♪ yvonne: good morning, we are live on a very dreary tokyo this morning. a few days before the sunday of national election. welcome to a special edition of "daybreak asia." i am yvonne man. the top stories this friday to read taking a look to the asian markets, lower open as assessors look at the earnings, the global economy, and the election in japan. shinzo abe looks for a decisive

win sunday. that would be a show of support for his attempts to revive a slumbering economy. kathleen: i am kathleen hays in new york where it is just past 7:00 p.m. thursday. treasuries rose and the dollar fell on reports president trump is leaning toward jerome powell to be this -- the head of the fed. yvonne: it is looking to be more like an easy win for shinzo abe on this sunday election. the latest poll we saw, the ruling coalition said to have the best election outcome in decades. more than 31 years. that was facing opposition in disarray. the party had -- was losing hopes in the past couple weeks.

kathleen: i guess that is one reason donald trump wanted to make sure everybody knew he would get this fed chair selected before he takes that very important trip to asia. he will have a lot of important business to attend to. the way the polls are looking, it looks like congratulations to abe on a victory. the question will be, what kind of momentum and support this to continueminister with more difficult reforms some say he has yet to tackle, as much as he could. yvonne: then again, anything could happen. pretty badsome weather coming through tokyo that could affect the turnout. also, a lot of skepticism. -- shinzo abe could have a theresa may moment. a lot of people do not want prime minister shinzo abe to stay on in power even after the win this weekend. kathleen: let's take a quick look at the u.s. markets.

there was a mix close with the dow jones industrial average up five points, to 23,163. the nasdaq closing a bit lower, 19 points, up about 0.33%. and of the day, not that much difference from where we started. yvonne: does not seem like it will be good for us in asia. take a look at new zealand. after then 0.6% opposition labor party won enough support in parliament to form the government. 27 for the kiwi. we're it five-month lows. australia kicking things off, the asx 200 on the downside, down 0.2% for the benchmark. 7877. -- japan,ing on the

13 straight days of gains on the nikkei, lucky number 13. looks like we could see a pullback according to chicago nikkei futures. dollar-yen, 112.56 this morning. let's go to first word news. >> janet yellen has made her pitch for a second term in an interview at the white house with president trump. she is one of five potential candidates with the president expected to name his choice before he starts the trip to asia early next month. yellen is facing opposition from house republicans. although they have no direct say in the fed role, are lobbying against her reappointment. the spanish prime minister rajoy has won the backing of other e.u. leaders as he prepares to take control of catalonia. they ruled out intervening in the crisis. catalan separatist leaders meet

on monday to plan their next move. they want to pull money out of banks in protest of their decisions to leave their legal domiciles out of the region. the cia says north korea's months away from a nuclear weapon, and the u.s. should act, as an attack is likely. ake pompeo says there is difference between being able to launch a missile and developing an arsenal of weapons. rex tillerson signaled washington's hesitation from china, saying they would like more progress on reining in pyongyang. prime minister says overseas investors are unlikely to raise their positions in the country, until a democratically elected government is in place. the military-backed regime says of that will be held in november next year under a constitution that gives appointed soldiers, judges and bureaucrats power over elected politicians. even so, he says it is a step forward. >> the level of engagement of

the current government is key with trading partners. ,t is not at the full level with suspension of trade talks. secondly, investors and naturally adopt a wait-and-see attitude. they may see strong fundamentals of the thai economy, but they are not yet willing to commit until they see a clear path ahead lyrically for thailand. >> global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ u.s. markets ended mixed with the s&p and dow wasing out gains, apple heavily on the nasdaq. ramy inocencio has a recap on the moves on wall street. this is where we ended the day.

it belies the story we thought. out of the gate in the morning session, we saw it fall out of the gate, and a slow rise threat the court of the day. when we got the news mr. trump was interested in drone power, we saw the split barely into the green. 0.33%, in is down large part because of what happened with apple. hop into the bloomberg terminal with me. functionto the imap for the s&p 500. you can see the push and pull, ending flat. six sectors in the green and four sectors in red and one flat. these are gaining in the growth sectors, growth stocks, on the downturn. let's take a look at some of the biggest movers, some of the biggest losers, today. apple down 2.4%. this is the biggest drop in two months. iphonenese report saying

8 and 8 plus sales are weak. about 4%,rris is down the biggest drop in 11 months. of the because transition between the cigarettes to e-cigarettes is not happening. corporation,nes the biggest drop since 2009. 1% tore showing a miss, 3%. i want to head back into my bloomberg terminal. this is interesting in terms of where they get most of their revenue. they get most of that because of the iphone, iphone sales, 63%. look at the year on year growth for apple iphone sales. that is basically flat right here. look at it relatively toward the last several years. we can see this has plateaued, g #btv 3164.

another charter want to show is one on phillip morris. we talking about falling sales and cigarettes. but there are still relatively healthy sales in asia, which is the orange line, continually the largest revenue maker for phillip morris around the world, right now more than $2.7 billion. that is something you can check under pm us equities. airline trading revenue, you talk about united airlines. margin,a profit trailing over the past five quarters and white. -- in white. delta here is in blue. i put on some asian airlines, air china is in red. american airlines is lesson than that and singapore airlines is even lower, 2.25%.

your ownee these on bloomberg terminal as we look at these major market movers. turning to commodities, we saw oil at its lowest in a week. what happened? earlier we heard from opec sending a signal they are likely to extend output curbs. .- curbs. -- curves ramy: they said they would follow vladimir putin's lead for cuts. there was bearish news on gains in the u.s. let's take a look at how oil did move. we can see the for crude as well to oneit did fall 1.5% point 25%. we did see a knock on effect. let's look at safeties before i send it back to you. toward. 10 year yield,

the right-hand side of your screen we saw yields fall a little, but then rise again. you would think it would have risen more. just a couple basis points off after the news donald trump was leaning toward jay powell. gold, and it near a high of the day, 1290. 80w pushing past to 1291. dollars per ounce. it is interesting in the equities and safe havens. ramy, thank you, joining us from new york. we speak to a former boj official who says japan to double down on abenomics. kathleen: the fed is in focus as markets sniff out trump's choice for the central bank's next chair. this is bloomberg. ♪

