan depends on economic reforms at a

macro level. with the u.s. we are not seeing any pressure towards that in the u.s. or japan. >> you are saying today's move is a little bit of -- >> a lot of hype. it is important and it is a benefit if we see fiscal resolution related to that. in terms ofieve monetary or economic history it is going to be a big day in history. >> what you write off the japanese economy? >> no. it depends what happens despite of economics -- despite abe economics first and second areas. there have been good developments one can point to in terms of technological innovation. >> we need people spending. people go out to shop. not necessarily need

consumer spending. you need business spending if you are going to get an economic renaissance. productivity growth and high paying jobs. that depends on the confidence out of print or shut. a lot of monetary engineering and uncertainty about whether will be in year time, that does not increase ernie. >> -- increase certainty. >> thank you very much. coming up, philip kitty turns 40. she experiencing and that crisis? details later this hour. ♪

>> welcome back to "the pulse." life on bloomberg television and radio and streaming on bloomberg.com. let's check in on the markets. jonathan ferro. we had shock and awe from japan. we don't know if it is going to work. >> what did economic fundamentals mean for stocks? look at the map in europe. , a jump on the dax. the ibex also up. was reduced to stimulus by the bank of japan. the other was adjustments made to the $1.1 trillion japanese

government pension investment fund. what does it mean for europe? in the bond market, yields lower in italy, spain, across the board. italian yields down by seven basis points to 2.5%. will boostn fund foreign debt holdings to 15% from 11%. credit agricole, that could support european bonds across the board. after in europe doing well. elsewhere, looking at fx, one trade -- dollar-yen, but i 2.24% biggest move%, since april 2013. euro dollar.-- cpi could disappoint. >> that is coming up in 35 minutes. thank you.

follow me on twitter. @flacqua. discussing all things japanese with the double whammy from the bank of japan and the pension fund. back in two. ♪

>> welcome back to "the pulse." lacqua.cine let's get straight to our top stories. the bank of japan has announced a surprise expansion of its target for monetary stimulus. agreedrrow vote, the boj to increase its holdings of government bonds to 80 trillion yen, $575 billion. sending the nikkei to its highest level since 2007. standing by for the release of the euro zone inflation number

for october. it is expected in the next hour. it comes a month after the inflation rate for september hit a five-year low of 0.3 percent. also coming out our figures on the eurozone unemployment. approaching, russia has agreed to terms with ukraine that will restore russian exports of natural gas, which have an halted since june. eu leaders who brokered the talks said they hope the deal will improve ties between the two countries. the agreement comes as pro-russian rebels in eastern ukraine stepped up attacks on government -- stepped up attacks on government forces. let's talk about technology. sony posted second-quarter numbers. losses ballooned for the quarter ending september 30 but still came in lower than analysts expected. the japanese company dialed back its smartphone sales target for the second time. let's bring in research director for european mobile devices. thank you. it seems that sony cannot quite

get it right in a number of things. now we are concerned about mobile devices. >> correct. their shipments are very flat. compared to last year. europe,ions in western which is the biggest region for their mobile phone business, a decline from last year. in japan, its home market, shipments declined 63% compared to last year. definitely challenging. the reason for that is because they mainly try to compete directly with apple in the high of the market. and they struggled to convince apple users to move to the sony device. on the low end, they are facing fierce competition from the chinese makers. >> i was going to ask you about chinese makers. you have apple as you are on one are, makers like xiaomi popular in the asian market. how do you face that?

is it a problem with price, a problem with the device? do they have to change strategy and go for the lower end? the market is changing dramatically. wave ineeing the second developed markets where those users who do not really want a smartphone, they will end up buying a smartphone because there are options. those users will look for the cheapest smartphones they can buy because they do not see value. on emerging markets, consumers cannot afford the iphone or the , those markets are difficult for sony as well. they have a much higher asb. sony's average selling price is $390. which is 3 times higher than xiaomi's average selling price. new brands emerging around the world, not just in asia but also

they focus on price and are trying to provide the best quality they can give to price.rs at the lowest because they do not have the same r&d investments as companies like sony or samsumg or apple, they can provide affordable handsets. that is what is attracting users. >> where does that leave sony? how do you face this? is there ain't a in the market where they can take advantage and get new customers? should they abandon the strategy? >> not necessarily abandon. thehe first quarter, smartphone market increase 25% year on year. the market is growing. and inrowing in regions segments that sony is not yet attracting properly. probably with a similar quality of handsets but lower price points. strongs a very

proposition in terms of services. bundling the current devices with a much stronger offering in terms of services. offering movies and music and games on their handsets, they had a unique bundle they can provide. they need to provide all that offering, not just on the high-end of the portfolio, but also on the medium and and low and tiers. they need to do it, otherwise it is difficult to compete with makers that are basically providing extremely affordable prices. device by sony. they need to unveil something that youheap to make tempe for an compete -- that you can compete with chinese makers. >> not the same price level as xiaomi. they have had been addressing the mid tier.

