betty: the fed turning its attention to the balance sheet. john williams says cutting back assets will not upset the market. toio draghi is the latest say the u.s. is wrong on trade. he says europe cost recovery may be threatened from abroad. >> japan changing the way it pushes wages and inflation. this hour brings the latest jobs and retail numbers. vietnam is the first

southeast asian nation to meet with president trump. we have the world covered here on daybreak asia and we will be live and across the region to get the latest market reaction. betty: as we mentioned, we are going to hear from the prime minister ahead of him meeting with president trump and why one of india's largest tech services companies is worried trump's policies will hurt the center in india. this is daybreak asia, coming to you from u.s. and asia headquarters. i am betty liu betty liu in new :00k, where it is after 7 p.m. yvonne: i am yvonne man in hong kong. why is he so worried about inflation? his counterparts have overlooked the last two months in recent weakness as a fake. he said missing the 2% inflation target does raise questions. what does that mean for this?

it could impact the role of the balance sheet. that could be key. betty: we have a guest coming up that says the fed has been excellent in terms of broadcasting how they will reduce that balance sheet. yvonne, let us come quickly into my terminal and look at my favorite function when we talk about this. w.a.r. p -- wirp. chance that we will see a rate hike. how many is the question now. by the end of this year, we will have 49%. we will have one rate hike. have two. we will the big uncertainty is three. 9% as indicated by fed funds futures. three more, i should say. in total, it seems the fed consensus is we will have two more this year, but it does not seem to be a sure thing. is closee said the fed

to where it needs to be on the policy rate. we will see what that means beyond june. let us check in on markets. all quiet on the western and eastern front as well. taiwan, back on mine today. hong kong closed for the dragon boat festival. we are seeing new zealand flat. futures across the board. we have seen the aussie holding onto three days of losses. the currency being weighed down by iron ore. crude kissing $50 per barrel. down inventories as the summer dragon season gets kicked off. yeah, not budging at all for the nikkei 225. as we look ahead to the

japan data coming up later on this hour, at the bottom of the hour. atest with rosalind chin with preview of that because we are talking about the jobless rate, household spending. we did see that -- we are expecting it could tighten even more. rosalind: we have already seen japan's business at 220%. that was the lowest in decades, since 1994. there going to look at ratio which will increase very from 1.45. 1.46, up this ratio is a measure of tightness in the job market. there is a slight increase in the number of jobs propaganda in japan. it has led to changes and

practices in terms of hiring. all of this pointing to some kind of good news for the boj in terms of the tightness of the job market. hiring ining temporary workers which has been big. they cannot fill the jobs they want a temporary workers, so they are starting to put in more permanent positions to get paid more money. the push of course will be whether these consumers actually are opening their wallets. 143, youok at g #btv can see the jobless rate is continuing to fall. it has obviously been about the same in the last two months, but it has been falling. there is a trend. the jobs to applicants ratio has been increasing. positive outlook generally.

help theg together to boj's ambitions in fueling inflation. yvonne: what about household spending and retail sales? those are out this hour. what are you expecting there? rosalind: weight increases, which we are seeing. that is not necessarily the case. we are taking something similar, down by 0.9% according to bloomberg surveys, according to bloomberg intelligence for household spending. there have been strong on a sales and conveniences. there is hope that maybe there will be some uptick in terms of household spending, retail sales month on month estimated at

-0.2% for the month of april. yvonne: thank you so much, rosalind chin. we will be watching those numbers for more analysis. we will be joined by a former doj policy board member. >> also currently a professor at keio university. first word news with ramy inocencio. ramy: thanks very much. first up, a boost in the value of foreign currency denominated asset schemes. the bank of japan making up for the near $2 billion losses suffered in the first six month of the year. the bank had net income of $4.6 billion. the 9% fall in the yen over the second half helped the boj by reducing losses from foreign currency holdings. the san francisco fed president, john williams, has told smallerg he sees a

balance sheet, starting with a baby step of unwinding before the end of 2017. policymakers say they will reduce the bank's assets gradually. he said the process will be "boring and in the background." theiven my own view of economy, where i see interest rates going, i expect it to start the normalization of the balance sheet, the 80 step later this year. that will take several years to step later this year. that will take several years to allow the assets to mature and .decline ramy: the u.s. might be heading down the wrong path on trade. speaking in brussels, the ecb president said the euro zone economy is strengthening, boosted by consumption and export. he added that the biggest threat are external, echoing angela merkel's comments at the e.u.

draghi said he will maintain policy to safeguard that recovery. for domestic price pressures to strengthen, we need very accommodative financing conditions, which are themselves dependent on a fairly substantial amount of monetary accommodation. ramy: the u k pratt minister, theresa may, and jeremy corbyn, have taken part in a live tv question and answer session. the general election to 10 days away through the two differed over potential payments due to europe under brexit. the prime ministers said it was not a question of pain to ensure a good deal, but the labor leader said he would hand over what is legally required. statekkei news says japan backed a turnaround fund. western digital is toshiba's joint venture partner in a flash memory business through the two companies have been locked in a dispute over the chip unit's

sale. western digital is reportedly planning and $18 billion offer for toshiba's memory chip unit, which is much lower than other offers. 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. yvonne. yvonne: thank you. vietnam potpie minister is set to meet president trump this week. an exclusive interview with him on what he is effecting to bring back from washington, coming up. betty: up next, making a case for the economy and rate hikes. we will sit down for an exclusive interview with the st. louis fed president. his thoughts on the plans to reduce the balance sheet and how many rate hikes do we really need here in the u.s.? this is bloomberg. ♪

betty: this is daybreak asia.

i am betty liu in new york. yvonne: i am yvonne man in hong kong. bmw is said to halt car production in china and south africa for at least one day as it grapples with a shortage of steering parts. production at the plant has been suspended since friday. the facility in unit has been affected. thes being reported that problem stems from an unidentified italian supplier, which has been unable to make the deliveries required by bmw. betty: warren buffett has bought a 3% stake in german chemicals whose shares soared in frankfurt. the stocks rose by almost 7% at berkshire hathaway. one of the company's tops it shareholders. it is transforming itself into one of the leading makers of lubricants and flame retardants. yvonne: mitsubishi ufj is boosting the rising cost of funding overseas expansion.