♪ yvonne: not looking too good in tokyo this morning. japan bracing for a monster set tos typhoon lan is make landfall this weekend. a monster storm, wind could 2 kilometers per hour saturday. it will take convincing for people to come out and vote on sunday. this is "daybreak asia." i am yvonne man in tokyo. kathleen: how exciting, rain, typhoons. she stirs things up. i am kathleen hays in new york. we want to take a look at a very important story, a lot going on. the tokyo election, and president trump. is he going to tell us who the next fed chair is? he met with janet yellen at the white house.

he is moving closer to the decision on who will be the next fed chair when yellen's term ends in february. editor, anda senior our guest. bonds even rally the bit. reporting steve mnuchin is pushing for jay powell. the middle of the road, follow janet yellen. jay powell, what type of fed chair would he be? choice isell interesting but underscores a point i have been making, which is, from apr policy standpoint in the fed funds rate, it really does not matter very much who he chooses. the degrees of freedom of movement is fairly small. the next chairman, the next crew is, is in the

regulation, deregulation, reregulation of banks. it really signals that is the direction they want to go. the impact of quantitative tightening, is really going to be determined by how much capital the banks continue to they'rehold, which holding a lot of, and how much they're willing to let go. kathleen: same question to you. saying, monetary policy come a rate hikes, they are on a path, they will gradually hike. what difference does jay powell make their? do you see a difference, and would it make a difference if it was more of the hawkish candidates like john taylor, given it is just one fed chair and there seems to be paths that the current fomc is on board with. >> we do not know who will be on the fomc next year.

powell, i do not think janet yellen will stay on the committee. vacancies on four a seven-member board. and you have very hawkish presidents moving into the voting roster next year. at the same time you have kashk ari moving out. you have uncertainty plus more hawkish voting members. i do not know. it could change the apology path quite a lot. kathleen: do you agree with that? it is an important point to underscore for our audience. you have a board of governors that is understaffed but trump will probably fill all those seats. possible it is a joke on the markets? that janet yellen leaves and somebody supposedly dovish comes in?

who votes in who does not is more of a media issue then within fomc. the economy is going to be stronger next year anyway. from that perspective, wage gains will be stronger. a little stronger in terms of core inflation. but really, wages will be leading the way with that. as a result you are really going to have the opportunity for somebody to be a bit more hawkish, to exercise their viewpoint. put another way, the market is underpricing at the moment. the odds of a move in march and another move in june. kathleen: what is bloomberg intelligence's view on next year? yelena: the hike seems to be well advertised by now. shallow it will be a path next year than it is currently projected.

we do not see much of a pickup in inflation. they will need to be more careful. we do see wages picking up, but not as much as would confirm we need three rate hikes next year. kathleen: you have raised the possibility of an inverted yield curve. you are not the only person looking at this, it has already been flattening. thanks won a steep curve, they can make more money that way. a signal of fear of recession. steve: it is far from inverted. secondly, the point of the curve -- that is the real governor on the fed being able to raise rates going forward. part and parcel of my viewpoint is that if the 10 year goes up in yield, and that gives the fed a little runway to raise rates. if we are sitting here in march

and the world is looking the way the spread now, and between funds and the 10-year is where it is right now, there is no room. in the economy does not call for them to flatten the curve. as i said, in my own view, they are going to have that room. lag the economy one year to 18 months. we had a minick, recession in early 2016. we are sitting here are year later. -- a year later. yelena: on the curve flattening or inverting, i would be more worried about that if trump was quoting john taylor or kevin warsh's name, because they would be seen as more hawkish. that would mean higher rates on the short end, and probably a

flatter curve. kathleen: quick question to both of you -- who would you choose? steve: of the choices out there, i would say kospi -- i would say powell. yelena: i would choose yellen. kathleen: why? yelena: look at what she has done. she has done a really great job. a continuation of that policy would do well for the economy. you think trump will tweet this out or will we get a rose garden ceremony with fanfare? steve: rose garden fanfare event. maybe he will have everybody in washington at the same time, and everybody will get confused. yelena: that would be very interesting to see what happens. a historical moment. it matters a lot who will be the fed chair. kathleen: it does. donald maybe realizing this is arguably the most him porton --

the most important appointment he makes. ,"ming up on "daybreak asia three years after thailand's military coup, the former looks ahead to the return of democracy. our exclusive interview is next. this is bloomberg. ♪

kathleen: this is "daybreak asia ," i am kathleen hays in new york. yvonne: and i am yvonne man in tokyo. government to hold the first general election since 2014's military coup. former prime minister vejjajiva told bloomberg he hopes for a return to power if they honor the date. he told rishaad salamat there is no reason for postponing it.