waterproof.s they need to expand the number of devices in mid range. the number is very limited. they need to expand the number of devices in the midrange to have a wider proposition for end users. >> thank you for joining us, research director for european mobile devices at idc u.k. happy birthday, hello kitty. celebrating 40 years on the market. earnings are down. is a midlife crisis to blame? after the break. ♪

>> welcome back to "the pulse." life from bloomberg's london headquarters. hello kitty turns 40. 's feline phenomenon facing a midlife crisis? paul allen reports. >> sometimes, it feels as if hello kitty is everywhere. in every country and on everything. model is toiness think.

after starting out on a coin purse in japan in 1974, sanrio licenses her image rather than making products. and has ensured she stays on trend by. with all the right people. >> -- by appearing with all the right people. it has made a billionaire of the company's founder and earned sanrio $750 million last financial year. sanrio will not reveal how much is down to hello kitty. is having an existential crisis. she is not really a cat. she is also now only japan's third highest grossing cartoon character. in her homeland, she trails mickey mouse and a superhero roll.head is a bread shares dipped after a change in strategy.

plans to move away from the licensing model to more expensive retail. despite the setbacks of middle age and the mysterious facial expression, hello kitty retains a strong connection. paul allen, bloomberg. >> for more on hello kitty, i'm joined by hello kitty fan and author of the book, "hello kitty: the remarkable story of sanrio and the billion-dollar feline phenomenon." explain the global appeal of hello kitty. >> it has a lot to do with her minimalist design. unlike mickey mouse or snoopy, does not have an elaborate back story. over the years, she has been a mirror for reflecting back what you want to put into her. early on, in the 1970's, she had

a british cachet, which was very popular with young japanese girls. now she is kind of an anti-fashion icon to some people and a popstar-glitterati emblem in the west coast of the u.s. it is a variety of meanings that has made her such a long-lasting brand. >> i'm intrigued. when you look at the licensing, she was basically -- it was a franchise with 50,000 products. something crazy like that. >> right. she is everywhere. very ubiquitous. it was a very shrewd commercial in the lastsanrio 15 years. you are offloading the risk of manufacturing and distributing the product and then taking in the royalties from it. it led to very big profit margins for the company. >> give us a sense, i used to

play pac-man. intohat is coming back fashion. hello kitty, will it have to disappear to reemerge stronger? know.on't she is showing her age. they grow up so quickly. i think they are stretching a little bit to keep the brand alive. reaching into new markets. they are now developing a product line for men, which is extraordinary. a lot of men have a gag reflex to hello kitty. whether they can keep the momentum going long time is a very interesting question. i think hello kitty will be around, but will she be the profit driver for san rio is another question. >> how far has hello kitty ?emained >> she is controversial for different groups of people. there is a contingent of feminist observers who have had

problems. they think that she encourages passive behavior in women. you can find websites that kind of torture hello kitty and make .un of her >> how does she rank, barbie comes to mind. you mentioned snoopy. how does she rank? you also see grown women buying hello kitty, which you would not with barbie. >> she is global. she is one of the great successes.oods in japan she is starting to fall off. there are other care there's that are now more popular -- there are other characters that are now more popular. if you added up all the revenues that mickey mouse, the iconic disney character, has developed, i don't think she would come close to that.

she belongs in the character hall of fame, no question about that. >> great heavy you on the program. what a fantastic story. for more on the business of hello kitty, we will bring you an interview with the chief operating officer of sanrio, the company that owns her. tonight at 9:40 p.m. and theer company news world's largest advertising company, posting third-quarter sales that be estimates. 3.1% from awpp rose year earlier, growth in continental europe and emerging markets offset slack from north america and you can't -- and the u.k. 1.2% forearnings rose ab inbev. the company said 40% of the drop in beer volume stemmed from europe.

citigroup has revealed it is facing a u.s. criminal probe into the bank's fx business and then it a $600 million legal charge that forced it to restate third-quarter results. citigroup says it is cooperating with investigations. and iberia owner iag posted third-quarter profit at most estimates. the outlook may be brighter. here is our european business correspondent, caroline hyde. a kickoff with those products. they were not so great. >> this is a company that is hugely outperforming most of the industry. profit up 31%. missing estimates but up 31%. this while the big competitors, air france-klm, the biggest player in europe, has been hit by strikes and profit slumped in the third quarter. lufthansa announcing its second profit warning in five months. homegrown crises, strikes and the like.