they have appointed 50 relationship manager is at its offices outside of japan to attract more corporate deposits. the bank is extending over seas. negative rates are sapping the profitability. reducethe fed expects to its balance sheet this year, a process that could take around five years. let us discuss all of that plus the potential impact on the markets and the general health of the u.s. economy with james bullard and kathleen hays. she is joining in on this conversation. so great to have you back on our air. all across from the waters. from me, let us start with john williams and his comments about the balance sheet being a very "boring process." it is your to be quite orderly. i'm curious to know what you make of that? all of us in the u.s. remember

the taper tantrum of 2013. do the conditions look like we are going to avoid something like that again? james: i do not think we are going to have anything like that again. that was a communications problem, not a problem with the actual policy. if you recall what happened in 2013, when we actually did the taper in december 2013, market id not react very much, so think, if we communicate effectively, and i agree with john's comments that this is baby steps, that the runoff in the balance sheet will go very smoothly. it is going to be managed, slow, and it will take quite a while. anchor: jim, you mentioned that the key rate is closer to the appropriate level. can you elaborate on that? does it mean the fed can raise less than is projected now? yeah, i think a good

thing about unwinding the balance sheet is that it will create policy space of the committee in the future if we rate it'snd on the all, i think that we are not very far from an appropriate rate for the u.s. economy that will keep inflation not too far from target and the labor market performing well. what i disagree with is the idea that we had to hundred basis points higher in order to get -- 200 basis points higher. i think we can say about where we are, possibly just where we are today. anchor: i had to follow-up on this question about the markets taking balance sheet reduction in stride. we know there are no details yet about where the caps will be set on how much can be rolled off every month. jpmorgan is saying they think it will be $12 billion to start. they give america a merrill lynch is saying $5 billion. the market does not have a

blueprint for this. neither do you. there will be a big source of demand removed from the situation because the fed has been buying so many bonds to replace the ones that are rolling off. i guess it will be predictable. i guess it will be fully committed get it. i wonder why everyone is so sanguine that this will be no big deal to the bond market. think yeah, i just do not the numbers are big enough to really have a very large impact. there will be some impact, but it will be relatively small, and to the extent that there would be months where there would be a lot of rolloff, we will put them caps on that to keep that under control, so there will be a sort of maximum that markets would face in any particular month. to thect details are up chair. we will let her make the call on that in conjunction with the markets desk in new york. anchor: jim, i want to get back to the issue of rate hikes.

is it one or two this year? i know you are more on the former than the latter. i want to bring up this chart for our viewers. i'm not sure if you can see this. it it is basically showing what kathleen have been talking about. market,got a hot jobs but our inflation numbers seem to be cooling, whether you are looking at pce, cpi, or core cpi. i'm curious why you think -- you know, why is it that you are the outlier among the fed speakers we have seen. we hear from john williams and others, who echo what seems to be more of the consensus, which is two more hikes this year. what are you seeing that they do not? james: yeah, i think that is inflation numbers have been a little bit surprising so far in 2017. you can see that chart, they are all down on a year over year basis. we have been arguing that we are making progress toward our 2% inflation goal, but these have

been going in the opposite direction in the early months of 2017. i also think come in the first quarter, we got a relatively weak gdp report. it was revised up a little bit, but even with that revision, i think the first half of 2017 ordinary gdpively growth of around 2%, so the idea that the economy is growing a lot faster, and this will push up inflation, i do not think it is matching up with the numbers we are seeing. furthermore, inflation at fixations actually are starting to decline after our march rate increase. that is important to keep track of as well in this discussion. anchor: jim, this feature gave, you talked about the fact that inflation has been missing the target for five years now, and

it is 4.5% below where it would have been otherwise. we have a chart we threw together. it is #8948. it shows volatility in inflation. the core headline going back to 1995 through 2012. is the fed at risk of being blamed for missing the inflation target? for not letting the economy grow fast enough? because it has been missing that target so badly the last five years, when the economy is in recovery. it is past the great recession, and the fed is talking about more and more rate hikes. james: i put the title chart in my speech. the trend i like to look at is the 1995 to 2012 trend in the u.s. i like to start in 1995 because that is about the time where the consensus formed that we would target 2% inflation, and as of 2012, when i originally used that chart, we were right on the price level path, and that gave

me confidence we had pursued a pretty good policy. of course, right after i gave that, the price level started to fall off the past, and the last five years, we have drifted lower because inflation has not been at a 2% target. now, the price level is almost 5% off the price level path, so if you think that the price level targeting is optimal with monetary policy, which is what a lot of theory tells us, you know, it does not look as good today as it did when i first started talking about it in 2012, so it made me a little bit concerned, a little bit worrisome that we are off that path. anchor: is there a risk -- anchor: jim, i want to -- anchor: go ahead. anchor: what is the risk of raising rates so much? are you saying the fed could tumble us into another recession? what is the fed playing with here? fire or something they should be

thinking about where you should thinkingng about -- about or you should be about? james: they will off at the period where you ran below. people on the committee talked around this in speeches, in various ways. know, this goes on for five years, and it starts to add up. it is one thing if it is a couple of quarters. you have quarters above target. this is quite a while below. i myself was expecting that with firepower, we would hit the inflation target sooner than we have, and that we would possibly overshoot for a while droid so far, that has not happened. so now that we are in a tightening cycle, the concern would be that you push the price level even further below the price level path, and that will not be the best policy. when it comes to the

firepower, we are not seeing that reflected in financial conditions. in fact, since the last rate hike, we have actually seen conditions ease. we fill up a chart to show you. we have seen the dollar has weakened, stocks continue to rise at record levels. the international outlook is looking better when you have worries of potential economic and political shocks out of china. europe seems to have receded now. can the fed still do more this year? i think younow, have to be careful and your viewers have to be careful about interpreting these financial conditions, indexes, so the equities are up a lot in the u.s. since the u.s. election. a loterpretation is that of that is in anticipation of corporate tax changes and possibly a personal tax changes , andare afoot in the u.s.

all by themselves, those tax changes when revalue the u.s. corporate sector on the order of 10% to 15%, which is about what has happened since the election. i think thehat, rise in equity prices cannot be interpreted quite the way it would be in other times when the market might foresee faster growth in the u.s. or other factors. on the dollar, the thing about the dollar is you have always got a question of what the other , andal banks are doing what was priced into market previously, so in the current environment, the dollar has weakened a little bit compared because of the changes in perception the policies of other central banks in tandem with u.s. monetary policy. anchor: it has also weekend perhaps, jim, as well, with -- weakened, perhaps as well with

what is going on in washington. consumer confidence. are those numbers -- they continue to go up, not bringing spending long. a virginclearly on past. consumer confidence remains high, but i am curious if you think that that is on shaky chaos outwe see more of washington, more distraction for president trump. do you think that eventually, if we see more of this, the fed will have to consider that impact on confidence? not just consumer confidence, but business confidence? yeah, i think the business confidence number shot up after the election. the president was perceived as more pro-business than the previous administration. you know, washington does how to deliver at some point, and i think that is a concern going forward whether the honeymoon