>> it would be very hard for anybody to justify not speaking to the so-called roadmap, and a liberally delaying elections for whatever reason. i think there is now an appetite for the thai people to move onto the next stage, that thailand comes out of these transitional people canthe thai have a government more responsive to their needs. they also hope that will provide a spark for the economy and lift the standard of living up many, many times. especially in rural areas. >> what about the constitution? will the military use that to entrench its position? >> if i became prime minister -- i have a mandate from the people. i will have made key campaign pledges and promises, which i

have to implement. i see no reason why senators or whoever can deny the wishes of the people, or somehow allow me not to fill that mandate. my message is very simple. i work for everybody. >> you have to come ultimately that is the responsibility of prime minister. >> unfortunately, my opponents do not say that. they have been explicit in saying he would only work for the people who support him. >> the national strategy plan in place, would you agree with it to begin with? >> i think it would be a very difficult document to write. anyone who can for see the trends of the next 20 years must be very brave indeed. >> but this is binding on the future government, is it not? >> that is what all it can do is set broad target, targets

everyone can agree on. >> thailand has an economic vanguard, of late? you would turn that around, if you win, of course? there is a long ways to go, a year. >> sure. you can identify where we have been lagging behind. the current government with key trading partners is not that the full level that has been suspension of trade talks. naturallyinvestors adopt a wait-and-see attitude. they may see strong fundamentals of the thai economy, but they are not willing to commit until they see quite a clear path ahead politically for thailand. that was former thai prime minister abhisit vejjajiva . look at the japan open happening the top of the hour, as well as

seoul. japan, looks like we could see a pullback on the nikkei 225. we did see 13 straight days of gains. 11 for dollar-yen. 2.57 -- this is bloomberg. ♪

yvonne: it is 8:30 a.m. friday here in tokyo, looking outside the imperial palace. looking dreary, i typhoon hitting the country, just two days ahead of sunday's election. kathleen: it is 7:30 p.m. thursday in new york. a beautiful autumn evening, markets closed mixed. i am kathleen hays in new york. yvonne: i am yvonne man in tokyo, you are watching "daybreak asia." we are seeing downside when it comes to equities.

we did not see a whole lot of momentum from the wall street session. the kiwi holding onto five-month lows after the opposition labor party won that coalition announcement with the new zealand first party. australia, sydney shares down on the asx 200. .7880. we are seeing a weaker dollar story after we do hear reports perhaps jerome powell may be the next pick for the fed chair. chicago futures heading lower. we could see a retreat after 13 straight gains on the nikkei 225. longest winning streak we have seen since 1988. 112.51 for the dollar-yen. leaders say e.u. the u.k. has offered more on brexit than before, but must do

better if the negotiations are to turn to trade before the end of the year. chancellor merkel said while theresa may sent signals, her presentation has not changed her stance. germany is motivated to move trade by december. she sees euro indications the brexit talks will not succeed. rex tillerson says there is little hope the saudi-led bloc standard for qatar will end any time soon. has been says qatar clear it is ready to engage and it is up to leadership for the quartet to respond. he will make his first trip there since july, with stops in doha. new zealand has its youngest a leader in more than 150 years. the leader is 37 and has been compared with other youthful leaders. -- she won and said

capitalism needs a human face. blow suffered another body with nissan suspending production for cars. output aty is halting six plans while it investigates how unauthorized workers were allowed to certify vehicle standards. they were already reeling from the kobe steel scandal. shares in paris slumped almost 2%. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ china has targeted property over investments and shadow banking fraud. leaving chinese investors few channels to park their money. let's get more from haidi lun

joining us from beijing, covering the party congress. good to see you. where is china's money going to go? haidi: i love that phrase, it is visual. this is just one of the pesky side effects of having a limited or closed capital system. they have limited avenues to put that money. we have seen everything from equities does shadow banking, wealth management products, domestic property. until recently, a certain segment into overseas companies. all of these asset classes have come under government scrutiny. we see asset bubbles and everything from cotton futures to bitcoin to cemetery plots, really crazy stuff. it seems some analysts are saying we have come full circle. back in 2015 we have the boom and bust of the chinese equity market where it rose 150% within

a year and plunged and lost 1/3 of its value in three weeks. morgan stanley's says it sees it from now until the end of 2019, chinese equity holdings will increase by ¥11 trillion. thate crackdown happens, great ball of money will come rolling back into equities. are we going to be concerned? we know what happened last time. i may regret my words, but a lot are saying this time will be different. here is a guy that predicted the boom and bust, the asia crash in 2015. he said this time it is different because the fundamentals are giggly stronger. our stronger -- are stronger. they are looking more at macro fundamentals, the growth futures

are pretty robust. he says valuations are looking ok. the sense, we are close to what happened in 2015. to say there could be a frenzy is too soon. this redirection of funds is probably going to be gradual. they think it will be difficult for equities to be strongly supported when they're operating in and in the environment of aggregates. we know the deleveraging campaign is key, given some of these remarks from the pboc governor as well as xi jinping. kathleen: i want to ask you about internet censorship. one thing happening in his 19th party congress, president xi is making it clear he is solidifying, even cracking down, on the internet. i spoke to a friend who is

married to someone who used to live in china. she is quite concerned about the cancellation of a tv show, because it discussed ideas. what does this portend for china's direction, how it is governed, and how things develop? haidi: huge ramifications. i am glad you brought up the anecdotal story from your friend. in the left your so it is gone beyond politically sensitive matters. we have seen everything from live streaming shows canceled, ed for content, and soap operas, and the like. it is becoming all-pervasive. we do expect president xi to take on another five or 10 years, all the way until 2027, unless a potential successor or heir is appointed at the end of this congress this week. what does that mean?

when he came to the home five years ago there was widespread optimism potentially you would be a great reformer to open up china more to the world, according to liberal ideals. we got a hint of that in his speech earlier this year. it is apparent that is not going to be the case. take a look at this extract from his keynote speech. he talks about the need to firmly oppose and resist various erroneous views with a clear stand, to ensure a clean a cyberspace. in doing so he is roped in alibaba, baidu, tencent, to help them do this. huge implications for foreign companies. they're complaining they are playing on an uneven playing field. preferential treatment for homegrown companies. it is difficult to go about your business.