external, political crises -- ukraine and syria. third-quarter profit manages to gain so much and they raised therefore your target. traffic for this year for iag could rise as much as 77%. >> how did they outperform? >> it seems to be a question of discipline, or so brags the chief executive. it is arguable that they have had all their crises ahead of the curve. they were facing the discounters quicker thanyanair the likes of the funds a. they had to react faster. iberia, theyk over started slashing jobs. now that unit in spain has turned a corner and they are posting a profit. they struck more modest pay negotiation tactics and were

able to get the strikes done with and start renegotiating with the pilots. they scrapped their worst-performing operations. what is really interesting is they have added in terms of capacity while the rest of the big competitors are retrenching because of middle eastern carriers and be discounted. they are adding capacity and adding flights to the u.s. they are adding aircraft that are able to cut costs 4.5%. that is excluding fuel. fuel is down 7.5%. what took my breath away was that per employee, they are up 11% in terms of efficiency. how are they incentivizing? they seem to be pushing workers. >> it may be a personality thing. the ceo is a force to be reckoned with. one of the big captains of industry in europe today. >> he is a character.

interesting also what we are working out is what he has been vocalizing in terms of the stresses he is coming under he brags they have the best discipline. interesting that he is not playing up the ebola crisis. we heard from labonte -- we have heard from the funds of -- we have heard from lufthansa , talking about ebola. hasie walsh is saying ebola not affected us in anyway. eight how to stop flying to liberia, he said that was a factor of demand. no mention of ebola. only positive outlook in terms of the future and the overall profitability of the company. a question of personality. interesting that the other big character in the market is the only went to outperform them share wise , ryanair. >> i would love to have a debate with both of them. thank you, caroline hyde on iag.

clean energy vehicles gain ground. the u.k.'s first electric car club come after the break. ♪

>> welcome back to "the pulse." television andrg radio. streaming on bloomberg.com.

the u.k. has its first entirely electric pay-per-use car club. designed to provide members with the convenience of a full-sized private car without the high cost of owning one. here to speak more is ecar's cofounder and managing director chris morris. you are not the first such in the world. paris has one. i'm going to ask you, we are aboutg -- when i think it, my concern would be repair and maintenance. you do not have that problem. >> no, we do not. it is common across all electric vehicles. there is little to go wrong. there is no motor, there is no electric engine. maintenance costs are low. it is one of the many issues the electric vehicles public has, in practice they tend to dissolve. >> do you have a main concern?

scalability or how you grow this and bring it to a bigger market? >> we are a young business. we have all the consent that go the fundraising being one of them. my biggest challenge of the last few years has been the installation and reliability of charging infrastructure. been a phenomenal drive in the u.k. over the last three or four years to install charge ports. 3000 around the country. which is good coverage. ensuring they are in the right locations and functioning adequately has been a challenge. i think that is part and parcel with operating an embryonic sector like this. become?ig can this do you want to keep it niche or go big? >> the last two years has been about establishing operational proof of concept. showing that we could do this under this model. and that economic proof of

concept, showing we could do this in a way that saves members and businesses money. we feel we have ticks those is about scaling the model. we operate in london and five or six counties of the east of england. we plan to grow quite rapidly 32015. having in excess of 200 vehicles on the road by the end of next year. >> which is why you need funding. >> the model is finding itself, to some extent. we were able to work with partners who are keen to promote electric vehicles. authorities,local universities, housing associations or other such organizations. we can get core use of those vehicles from day one and build the private usage around that. as a result, the vehicles are well used and breaking even. we can scale quite quickly. >> rate to have you. it is a great model. we will see how the funding goes. chris morris from ecar.

for those listening on the radio, "the first word" is next. a second hour of "the pulse" is coming up. shock and awe from japan. we break down the inflation and unemployment numbers. we will be talking to rbc's chief european economist. are talking about japan. whether what we saw in the translate into real growth. and then russia, if russia's rate decision, heavily seen huge slides in the ruble. we talk about what it means for the russian economy. then we have the great interview harrisr reported caroline connan did with the bnp paribas chief financial officer. we've seen at lot of things having to increase provisions for foreign exchange probes. what does it mean for the banks

reporting next week? follow me on twitter in the meantime, i am @flacqua. back in a couple minutes. ♪ . .

>> this is "bloomberg surveillance." japan stunsof markets, ordering more stimulus. europeworldwide surge as

and japan fight deflation. and working to get out the democratic faithful, republicans attempt to run up the score. and america, well, they do not care as long as ebola is not in my back yard. good morning, everyone. this is "bloomberg surveillance." we are live from our world headquarters in new york. it is friday, october 31. i am tom keene. joining me, scarlet "red riding greeley isnd brendan here as well. what a day. >> absolutely. let's start with japan. in a surprise move, the central bank announced more stimulus measures. the bank of japan boosted its asset buying for the first time in a year and a half. stocks climbed in asia and are up in europe. meanwhile, the yen fell almost 2% against the dollar. it is now its lowest level in almost seven years, passed $1.11. it looks unlikely