point,would end at some and may be the reality of american politics would settle in. we'll see if that happens or not . i think the jury is still out. anchor: i want to ask you quickly about unemployment through the phillips curve. wages have not accelerated very much. you have another chart, #189, that shows an implement gone down and wages have not accelerated very much. they seem to have pulled back down again. the fed is looking for something that is not happening. is this another concern? how can you justify being worried about inflation or continuing to raise rates and remove stimulus? james: yeah, i think the wage increases are very consistent with trend growth story of 2%, which is the one i have been telling. you only have .5% increase in labor productivity in the u.s. over the last several years annually, and so half a percent

plus 2% inflation target would give you 2.5% on compensation, and those are the kind of numbers we are seeing, so the way i like to interpret things is we are growing at 2%, wages are growing known away -- growing in a way that is consistent. inflation is below target, but the trend growth rate is not going to be enough to push inflation higher, so we have to be careful in this environment with our policy, not get out in ourt of ourselves, and in attempt to normalize u.s. monetary policy. anchor: great to have you, jim bullard, joining us from tokyo. i want to thank kathleen hays, joining us from new york. vietnam potpie minister will be the first southeast asian leader to meet president trump. himear exclusively from

ahead of his trip. this is the word.

7:30 a.m. tuesday in hong kong. a gloomy picture, but plenty of people out for the dragon boat festival. i want to wish our dragon boat uck this morning. betty: good dragon boat race. it is 7:30 p.m. monday, here in new york. a little bit of a cloudy memorial day holiday. i am betty liu in new york. yvonne: i am yvonne man in hong kong and you are watching daybreak asia. breaking news now. latest job makers out of japan, crossing the bloombergs or yet another tighter labor market in japan. so as expected,

in line with expectations. the number for the month of april comes in at 2.8 percent. up the third month at 2.8%, the lowest since 1994. what is interesting, if you look at the job to applicant ratio, that has come in at 1.48. estimates were for 1.46. we see an increase in the job applicant in japan. we do not know of course whether it is because there are fewer people in the job market for various reasons, being one of the factors there. if you look at household spending, that has fallen down 1.4%, against estimates of .9% in the previous period. it was down 1.2%, a bigger drop than expected. a 14th month.p a bit of a blow. we are relying on increases in wages. deflation toy spur

get wages increased and therefore spend more. we are seeing some wage increases. there have been modest rises in it does not seem to have been the case for the month of april with overall household spending down 1.4%. we are looking closely at that. why are people not opening their purses in japan? we are seeing an increase in terms of number of people in permanent positions in japan, which generally tends to pay better than to burn jobs. temporary -- than jobs. why are people not spending? there is a slight increase of optimism in terms of how the economy is doing. anchor: the conundrum in the u.s., why there is very little weight growth. that is a quick look at japan job numbers. as you just saw, the japanese yen not doing very much. currency markets -- the traders

are reacting as these numbers are favoring household spending numbers. they trade and react to this. take a look at other markets and what else to watch in asia. vivek,ection car -- what else is on your radar? >> people will be looking at this in the 50's price range, and really, with the holidays in china and hong kong, and memorial day in the u.s., trading volumes have been there. market will be looking to europe for direction enter whether mario draghi has said the euro area still needs stimulus, and

so, that affected the euro, obviously. thin trading so far. that is what markets were like yesterday. i imagine that will be the case for going into the europe day-to-day at least. anchor: you have been tracking these interchanges announced by msci that take effect tomorrow. the ones that have lost out. how are those stocks doing? it has not exactly been a doomsday scenario yet. no, this time around has not been. some of our colleagues in hong kong created these stocks. to bees that are due ci index ishe ms tomorrow. cathay pacific is one of them. a lot of it is obviously company-specific. and investors really do look at these index changes because, you

know, depending on how their funds that chapter, they are pulling in and out of these stocks. cathay pacific is showing a focus group on an australian stock that is being removed from the msci. indexes are up since the deletions were announced earlier in may. you know, part of it could also traders with short positions. you know, it is like the old american express ad. membership has its perks, but in this case, even not having membership has its perks. anchor: may not be the end of the world. great to have you. vivek shankar joining us from sydney. first word news with ramy inocencio. ramy: thanks very much. we will recap what just happened with the st. louis fed president saying the last taper tantrum was a failure of the medication,

not a policy. speaking exclusively to bloomberg daybreak: asia, james bullard said the economy is close to the fed's targets and the current interest rate level is close to appropriate. he said it is time to consider unwinding the balance sheet, and agreed with john williams that it will be done in an orderly manner. we communicate effectively, and i agree with john's comments that this is baby steps, that the runoff in the balance sheet will go very smoothly. it is going to be managed, slow, and it will take quite a while. ramy: to china, and the country is revising the rules on major investors selling their states through the china securities regulatory commission says investors owning more than 5% of a company who then decide to dispose of their holdings must act in a legal, rational, and orderly manner. before,re is acquired during, and after a sale, and penalties will be imposed on

anyone breaking those new rules. the offshore yuan extended gains. policymakers are becoming less tolerant of a weak currency. the exchange rate surged almost 1% in the past four days amidst suspected intervention from the people's bank of china. the one-month implied volatility is heading for its biggest three-day jump since the august 2015 devaluation. and one of india's largest tech services companies is warning president trump's visa policy will damage the industry. tech mahindra commented as it weaker earnings. net income was $91 million in the fourth quarter, compared to estimates of $120 million. the vice chair said the president's america first policy will hurt the i.t. sector. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.

i am a minas nco. this is bloomberg. anchor: the enemies prime minister nguyen xuan phuc is in washington today, the first southeast asian head of state to meet president trump during the prime minister spoke to bloomberg exclusively just before leaving vietnam and said he aims to convince his host that two-way trade is going to be mutually beneficial. : my visit aimsc to promote the comprehensive partnership between vietnam and the united states for added substance in all three channels, including bilateral, regional, and international. pushing for a bilateral free trade agreement given the u.s. has pulled out of tpp? the u.s.an phuc: after withdrew from the tpp, vietnam and the u.s. have restarted the trade and investment trade agreement, to maintain dialogue on issues of common interests related to economic and trade

matters. respect donald trump's decisions with regard to trade and, we want to make sure we can convince him that this is a mutually beneficial relationship for both sides, and american consumers benefit and prefer the products that vietnam experts should the u.s. market. >> are you saying that you're confident of concluding a free-trade agreement, bilateral free-trade agreement with the u.s.? noting of course that president trump has called vietnam a trade cheat because of the $31 billion trade surplus with of the u.s.? nguyen xuan phuc: there is no cheating in any of the products we export to the united states, whether it be catfish or shrimp, and we have all the proofs to prove it. i would like to stress that besides affording to the united states, vietnam also imports and buys a lot of products from the u.s., including airplanes and engine turbines, down to the

agro producers like miaze. and i can -- like maise. and i can tell you the imports will increase significantly because we will send billions of dollars worth of deals with american firms and import the fall high-value products from the united states that will create american jobs. is there a need to diversify more your trading partners? vietnam is ahuc: big supporter of free trade, and we want to make sure that all people and countries benefit from free trade. we have established at the same time a wide network of partners with 12 currently signed and four under negotiation. i can guarantee you that businesses will not invest in vietnam if they do not see interest in profits.