you cannot access twitter, facebook, instagram, snapchat, google. it is difficult in terms of internet access. foreign companies, we know google and facebook continue to push into this massive market. they really need to weigh up. do they want access to this lucrative market that is china? what does it come at the expense of? applewas a criticism to when they deleted it on the app stores. it was seen by people as a repressive government. covering thank you, some important topics for us in beijing as she covers the 19th party congress. let's move on to the u.s. ipo market, in something of a revival. most of the credit belongs overseas. chinese companies will have raised in nearly $2 billion since labor day, 20 times more than they raised over the same last year.

a chinese tutoring company is speaking -- is seeking a $1 billion valuation. we have a bain capital managing director with us, welcome to the show. -- china is aut huge market. -- is it so important understand there is a link here. your immersive english is being taught in china, but why the u.s. for china ipo's? >> the u.s., particularly new york, is a prominent capital market of the world. coming here is a milestone for english training companies. it proves you have certain skills, proves you have evaluated the business model, and transparency. you also have a large investor base that understands education and supported a lot of education

companies to grow. the chinese companies get better valuations if they list here than they would in china? lihong: at this point, yes, that is correct. aresee comparable companies trading at all-time highs. most importantly, you have the investor base. in some ways is more flexible for companies like us, to get listed in the u.s. kathleen: how about the health of dealmaking in asia, more broadly? we actually see increasing deal flows in asia, even in china, with buyout opportunities. however, the valuation and quality of the company, still our concerns. -- are concerns.

in order to make good investments you need to find good companies and have capabilities to help them grow, to improve the management capabilities, and also have a long-term view that you can really create value from investment. in terms of ipo in china, are there differences in the regulations or kind of requirements a new company has to meet in order to do an initial public offering in china, versus the u.s.? is it easier, less stringent? do something else make the u.s. more attractive? lihong: in china there are still stringent ipo qualifications. first, government has window guidance about particular year, how many may go public. think nos, they even company should go public.

the second thing is, for profitability, china still encourages companies with three-year track records on the profitability side. in the u.s. you may have more creative business models to go public. the third thing for private equity control companies, the u.s. is very used to this kind of company to go public. in china, still that is a new phenomenon. it is not that easy to go public. have you decided to sell your stake in rise because it is a crowded field? have you gone past the sweet spot, is it time to sell and move on? lihong: i think this is just the first stage. thecan see that we remain

largest shareholder with over 70% of the state -- stake. to raise liquidity for the company is a small step. going forward we will help the company to grow. as i mentioned, ipo listing is just one milestone. kathleen: i hope you have many more and share them with us. director.al managing we speak to a former boj executive director on why he aben is creatingo growth but not spreading it far enough. mics this is bloomberg. ♪

kathleen: this is "daybreak asia ," i am kathleen hays in new

york. yvonne: and i am yvonne man in hong kong. shinzo abe's election gamble looks like it will pay off. on track for decisive win. our next guest is a former boj director. he sees no significant policy changes after sunday's vote. thank you so much for joining us e of sunday'sve ev election. is this a done deal for shinzo abe? >> it is a clear and decisive win. divided, he gives a lot to the coalition. he will have leadership on the agenda, including national security and economic policy.

we have been talking about how the economy is on stronger footing. but there is still a lot of unfinished business for shinzo abe. inflation is not a 2%. wages and consumption still quite stagnant. a 300 -- with a 300 seat win, will he be able to implement structural reforms and aggressive action? economyo far, japan's has been doing well, for the past four or five years. it has beenics, goodbye japanese standards. growth. more than 1% market why they have a position of continued tightening. but theren is weak,

is resiliency. i think the most significant agenda for mr. abe is [indiscernible] the spending plan he is proposing, diverting consumption tax revenue to education, childcare, how much growth could this unlock? this is just a fraction of gdp. kazuo: it is not a straightforward change. this is partially a structure change. childcare, after that, people have more flexibility in terms of lifestyle. have better human resources to create productivity in the economy.

it is about the magnitude of spending, and equality to achieve the longtime goal of abenomics. yvonne: i want to throw up the chart here. people do not feel like things are losing momentum. look at g #btv 5730. it tracks inflation as well as unemployment. know the japanese are not fans of inflation altogether. they live quite comfortable lives here in japan. does it matter we do not have 2% inflation? ays.o: you can argue two w because of the lack of a sense of crisis, we are slow to create structural reform. the people are satisfied with the current situation.

there is a government survey that shows we are at the highest spot in 60 years considering the satisfaction of life. people are very satisfied. yvonne: with this consumption tax hike expected to increase, can japan survive it? will the boj step in if it goes the other way? kazuo: it is still two years from now, so it is uncertain. there is some uncertainty about how it will turn out. [indiscernible] i think this should be enough for mr. abe to decide. thate: we are hearing perhaps jerome powell will be

the next fed chair. what does that mean for the boj? kazuo: it does not change much or make much difference. there will be continuity. it does not make a change in any material way. it, formerreciate boj executive director. kathleen: bloomberg news getting its scoop. all, trump has made up his mind on the fed chair. he just met with janet yellen today, he is thinking it -- he is taking it very seriously. advisors say he is leaning toward john taylor, taylor rule, considered hawkish, or, jay powell. steve mnuchin is one of the people pushing for jay powell. for one reason, he knows banking, is open to looking at

regulation. with his experience and background he could give a reasonable, intelligent, careful look at this. fed chair announcement unlikely to come this week, officials are saying. again, donald trump realizes this is probably one of the most important decisions you will make, one of the most important appointments he makes, while he is president. we will have more on the fed coming up. a lot more ahead. this is bloomberg. ♪

♪ yvonne: this is "daybreak asia." i am yvonne man in tokyo. kathleen: i am kathleen hays in new york. we are looking at a big scoop from our bloomberg news team in washington. yet another one, i should say.

president trump met with the janet yellen today. he has not made up his mind for the fed chair. it is down to jay powell, john taylor. weekr and trump met last and they had such a good meeting. john taylor has impressed him. steve mnuchin, the treasury secretary, getting down to the wire. i can't imagine what happened in that room there between janet yellen and donald trump. hopefully we get some type of announcement before president trump makes his trip to asia in november. that was the set plan. a lot of questions. we were just talking to our guest about whether this has implications for the boj. and jerome powell, a potential pick, could be more of the status quo. john taylor is a

republican. he believes in free markets, he believes in limited market. and he is 70 years old. who does that remind you of? donald trump. he indicated he is willing to be flexible on his taylor rule. he will not necessarily raise rates immediately. maybe that has what made trump look at him seriously. yvonne: markets really honing in on this right now. we continue to watch for more of those headlines and details, on who that potential fed chair is going to be. coming up, we sit down with a special advisor to the abe government and find out what is on the agenda, when japan has a snap election. do not miss our talk. plenty more to come here on "daybreak asia." special coverage as we count down to the national election on

sunday. a dreary weekend here are as typhoon lan makes landfall this weekend. this is bloomberg. ♪ who knew that phones would start doing everything?

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♪ yvonne: rainy and wet here in tokyo, 9:00 a.m. in the city and we are counting down to the special coverage on daybreak asia, as well as the sunday collection as shinzo abe looks one step closer to be the longest serving prime minister in japanese history. at 2.25, the top stories this friday as we count down to the election. looking ahead to the asia-pacific markets facing a lower open to start the weeks. the election here in japan. shinzo abe looks on track for

that decisive win, which will be a show of support for his attempt to revive the slumbering economy. on kathleen hays in new york. president trump interview janet yellen earlier for the fed job but it is down to the wire between drum towel and stanford economist john taylor to get that seat. halt production at the domestic plant over unauthorized quality control. ♪ kathleen: we are covering two big races, the race to be the next fed chair advancing the story. john taylor, considered more hawkish, j powell considered

more middle of the road, you are in tokyo for a very important race. seems like there is an into size of this from trump when it comes to the fed chair, but not as indecisive in japan. the latest poll said 300 seats expected from the ruling coalition party and that would be 10 more than the super majority they already have out of the 465 seats up for grabs. the big gamble for shinzo abe looking like an easy win. you never know. you saw what happened in the u.s. and the u.k. anything can happen. it might be hard for photos to come out this weekend. let's get to first word news with juliette saly. fed chair janet yellen has made her pitch for a second term in an interview at the white house with president trump.

she is one of five candidates and the president is expected to make his choice before his trip to asia. she is facing opposition from house republicans. they are lobbying against her reappointment. the spanish prime minister has won the backing of other eu leaders as he prepares to take control of catalonia. brussels act his stance and ruled out intervening in the crisis. separatist leaders meet monday to plan their next moves. supporters tog pull money out of the bank out of protest. says north korea is months away from a nuclear weapon and the u.s. should act as if an attack is likely. between a difference launching a missile and developing an arsenal of weapons. rex tillerson signaled washington's impatience with china, saying the industry should would like more progress

on reining in pyongyang. former thai prime minister says overseas investors are unlikely to raise their positions in the country until a democratically elected government is in play. a vote will be held in november next year under a constitution that gives soldiers, judges, and derek katz power over the elected politicians. power overats elected politicians. >> the level of engagement of the current government with key trading partners is not at the full level that is the suspension of trade talks and negotiations. secondly, investors naturally adopt a wait and see attitude. they have strong fundamentals with the tight economy, but they are not willing to commit until they see a clear path ahead for thailand. juliette: global news 24 hours a

day, powered by more than 2700 journalists and analysts in more than 120 countries. saly, this is bloomberg. let's get to the markets. a lot going on on this friday, thursday evening in new york. we'll check the market response with sophie, rooted. -- sophie kamaruddin. saving --e hoping for seven day rally. higher,is trading recovering from the negative reaction we saw on thursday following the hawkish tilt. on the last trading date for japan ahead of sunday's election, the nikkei 225 is snapping a 13 date rally and the yen is assuming losses for a fourth day in five. we saw it exacerbated over reports the fed chair

announcement is unlikely to come this week and speculation trump is leaning toward drum paulo or john taylor. -- jerome powell or john taylor. that was spiked by concerns the new government might change the central banks mandate and what that might mean for immigration policies. we are seeing the kiwi dollar lose ground against the greenback, down .1%. it is sliding against the euro, swissie, the yen from this chart here and it is at a two-year low against the aussie dollar. continue, this is looking like a buying opportunity. panic,y don't fundamentals are favorable. the --.eeping an eye on that is the second and biggest

drop of 2017 as you can see at the bottom of the panel. it is still above the 50 day moving average as illustrated by the top panels here. has proven to be a good time to buy. on the nikkei 225, you have 1626 and taking a down look at what is going on with nissan and kobe steel, they are at the heart of this debate. the nhk reporting nissan is --sing expections inspections from 20 years ago. some japanese manufacturers have gone down a dark path. we are counting down to the election on sunday and heads up, we are going to hear from the boj governor kuroda later this

afternoon. yvonne: perfect way to talk to our next guest. take a look at the rally on the nikkei 225, the topics around 4.2%. view.ntrarian thank you so much. we haven't talking about this rally for some time, 20 year highs, seeing a little bit of pullback. at this is the longest streak since the 1980's. why stand in front of this train? the media reported a snap election is coming. of it, butbe the end

a recent poll shows the win moreation will than 300 seats, way more than we expected. that is a reason why. doesn'tontinue, but it mean it keeps working from now on. that is our view. yvonne: is the market looking at a specific number? what is the magic number? guest: 300, i believe. yvonne: he can't lose any more seats, he asked again. trickymay become a point. if they win more than 300 seats, that means it is going to change anything from now on. we believe they need a fourth arrow, but if they win too many