same for vietnam. reporter: prime minister, you talked about wanting a closer economic relationship with the u.s. what role would you like to see the u.s. play in areas like the south china sea? would you like to see more u.s. presence? nguyen xuan phuc: vietnam and the united states and other countries in the region and the world want to have a south china sea in which the freedom of navigation and aviation is insured, and the convention on the law of the sea in 1982 is observed. reporter: will that require more u.s. presence or not? nguyen xuan phuc: i think that we would need to discuss together with the stakeholders to make sure all parties benefit from whatever action we decide to take to ensure peace in this area.

vietnameset was the prime minister, nguyen xuan phuc , speaking exclusively with haslinda amin and hanoi -- in hanoi. i will speak exclusively with the former hedge fund manager, phil falcone. also hosting a roundtable with the prime minister tomorrow on the investment opportunities in the country. and throughout asia. do not miss that interview i 1:00 p.m. new york time, or 3:00 a.m. if you are watching in sydney, or 1:00 a.m. in hong kong, guys. anchor: coming up next, the st. louis fed president's views with nomura. this is bloomberg. ♪

yvonne: this is daybreak asia. i am yvonne man in hong kong. betty: i am betty liu in new

york. anchor: u.s. policy makers would like to start shrinking their bloated balance sheet by the end of the year. guestpen growth, our next says the fed's communication around balance sheet reduction has been excellent and shall limit the chance of another taper tantrum. you know, we just had jim bullard on from the st. louis said he said the taper tantrum a few years ago was a malcolm indication -- was from communication. do you think the fed is going to execute both on the execution, but also on the committee case and this time? do you have faith in that? executing veryen well. i think they learned a very important lesson from the taper tantrum, and particularly out here in asia and other emerging markets. what happened.

it has huge effects globally. we saw that in the minute last week on just how much more detail and careful they are deliberating how they are going to go about it. my sense is that this, when they do actually start reducing the balance sheet, it will be the most signaled them out there. beene: it certainly has widely broadcast. one area jim bullard and his counterparts do not agree on is how many rate hikes we will get this year. play for you why he thinks that this economy, you know, is not prepared, and more rate absorb two hikes this year. let us listen in. on the rate itself, i do not think we are very far from an

appropriate rate for the u.s. economy that will keep inflation not too far from target, and the labor market performing well. disagree with is the idea that we have to go 200 basis points higher in order to get you some sort of neutral rate. i do not think that is the environment we are in. i think we can say about where we are, possibly higher than where we are today. betty: where do you see him on that? we are expecting a hike in june, and then another hike in september, and two hikes next year. quite a bit different to the view you just heard. this week, it will make it even more puzzling for the markets because we are getting the core pce deflator and that will drop from 1.6 to 1.4. the labor market job report on friday, that will be pretty solid, so it will be confusing,

but i will give you teething reasons why i think the fed needs to get that going and gradually raise rates. one is simply that there will be another recession at some point, and i think the fed needs to move away from this emergency low rate level to be able to deal with that, but i also think is doing morerate harm than good for the economy. i will give you three examples. one, it is encouraging to much risk-taking. it is not mortgage in the u.s., but credit card, commercial real estate, and how much money is going to em. secondly, the transition is being affected because of the low rates which are not good for the banks. the interim company, the pension funds. thirdly, productivity. i would say that is keeping nonviable firms afloat. that is not the productivity as well. overall, the fed needs to move

away from these low rates. as long as inflation is getting close to two, they should keep moving. bring up a jim did point that this is worrisome, not just a fed issue, but in germany, japan, as well. central banks are fight for flex on why these tight labor markets are not giving inflation a lift. is there something wrong with the central bank models on the theory of the phillips curve, or is there still slack in the labor market at the moment? rob: it is true. there is still some slack if you go back to years and asked central bankers what would happen if unemployment got to these kind of levels in the u.s. and japan here at most would argue that inflation would be higher -- wage inflation would be higher than what it is now. , but as long as the unemployment rate continues to grind lower, it is a matter of time before we will see wage inflation pick up. look, if you're looking at

growth, it is not just the u.s.. i would make the point that this is the most synchronized global pickup in growth we have seen for a long time. it is happening in the euro area, japan. i would say, in parts of asia as all, we are seeing exports picking up. it is time to move on, and i think from a risk management perspective, it is probably on the safe side to assume that it is better to move gradually now because monetary policy works with a lag, and wage inflation should pick up given the low rates of unemployment we are seeing in the u.s. anchor: hold on a second jury breaking news out of japan. it across into the bloomberg. retail sales month on month, up quite a sizable beat for the month of april, rising some 1.4%. the estimate was for a drop of .2%. we are seeing a continuing trend of rising retail sales month on month.

year on year also, much better than expected, rising 3.2% for retail trade. that was also a beat from the 2.3% estimate, and an improvement from what we saw in of march. it seemed like it was department store sales and supermarket sales that were a big contributor to this, writing some 1.1%, which is also a beach. looks like a beat across the board for retail sales. we saw the household spending number was dropped, 1.4% earlier. we will get the latest data and see the reaction later on. let us bring that the conversation with rob. i know you cannot talk about bring about tous the fed discussions should we talked to jim bullard about caps with reducing the balance sheet. he said it is not important on where that sits and how long, and how they will adjusted after a couple of months or so. does the mantra care about that on how this starts and how this essentially finishes? rob: i think so, and i think the

caps is a good way to demonstrate to the market over time. again, it is kind of forward guidance to prepare the markets in terms of making sure that the markets understand that this balance sheet reduction is going to happen in a very gradual -phased manner. i think it helps soothe market concerns. anchor: what would be the level? rob: in terms of where the -- anchor: i am saying -- right. in terms of the portion of fed tightening, the runoff, how would that coincide with the rate hikes? is there a monthly cap from other di -- monthly cap for mortgage-backed securities? ab: we did not come up with

monthly cap. at this stage, we are thinking it is going to be introduced at a very conservative level to start with, and they will judge how the markets are reacting to that, and depending on the data as well, how the u.s. economy is doing, and then they will gradually adjust the caps more. we have not come up with a dollar amount at this point. betty: really quickly, jim beenrd did say -- we have talking about what was going on in washington washington has to deliver. we know the fed is data dependent. at what point do you factor in, you know, the drag you are getting from washington? a good point. you know, at this point, it still apply consumer business confidence remains quite elevated. that the a risk