seats, they are not going to change their policies. yvonne: fourth arrow, what could he bring ? a third arrow has barely been fired. the abenomics is almost five years old and we think it is getting obsolete. growth does everything they can do at this point in time. it isn't something new. he or much --nd any or much improvement in abenomics. the japanese economy or japanese equity markets will appreciate continuation. youne: even if abe wins, can't deny what is going on in

the markets. there is a fundamental aspect that is positive. i have a chart to show. corporate profits are still at record highs. look at tank lending. we are seeing -- bank lending. we are seeing strength from outstanding banks, six straight quarters of growth. interest rates are negative. isn't this beneficial to an equity market? are keyes, but there drivers. they are losing steam. japanese yen.ker we don't see a weaker japanese yen anymore. it is possible it is fading. number two, there is a one time rebound of the extraordinary loss in 2016.

last year was a rebounding year because of that. number three, because of lower tax rate. it was implemented last year. this year, next year, almost no tax rate lowering is happening. there is no driver for corporate earnings in my opinion. new,e: we need something you mentioned. a regime change. does that include the boj and kuroda? guest: we don't think so. kuroda is doing almost everything he can do at this point in time. abenomics is helping more the japanese economy to recover. from now on, there should be more private company centric.

lastare piling up cash the 10 years. for the last 10 years, japanese companies increase their cash to buy 75%, which is a huge number. the investment increase is only 25%. it is time for a japanese company to invest more in japan or return the cash to investors. that is basically what one person mentioned in her stance. she thought it focus more on fiscal policy and more on the private sector. what if there is a shocking win from party of hope? a theresa may moment. what could happen to stocks? yen gets -- for a short time. it is maybe positive for abenomics. needs new arrows.

if the party of hope wins more than expected, it is maybe a turning point for abenomics to change something for something painful for economic measures. yvonne: thank you. head of japanese equities. the countdown to sunday's election for us and offering a contrarian view. back as another big name struggles with another scandal. why nissan is halting production. we will be live in beijing to see why the internet crackdown might be stepped up. keep it right here. a lot going on. this is bloomberg. ♪

♪ yvonne: this is daybreak asia, i

am yvonne man in tokyo. kathleen: i'm kathleen hays in new york. a changing economy high on the agenda. notre growth must equality, want to the come up but the transmission in china is leading victim in its wake. over to tom mackenzie. interesting party congress. it is, absolutely not to get a flavor of some of the challenges they will have to face, we went to the province northeast in the country. it was once at the heart of the industrial machine. it is a different story now and this paints a picture of those problems that are going to have to be faced head-on by new leadership and the contrast between the northeast provinces of china and the growth we are

seeing in cities like shanghai. this is one sheet city, once a driving force in the country's driving machine, now a sick child of chinese economy. 8.8% after years of high inflation growth. later we found the data was fabricated by officials. local government so strapped for cash, it had to be bailed out by beijing to the tune of $2.5 billion. the impact rippled across the city of a 1.5 million. loads of people have come here to look for work. there are jobs, they are low-paid, about $300 or $400 a month, part-time. there is not enough decent,

well-paid work to go around. >> what decent job offer can you see? $200 or ones that a $300 a month. >> it is the worst among all three provinces. it is hopeless. ironthe once mighty bunxi and steel employed more than 60,000 people. it is a lumbering liability. demand, it isling indebted and loaded to make a profit -- bloated to make a profit. it can trigger social unrest. primaryt parties concern. some workers have been laid off. those that remain have seen their pay halved. when the government talk about debt, those

policies are put to the test. progress has been painfully slow. there are opportunities in autos and new energy, but policymakers need to act now. >> in the next five years, we need to see a drastic change and to get new business in new opportunities here and change the city. otherwise we fall further behind. the communist party laid out a plan to rejuvenate the northeast, but there is little evidence of the impact here in chinese faded icon of industrial past and imposing challenges. talked about some of the bright spots as well as some of the challenges that face bunxi.

we talked about the auto sector peoplew employing 10,000 and opening a new factory. that is the kind of high-end business and manufacturing the government would like to see. the problem is getting that to scale where they can take on jobs from the cold and steel sectors. another question around trying to develop innovation. you have anhat when increasing crackdown on freedom of expression? how do you innovate when you have a censorship regime in china? we have seen that ramped up when there is this crackdown on vpn and the censorship campaign, is it going to get worse? it certainly seems that will be the case. president xi said he wants to tackle erroneous views.

he wants to get rid of that content, whatever that means. when i arrived in china, there were three things to avoid. you would not put them into google. it is more sophisticated now. it is more granular and more pervasive. it is not just that google and facebook and twitter are deadlocked, you have tencent and alibaba compelled by the government to take steps to ensure there is an what they would see as erroneous views or content that doesn't sit within the parties framework, making sure that is removed. you have companies setting up artificial intelligence systems to weed out some of this content. we are seeing vpn shut down, apple removing some of these apps from their store. microsoft set up data centers here open to chinese government

enforcement. -- censorsnsors their content here. clearly, there is a pay off. the question is, how much they are willing to sacrifice in terms of censorship regime to get a site of the market and how much innovation you can have in a country that is becoming suffocating in terms of the and environment and freedom of expression that is now pervasive in china. yvonne: we heard from the president during his address at the party congress talking about opening up to foreign businesses. you have to have an asterisk after all the things you highlighted. great work from beijing. a roundup of the stories you need to note to get your date know to getneed to

your day going. you can also customize your settings and only get the news you care about. check it out at dayb . this is bloomberg. ♪

♪ this is daybreak asia, i'm yvonne man in tokyo. kathleen: i'm kathleen hays in new york. they are looking ahead to local elections next june and presidential elections in 2019. a recent poll put the president's rating at 68%, but said he is not sure he will run for president. i am now concentrating on the job, the tasks people interested me to do, monitoring infrastructure, controlling

infrastructure, checking the health card and smart card, checking family hope, and rural funds. he must be checked and controlled. regarding the upcoming presidential election, i believe it to the people. leave it to the people. , given theue projects you would like to implement? if i stay in the position of working as planned, i will focus on that. we expect the programs to be completed. but if they are not finished, the programs and he continued the next period by whoever the ministers are. -- the administers are.

you can catch haslinda amin's exclusive interview. this is bloomberg. ♪

♪ not event seems like japan can escape mother nature's fury these days. a storm is expected to make landfall this weekend days before the sunday election. the electionsway on sunday? i'm yvonne man in tokyo. kathleen: they have umbrellas and all kinds of things. maybe it won't be as that as we think. it is a lovely evening. let's get to first word news with juliette saly. president trump

completed his interviews for the fed a job and his closest advisers are said to be steering him towards these two candidates. mike pence and the steven mnuchin want it to be trump powell or john taylor -- jerome powell or john taylor. an announcement is unlikely this week. eu leaders say the u.k. has offered more on brexit than before. merkel saidngela while theresa may once , they have signals not changed their stance. tradere expected to move by september and she sees it zero expectations the brexit talks won't succeed. rex tillerson says there is little hope that the standoff qatar will end soon, blaming the four countries aligned up against the gulf emirates.

they are ready to engage and it is up to the leadership to respond. he plans to fly into the region next week, his first trip since july. new zealand has its youngest leader in 150 years after labor won the backing. he is 37 and has been compared with other youthful figures such has an manual macron and prime minister justin trudeau. -- emmanuel macron and prime minister justin trudeau. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm juliette saly, this is bloomberg. i want to see how asian markets are shaping up on the final trading day of the week with so much going on around the elections in japan. sophie kamaruddin is here with the latest. : the situation is mixed

in asia. korean assets are recovering from yesterday's slide, the cost be is in a fifth weekly gain. the one is leading the rise among asian currencies, up .3% while the kiwi is the only g10 currencies sliding against the dollar, although the dollar-yen is now trading at .65 right there. dollarlook at the aussie sliding somewhat here. losses, reversing looking pretty flat. 1.7%,e utilities gaining offsetting the dreck we are seeing in energy and health care stocks, crude holding onto losses amid what is going on with the concurrence of and a slew of changes for stocks

under. santos cuts control at j.p. morgan. taking a look at what is happening at the nikkei 225 kobe steel% hoping oneing 13% while nissan is of the worst performers of the day and other automakers also sliding. when it comes to what is happening with japanese stocks, the events we are seeing is nothing more than relief. could this just be a blip given the events we have seen? we will find out more hopefully . more trouble for corporate japan. , we were talking about

those problems sophie mentioned, with plans being shut down as well. let's talk more about that with our auto reporter from tokyo. a significant is this right now? guest: it is a big deal for nissan. -- the challenge for nissan is to fight expectations. they have been doing this for 20 years. they will have to change this process within the next two weeks and reconfigure their final vehicle inspection lines. in the longer term, they will have to hire more certified expect her's -- inspectors in japan to restore consumer confidence. yvonne: the timing has been interesting because this nissan scandal corrupted a week before kobe steel. are there parallels between the two? guest: there are similarities,

not so much. productmore about quality then nissan. there are no quality issues with the car, but the process of inspection. yvonne: we saw more positive developments for kobe steel. this is a new ceo walking in with a potential crisis for nissan. what are some challenges for him now? what does he need to do? guest: he will have to restore customer confidence in japan because that is their home of market. they are trying to beat number two in the market. customers are sensitive to to brand sensitive image. that is a challenge for him. in terms of the financial cost, maybe not that big. ¥26 billionrmarked

from recalling the inspections. is only 20% of their annual operating income. thanks to bloomberg auto reporter joining us from tokyo where yvonne is covering the snap election. we have a special guest on the phone. bloomberg news has broken a big story in the last hour, down to two candidates to be the next big chair -- next fed chair. trump advisors are steering him toward john taylor and jay powell. he is the fed governor with a lot of experience in bank and bank regulation. we are joined by the vice chair formererland and research director at the atlanta fed, so he wasn't a fed official himself. bob, are you surprised by these two guys, the fact that it is not jay powell, but also john

taylor, the man a lot of people said he is to hawkish for trump to choose? guest: i think in many respects, john is a very accomplished, practical guide, not a dogmatic -based person. uses the rules as a guide and develop them to describe the fed policy. he is the kind of person that has both experience and a reputation that would stand at well at the federal reserve, the question about that. >> jay powell has maybe the edge when it comes to regulation in the sense that he has worked in financial services and knows a lot about it and when he speaks, this is what the topic is.

hand, john taylor is a republican. someone who thinks maybe there is too much regulation. do you think they might go at this different way? is that something important to trump? guest: we are losing a picture in the equation, a nomination of randy quarles, and an approval to be vice chairman of regulation. in some sense, that die has already been cast. if john was chairman, he could freely focus on monetary policy. the whole board worries about regulatory holocene, but the fact is -- regulatory policy, but there has already been someone chosen for the regulatory side. i don't see that being an issue. kathleen: he is not dogmatic or

masochistic, but he has been somewhat simplified into that person who has a monetary role that suggesting key rate should be higher. would keep get in trouble -- would he get in trouble with republicans if he raised rates? there are arty people talk -- already people talking about janet yellen. guest: what you do in that situation is focus on where inflation is, if you are comfortable with inflation, how dogmatic are you with a 2% inflation target? what is wrong with where we are right now? the markets are doing pretty well right now with an inflation number below the fed target. if you are going to be mad, you have to look -- pragmatic about this, you have to look at the markets. kathleen: we should also

he is a centrist or maybe a little bit dovish, so would he be the right fed chair for the time? someone not so eager to raise rates? guest: i would not assert that john taylor would be one who would raise rates. he would have a discussion. he is an academic. he understands how you build consensus and everything else. he is a reasonable man and he would not be someone who i would expect to impose a dogmatic view upon the board. he would use his views and reputation to guide the discussion. i don't think he would use it to impose a policy regime. kathleen: thank you for joining us. we will let you go back to your dinner.