political noise and the disruptions really start to affect the legislative process more. ishink for markets, the risk that fiscal stimulus, tax cuts, get delayed. maybe the financial reforms get delayed. you know, that can have an effect on monetary policy because i think you can argue that the more aggressive the fiscal stimulus, and the earlier it comes, it provides more room for the fed to get on with normalizing. i think that is clearly a risk. anchor: thank you so much. robert subbaraman, chief economist for asia at nomura. we will have much more on daybreak asia. this is bloomberg. ♪

betty: this is daybreak asia. i am betty liu. yvonne: i am yvonne man. inyet reported a 38% fall

profits. india has reported a 38% fall in profits. fourth quarter in a row of falling profits. growing competition from energy such as solar and wind prevented the company from raising prices. betty: tooth and nail competition catching up with a reliant's communication. the stock dropping to a record low on the back of a first net loss. the wireless operator in talk with lenders for sale of its power business. debtuld allow it to pare by $4 billion. yvonne: china surging to a record in hong kong. it is the world's most embedded developer. shares closed --

indebted developer. evergrande business is not sustainable, according to some. betty: plenty ♪

yvonne: japan remains of stuck in neutral. unemployment is low, wages are rising, but they are increasingly unwilling to spend. betty: the st. louis fed manager seeking calm, saying the balance sheet reduction will be slow. yvonne: more policy advice for the white house. tech mahindra say changes are hurting the industry. betty: india and china start trade talks in europe, suggesting asia is the coming more important as the u.s. pulls back. yvonne: this is the second hour

i am yvonne asia," man. betty: i am betty liu. just about 10 minutes ago we had the big beat on japan retail sales. are indeedn japan spending. the not see much reaction in the currency markets. let's see how the equity markets are reacting to these numbers. we continue to see household consumption 14 straight months in negative territory, despite the fact we see a tight labor market. the job toin saw applicant ratio tick higher. kind ofslating to any wage growth, as well as inflation. we ask this question to a guest in the next segment. let's take a look after the market opens in seoul, tokyo, and sydney.

ready slow going. >> a slow start this tuesday. look at the nikkei 225 fighting for a third day. we have the latest batch of data out from japan. household spending mired in a slump. we saw sizable beats when it came to the retail sales numbers. take a look a third day. the kospi maintaining its resilience. we will get into that later. look at the currency station and i will point out what is going on with the yen, looking unchanged. they look to u.s. personal spending data according to analysts, when it comes to whether or not they can contest the 112 level. offshore yuan dropping 0.1% against the dollar. considering what is going on with opec after its conditions to extend its deal

for another nine months. i wanted to show you what is going on with the currency space. seeing modestllar gains as the feds's john williams say three hikes do make sense this year. speak toad jim bullard you guys. he sees the rate staying where it is or just a little bit higher. take a look at what is going on with the euro. it is on the back of shares, along with the dollar and the yen. this after mario draghi's comments of what is needed in the euro area. against of the yen, the euro falling as low as 123.82. that is the weakest since may 19. our analyst says this is performing a double bearish talk. 122.56 a two-week low as . draghi is his usual dovish self.

taking a look at the kospi, something to watch for, it is set for its best month since january 2012. we had warning signs this could be waiting as global signs pullback $2 billion from korean stocks this year. we are seeing bearish wagers creep higher. we do want credit suisse and securities keeping the faith. we want to see a further value of the 6% for the kospi, maintaining its best performance this year against other equity markets. betty: thank you so much on the markets. let's get the first word news with a ramy inocencio. [indiscernible] betty: we seem to have lost

ramy's mic. we will get back to you with the first word news. in the meantime, let's get to the james bullard interview we conducted an hour ago at the federal reserve. he says they have done all they need on the rate hiking path. we are new the appropriate level for the u.s. economy. that was a headline from the st. louis fed president. i want to bring and kathleen hays, who joins in on that conversation and the reaction we are getting so far. kathleen: we are getting a lot of coverage on bloomberg news. he is always very frank, tells you what is on his mind. we thank you for sharing his time on bloomberg television. what i won a look at is the fact he is concerned about the fed missing its inflation goals for the past five years. he also said officials say they are worried about falling behind the curve, labor markets are

tight, wages will rise, jim does not see that. here is one of the things he said. >> the idea that the economy is growing faster and this will push up inflation, i do not think is matching up with the numbers we would actually see. kathleen: let's look at numbers jim bullard is looking at. we want to look at core cpe. the turquoise line is cpe. tok to percent, it is down 1.8 percent. if you take out food and energy it is below 1.6%. it is heading in the wrong direction. jim said you said recently he rates are at an appropriate level, are you worried about the fed hiking rates? are they on the wrong track? here is what he said. we arehe rate itself, not far from an appropriate rate for the u.s. economy that will keep inflation not too far from target and the labor market

performing well. what i disagree with is the idea we have to go 200 basis points higher to get to neutral rates. that is not the environment we're in. i think we can stay about where we are, possibly higher than where we are today. kathleen: we will see how that plays out, if anyone else on the s&p is having second thoughts with inflation falling short. they keep saying, we think it is a temporary blip. another interesting thing in the interview is trump turmoil. a lot of people are watching the turmoil in washington over so many issues. owledged something is going on. he said the jury is out, it is too early to tell. yvonne: the fed will need to deliver on something soon. you mentioned the balance sheet. alert agreed with john williams, the san francisco fed president

that the balance sheet reduction will not cause bond market disruption. they are vocal about how they want to orchestrate this. where they so sanguine about it? theleen: jim said the size fed will roll often not reinvest will be small enough it will not be a disruption relative to the size of the u.s. treasury market, which we said is about $12 trillion. they are talking about losses that could be big. it jim insisted would be slow and orderly and the markets will take in stride. here is what he said. >> if we communicate effectively, and i agree with john's comments, these are baby steps. the runoff in the balance sheet will go very smoothly. it will be managed, slow, it will take quite a while. just a reminder how big that balance sheet is and what it looks like. the white section is treasury

notes and bonds. look to the left, how small it was, about half $1 billion before the great recession. look how greatly it ballooned. you have $2.3 trillion in trading securities and $1.8 billion in mortgage-backed securities. they say it will be trickier because if prices start falling, it could trigger all sorts of things in the mortgage market. but the fed wants to get the mortgage-backed securities office balance sheet. nothing like the taper tantrum of 2013. that was a problem. they did, but communication. it is clear the fed is doing everything it can to communicate ahead that they would communicate more and that everybody knows it is coming. a lot of bond market people are wondering how it will play out. betty: indeed. communication is so important. thank you so much, kathleen hays on the james bullard interview.

let's get back to first word news with ramy inocencio. >> a boost in the value of and the bank of japan, a year profit in 2016, making up for the near $2 billion loss suffered in the first six months of the year. they had a net income of $4.6 billion through march. the 9% fall over the second half helped the boj with losses from for an -- foreign currency holdings. mario draghi warns the u.s. it may be heading down the wrong path on trade. speaking in brussels, he said euro zone economy is strengthening, boosted by consumption and exports. he added the biggest threats are externals, equities. the e.u. and the u.s. are drifting apart. draghi said he will maintain policy to safeguard that recovery. >> for domestic pressures to strengthen, we need accommodative financing conditions, which are themselves the tenants of a feral -- fairly

substantial amount of monetary -- >> taking part in a live tv question-and-answer session with the general election 10 days away. the two differ about the payments due after brexit. the labor leaders said he would hand over what is legally required. japan'sei news says state backed fund is considering joining western digital in a bid for toshiba's chip unit. western digital and toshiba are partnered in the flash memory business, but the two are in dispute over sale. reportedlyital bidding for control of the unit. but that would be lower than other offers on the table. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.

i am a ramy inocencio, this is bloomberg. yvonne: still ahead, india's prime minister starts a tour of europe. this is the start of the asia pivot. next, more on global central bank policy. we heard from jim bullard. moise between former u.s. board member that voted against negative rates. this is bloomberg. ♪

betty: this is "daybreak asia," i am betty lou in new york. yvonne: i am yvonne man in hong kong. let's bring up the latest japan data, the jobless rate and household spending. the boj counting on a tight labor market to boost inflation. at unemployment rate holding 2.8%, the lowest level since 1994.

the jobs to applicant ratio 1.48% righther at now. if you take a look at this bloomberg, it shows exactly that. from aet the latest professor and former boj board member to talk about these numbers. great to have you. it is supposed to be a virtuous cycle, right? 3/4see a positive gap and of growth. holding below -- jobless rate holding below 30% should be rising wages. that not seeing it grow fast enough, why? moment, japan has a it is nottage, but based on labor demand. look at the number of job applicants, it is adjusting significantly. we have a serious labor supply declining.

at this moment we do not see a sharp increase in services because much of it was figured out by hiring retired people or female housewives who are working on a part-time basis. we dos the main reason not see pressure on wages. -- upward pressure on wages. yvonne: it is interesting, because what we have seen, the figures in march was, the labor market was so tight, companies had to fill positions with full-time workers, not just part-time contract jobs right now. the amount of permanent workers rising for the first time since the global financial crisis. that should help in terms of driving household spending. but that did not happen in april, either. sayuri: yes. when you look at real it has beenlevels,

constant since 2012. we see increasing consumption. when you look at real wages, there is no increase in real wages. when you look at the level of real wages, it is much lower than before monetary policy was implemented. upinal wages have not caught . with higher inflation -- not caught up with higher inflation. betty: i want to piggyback on this chart that illustrates that, as well. let's bring that chart again, which talks about these cautious consumers. and as you just mentioned, the wages are growing. would like to we see, as policymakers would like to see. you see low employment in household spending, really fill in the red. is there a trigger point?

how much do wages have to grow by before we start to see those numbers go from red to green? is there a correlation, a direct correlation there? sayuri: yes. first of all, i think households have to feel real wages are really picking up. and that has not happened. second, the household needs to have a higher expected wage growth. sincelso has not happened 2013. we really need to see this nominal wage continue to grow. at some point, nominal wage growth will be higher than inflation. that has not happened for over four years. is there more of a need for japan to do more targeted measures? do they need a one-time jump in minimum wages? there's been talk about tax income. is that is what is needed, instead of monetary and fiscal policy? say we yes, some people

should have a wage-based targeting system rather than inflation. corporateends on sectors. the corporate sector has a high profit over the last four years. they do not use that for providing higher wages, they keep of most of the money in terms of cash. mobilizeo think how to the cash deposits. like u.s. corporate sectors, they are worried about uncertainty. they are wondering how to utilize the money. uncertainty is another important factor contributing to this low wage growth. that cannot be sold out with only monetary policy. betty: they have to really

invest their money. let's talk about the japanese yen. how stuck in this -- it has range for in this 111 quite some time. the fed it looking it might hike two -- i know jim bullard disagrees here. visit resume a fall? sayuri: at this moment, if the fed is going to increase twice -- wee remaining year, have to look at what will happen to u.s. interest rates. if we see further expansion in the differential between the u.s. and japan, it could lead to the decrease of the japanese yen. otherwise, maintaining the current level is the likely

outcome. yen againsteven 111 in the. dollar is territory of the valuation of the japanese yen. still, the corporate factor benefits from the yen's level. yvonne: when it comes to the boj, is it steady as she goes? do they continue to follow this curve control and wait for the fed to raise rates? what is the strategy for the boj, and can they continue this yield curve control and get to that 2% target? sayuri: the problem of this policy is that it could have an impact in terms of increasing the consumer demand in wages. there is a limited impact their. -- there. the demand for credit is limited in japan. it is not very high in japan,

compared to the united states. this monetary policy helps japanese stocks maintain productivity at high levels and yen at the undervalued level. monetary policy is important in maintaining this outcome. sustainable is how the boj policy is. annual -- isurrent not sustainable. they have to change it to the most sustainable level. betty: very quickly -- given your experience, do you see evidence in the u.s. we might be seeing japan 2.0? any evidence we could be following in japan's footsteps? -- the united states is not going to fall into japan's problems.

u.s. fundamentals are far stronger than japan. inflation is much stronger, they still have growth. the u.s. consumers have a strong consumption appetite. all of those things are lacking in japan. there is a tremendous difference between the united states and japan. betty: thank you so much, andessor at the university former boj policy number. we have our interactive tv function. you can find it and watch us live, but also see previous interviews like our interview with jim bullard. dive into securities and functions we talked about today and become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only. this is bloomberg. ♪

♪ ,"tty: this is "daybreak asia i am betty lou in new york. yvonne: i am yvonne man in hong kong. set -- bmw set to halt production as they grapple with us shortage of steering parts. suspended and a facility in munich has also been us -- affected. an unidentified italian manufacturer has been unable to deliver the parts. shares soared in frankfurt. the stock rose and berkshire hathaway's boss became one of the top shareholders. they are one of the biggest makers of lubricants and flame retardants. yvonne: a pharmacy interested in

buying the body shop that has without up for l'oreal price tag of more than $1 billion. they have been invited for a second round. inreal not the body shop 2006 -- bought the body shop in 2006. pretty slow going, the nikkei 225 flat. down a 7.5 points on the board. we saw a tighter labor market and unemployment still at 2.8%. household spending was another side of the miss. retail sales were on a beat. about into the kospi, up 0.2%. seeing weakness and flatness and australia here today. betty: india's prime minister

says his tour of europe -- could this signal a pivot? this is bloomberg. ♪

innne: it is eight: 30 singapore, half an hour away from the opening of trading there. going, noady slow lead in coming out of the u.s. as well as the u.k. markets. the china and taiwan markets coming online today. hong kong closed for the dragon festival. we will see how things go. but i think pretty boring is it safe to say. betty: that is right. many of those major markets closed, there is not going to be a lot of trading going on. but it will be that calm before the storm.

u.s., our markets were off, as well. we have housing data being released tomorrow, as well as a jobs report friday. as it is in japan and other parts of the world, where wage inflation has been stuck, a lot of folks and investors will be watching closely those wage numbers in the jobs report. let's get the first word news with ramy inocencio. >> japan shows a few signs of ending years of draft. the unemployment rate is at its lowest in more than two decades. wages are generally rising, but lasthold spending fell month by a more than expected 1.4%, mired in a slump. retail sales beat expectations in april, showing a 1.4 percent rise. >> households need to have higher-than-expected wage growth. that has not happened since

2013. we really need to see this nominal growth continue. nominal wage growth will be higher than the inflation. that is not happened for over four years since they implemented it. >> to china and the offshore yuan extended gains for a fourth day in a row shows policymakers are less tolerant of a weak currency. has surgede rate more than 1.6%. there was an expected intervention in the bank of china. market, theatives biggest three-day jump since the august 2015 devaluation. meanwhile, china is revising the rolls on major investors selling their stakes. commission says investors owing more than 5% of companies decided to dispose of in a legal,gs rational, orderly manner. the disclosure is required

before, during, and after a sale. penalties will be imposed on anyone breaking the rules. the fed president said the last tapered tantrum was a failure of communication, not a policy. speaking exclusively to bloomberg daybreak: asia, jim bullard said the fed is close to the target and the current interest rate target is close to appropriate. he said it is time to consider unwinding the balance sheet and agreed with san francisco's john williams that it will be done in an orderly manner. >> if we communicate effectively, i agree with the john's comments, these are baby steps, that the runoff in the balance sheet will go very smoothly. it is going to be managed, slow. it will take quite a while. can catch more of our exclusive interview with st. louis fed president jim bullard later on daybreak asia in 10 minutes time, so stay tuned. north korea says its latest missile test involved a new

weapon with a precision guided system and improved electronics. state media says kim jong and oversaw the firing of what be a variant of a scud missile. the firing process was more automated than previously, adding it markedly reduces the launching time. plan toed it had a target, seven meters wide. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am remy inocencio. of this is bloomberg. time to see how the asian markets are shaping up this morning. we have the latest with sophie kamaruddin. >> asian stocks are looking mixed in trading. alonge chinese markets with markets in hong kong and taiwan. i want to focus what is going on in japan, following the data dump this morning. the yen remains unchanged against the dollar, around 111.20.

switching to the red along with consumer discretionary stocks, falling 0.3%. retail sales did see a sizable beat. economists are forecasting the first drop this year when it came to that metric. we have the nikkei falling for a third day. movers, we on equity do have fast retailing, the operator of uniqlo falling over five points. getting 0.4%. this is the data from this morning. a mixed picture when it comes to the economic picture. we have the labor market tightening in japan, which could indicate approval when it comes to wages. but it did not have an effect on spending down the track. betty: as you know, we have been following this 1mdb scandal in

malaysia. singapore is penalizing credit after the probe into 1mdb. this has been a probe that has engulfed many characters, so to speak. including goldman sachs. singapore penalizing credit suisse and the you will be after the probe into the 1mdb scandal. yvonne: we were just reporting in the last couple days that a fifth person was convicted on charges linked to that probe. as you mentioned, goldman sachs and other bsi bankers as well. this is continuing on as a singapore tries to put a damper on this scandal once and for all. the latest one is credit suisse and uob. betty: let's stay in southeast

asia. avena mise prime minister nguy?n xuan phuc is in washington today, the first southeast asian head of state to meet president trump. the prime minister speaking exclusively to bloomberg before leaving the u.s.. he says he aims to convince his host that traded beneficial for both. [speaking foreign language] aims to promote the comprehensive partnership between vietnam and the united dates for a wider scope and added substance including bilateral, regional, and international. a will you be pushing for bilateral free trade agreement, given the u.s. has pulled out of bp -- tpp? >> after the u.s. withdrew from the tpp we have a tefa mechanism to maintain issues of common interest related to economic and trade manners.

we want to make sure we can convince president trump this is a mutually beneficial relationship for both sides, and american consumers benefit and prefer the products that vietnam export to the u.s. market. >> are you confident of concluding a free-trade agreement, i bilateral trade agreement, with the u.s.? noting of course that president trump has called vietnam a trade cheat because of a $31 billion trade surplus with the u.s.. in anye is no cheating kind of products we export to the united states, whether it be catfish or shrimp. we have all the documents to prove it. besideslike to stress reporting to the united states, we import a lot of products from the u.s., including airplanes, engines, turbines, down to the agricultural producers.

importsll you that the from the united states will increase significantly since this year as we will sign $1 billion with a deals with pour lots ofs and meaningful, high-value products into the united states that will help create american jobs. there is a concern about rising protectionism. is there a need to diversify more with trading partners? the anonymous a big supporter of free trade. we want to make sure all people and countries benefit from free trade. we have established at the same time, a wide network of partners other --igned and some under consideration. they would not invest in vietnam if they did not see interest in profits. the same for vietnam and the united states. a you talked about wanting

closer relationship with the united states. what role would you like to see the u.s. play in areas like the south china sea, for instance? would you like to see more u.s. presence? vietnam and the united states and other countries in the want tond the world have a south china sea in which the freedom of navigation and ensured,is insured -- and the u.n. document from 1982 is observed. to discusswould need together with stakeholders to make sure all parties will benefit from whatever action we decide to take and to ensure peace in this area. betty: that was the mise prime minister nguy?n xuan phuc

speaking exclusively to bloomberg ahead of his trip to the u.s. we will talk more about vietnam on bloomberg television tomorrow when i speak exclusively to a former hedge fund manager. he has been making a comeback. one of his investments is in resort. the expanding that interview is at 1:00 p.m. in new york and 1:00 a.m. in hong kong. he is the biggest investor in that resort. yvonne: definitely something to watch. fresh off hisnow protectionist tones during his recent trip to europe. it is india and china's term to discuss a potential new world order with european leaders. david angle joining us more for discussions on prime minister modi. what is at stake with the e.u.- india relationship? >> it seems like it is a giant

chessboard and donald trump has taken the chessboard and gone like this. players are trying to reestablish their positioning. you have vietnam going to the prime states and modi, minister of india, in germany. he is going to four different countries, followed on the heels tomorrow by another leader going to germany and brussels. when donald trump went to europe last week, a lot of reverberations. and one merkel said the old world friendships built during world war ii are, to some extent, over. you see china and india capitalizing on this and seeing where the new world order, if there is one, where they can play a big role. berlin sees new delhi as playing a significant role in perhaps identifying global free trade and enforcing that, as well as efforts to protect climate.

climate change initiatives, which donald trump -- yvonne: still not confirmed at the paris accord. >> trying to get common ground there. -- a bringing a high trade high-level trade delegation. the commerce minister, energy minister going to europe. the minute -- the minister of state for external affairs also going there. had said, wemodi want to chart out a future roadmap that will focus on trade and investment. i want to take you into the bloomberg terminal. there have been stumbling blocks between india and the european union. the negotiations have stalled a bit worried complicated again by brexit. separatedia can have a agreement with the european union. india has built a trade surplus with the european union.

or you can say, the european union has a deficit with india. we can change the page to another chart, we can see that despite the surplus with europe, they are also getting inbound. indias increased into under the policies of mr. modi. next,li keqiang meeting merkel. inflation.g the fed is close to where it needs to be on rates. we will hear exclusively from james bullard. this is bloomberg. ♪

♪ fed expects to reduce its balance sheet this year, a process that could take around five years.

we spoke to james bullard earlier today. he agreed with his colleagues about this rollout, could be orchestrated. take a listen. a good thing about unwinding the balance sheet is that it will create policy space for the committee in the future, if we need it. on the rate itself, i think we are not very far from appropriate rates for the u.s. economy that will keep inflation not too far from target and the labor market performing well. what i disagree with is a come on the idea we have to go 200 basis points higher to get to some sort of neutral rate. that is not the environment we're in. i think we can stay about where we are, possibly higher than where we are today. betty: i want to bring up this chart for our viewers come i am not sure if you can see that, as well. it shows what kathleen has been talking about, what we have been hearing over and over again.

we have a hot jobs market better inflation numbers are cooling, whether you are looking at cpe or core cpi. your theous, why is it outlier here among the fed speaker we have seen? we hear from john williams and others who echo what seems to be the consensus, two more hikes this year. what do you see that they don't? >> i think those inflation numbers have been surprising. you can see in that chart, they are down on a year-over-year basis. we've been arguing that we're making progress toward our 2% inflation goal. but these have been going in the opposite direction in the early months of 2017. i also think in the first quarter we have got a relatively weak gdp report. a little bit. up even with that revision, i think

the first half of 2017 will be gdp growthordinary of around 2%. the idea that the economy is growing faster than trend and this will push up inflation, i do not think is matching up with the numbers we are actually seeing. furthermore, inflation expectations actually started to decline after our march rate increase. and that is an important variable to keep track of as well and this discussion. that speech you gave, you talked about the fact that inflation has been missing the thatt for five years now, it is about 4.5% below where it would have been otherwise. we have a chart we threw together, not exactly like the one you used in your speech. it shows volatility inflation, through 2012.1995

is the set at risk of being blamed for missing the inflation target, for not allowing the economy to grow fast enough because it has been missing that target so badly the last five years when the economy is in recovery, past the great recession, the fed talks about more and more rate hikes? chart in my this speech. the trend i like to look at is the 1995 to 2012 trend in the u.s.. i like to start in 1995 because that is about the time where the consensus formed we would target 2% inflation. as of 2012, when i originally used that chart, we were right on the price level path and that gave me confidence that we have pursued a good policy. right after i gave that, the price level started to fall off the path. in the next five years, we drifted lower because inflation has not met our 2% target.

now the price level is almost 5% off the price level path. if you think price level targeting is optimal with monetary policy, which is what a lot of theory tells us, it does not look as good today as it did when i first started talking about it in 2012. it made me a little concerned, worried, we are off that path. betty: that was james bullard of the st. louis fed. coming up, india's tech services company worries trump policy will damage the industry. details are next. this is bloomberg. ♪

♪ ,"onne: this is "daybreak asia i am yvonne man in hong kong. betty: i am betty liu in new york. one of india's biggest tech services firm warns trump's agenda will damage the technology industry. ramy inocencio has been following this. what is the company saying? said this after their earnings report, which came out friday. tech mahindra's vice chair came out swinging and said because of the earnings, net income of fell by 24% against analyst estimates, the tech managers advice was, it is more because of donald trump and the white house's restrictive policies on immigration. a little bit about tech mahindra

, it is india's system biggest software services company, with a market cap of about $5.7 billion. infosys andclude others. h-1blean heavily on the visa system to get their employees to go over to the u.s. from india. the now with these restrictions, that could be trickling down. the vice chair said this is actually a radical shift in policies here. he said it will be a tougher application procedure and higher costs on indian i.t. companies looking to bring talent to the united states. in terms of not going to the united states, they might see a boom in india or potentially europe. bloomberg intelligence data analysis in terms of where the flow might be going if they cannot head to the u.s., they

could very well go elsewhere. yvonne: it was a pretty brutal day for the stock yesterday, down close to 12%. a lot of analysts rushing to slash their forecast for the stock. since octoberst 2013. happened to the bloomberg terminal. amr isto show you this, a function. buys.eens are the s, really the sell jumped. they have not been this high since early 2015, about two years ago. in the meantime, the greens fell since their lowest since october of 2016. the price target, 12 month target, down. the price down to 379.

seven, by my count have cut. morgan stanley, jpmorgan, as well as ubs, all cutting to sell. definitely getting a hit in terms of what is happening, according to donald trump's immigration policy, as they say. yvonne: thank you. that is almost it for us on "daybreak asia." it is time to look at what is coming up in bloomberg markets. hong kong also joining in on the holiday. we are focusing on the japan numbers that just broke. of the dragonnce holiday. missing puzzle piece to the japan recovery. household spending, that consumption sentiment is not improving, despite the labor market getting tighter and tighter. we will speaking to one interesting guest and the house

of corporate japan, former sony ceo joining us from tokyo. we will ask him if japan should be pulling its part more on reinvesting. volatility,lk about the bloomberg commodity index at the lowest level since 2014. what is going on with that complacency? >> yes, where is the fun? we are talking about transparency. everything is well communicated. volatility, when it comes to commodities, we'll be back with a vengeance. plenty more to come.

haidi: xd9 and in hong kong, 11 it 9 a.m. in-- hong kong, 11 a.m. in sydney. 9 p.m. in new york. if it -- this is "bloomberg markets: asia." i'm haidi lun. for the asia-pacific with china, hong kong, and taiwan markets all closed. telling bloomberg the target is close. japan remains stuck in neutral