he is vice chair at cumberland advisors, former director of the research at the atlanta fed. shinzo abe has been pushing reform for five years. the progress he has made with a special advisor to the cabinet. that is coming up next. keep it right here. this is bloomberg. ♪

♪ yvonne: this is daybreak asia. i am yvonne man in tokyo. kathleen: on kathleen hays in new york shinzo abe is on track for a decisive victory. he is expected to win 300 seats in his best result in decades and would show support for his policies. still, challenges remain.

the word abenomics was coined when shinzo abe began his second stint as prime minister in 2012. it was marketed as shock therapy. to/debt, japan debt,es -- to slash salaries, and expectations. nearly five years into the plan, it is not clear the three arrows of monetary easing, fiscal stimulus, and a structural reform is the right here. it seems to be the only way to shake off deflation and stagnation. the economy is heading for a seventh straight order of expansion. trade and corporate profits benefited from a weaker yen. it is still less than half the

boj's target of 2.2%. critics note the bank has pushed back the timeframe while adding to the swelling down to she. the imf warned the swelling could warn rural markets -- world markets. rendering the debt unsustainable. many are calling for bolder steps, a reload of the three arrows to support higher wages and market reform to get more women in the workforce and take on the job interest in corporate japan. abenomics should not be seen as medicinal, but behavioral, as well. >> shinzo abe promised deregulation would help technological innovation, even resulting in japan's own silicon valley. that hasn't happened yet. william saito.is

he joins us here in our tokyo studio. thank you for joining us. you joined the council at the national policy for government. in itse seen abenomics infancy. five years later, where are we now? guest: the biggest change we have seen is stability. the confidence to build not only companies, but the people. we see that in the numbers. the stock market right now is at a two decade high, we had 13 straight days of wins, a three decade high. we have these trends of that show corporations are becoming more active. yvonne: we just had a guest earlier this morning that said there is any for something new in japan right now when it comes -- even if they wins on sunday,

sunday, it will still the status quo. i can't blame him. with sony and panasonic, japan 2.0, where are we right now? are there new companies bringing innovation to the table? guest: the definition in japan is different than the rest of the world. how do we let the rest of the world know these things are available? a lot of corporate japan is sitting on close to $3 trillion in cash. it is not as obvious as japan locally making the difference. you see these investments and integration and acquisitions and transactions it you did not see in a shorter term administration. yvonne: why is it difficult? we talk about kobe steel and nissan, people don't like to take risks in japan.

people can't say no. you have really high expectations and people do whatever it takes to live up to that. how do you shake up that mentality? guest: that occurred in the last two decades or so. they do a lot of risks, when they were investing in startups in california, it would be unheard of. when the bubble bursts, it is a loss of confidence we are beginning and it is that ability go aboveew risks and and beyond on some time scale that doesn't shift every year. yvonne: what do entrepreneurs in japan need? support from banks, the government? how are you seeing the environment right now? guest: definitely not a lack of liquidities or cash or did i think it is a lack of a total ecosystem.

we allow ventures to grow and prosper and higher people. -- hire people. the problem i see is an ecosystem where larger companies can't take the risk you mentioned, purchase from the ventures and let them grow. venture,a prosperous but after a certain stage, they go to singapore or silicon valley to finish their growth. i'm wondering, it is cultural or social. there is so much there. what would you, if you could say to the prime minister this is exactly what we need to do, would it be education? would it be incentive? trying to get women involved? what is the way forward? guest: i think the last two decades, failure has become a bad word.

it means you are losing out on something. whereas failure in silicon valley, it means experience. allowing people to restart or redo things. you have a situation where you have prosperous people who have may have taken the wrong missteps and they can't outgrow that. how do you allow them to reset and redo things better? we don't have that circular economy. kathleen: what does that mean for growth drivers than? guest: i think women who make up more population is key to this. we don't have much diversity and if we shut up 50% of the economy, that doesn't do anybody any good. the younger generation that is competent and capable, it is

empowering them's the are allowed to take these risks if they do fail in order to get them back on their feet. it is to enable a population that has not had a chance. that is the next step in abenomics and the next administration. yvonne: talk about the spending bill that you are working on. what could we see when it comes to unlocking the potential growth factors? when it comes to child care, education. what is the prime minister aiming for? guest: traditionally, you have budgets after the election and things like this. to avoid hazard i want is to smuggle money haphazardly. there are other mechanisms and levers in place. things like in i.t. spending, cybersecurity, so that it helps --ple include i.t., in close

including increasing productivity. there are tertiary effects in effect in policy and not just throw money around. there will be some of that. olympics, will that be a shot in the arm? guest: definitely. yvonne: even with the budget? guest: even with the budget. it is a galvanizing force that affects change. you have various silos and ministries that work together to make it a success. this is something that would not happen without outside influence, but because of the olympics of what they are, it is punching a hole through this through the bureaucracy. abene: polls are suggesting will remain in power. does that mean the kuroda team moves forward? guest: we will see.

we have federal reserve changes around the world. i don't have any visibility for that, but i must say -- yvonne: but the part of that -- guest: correct, but too soon to tell. that is the special advisor to the japanese office. william saito, thank you for joining us. terrific interview you are doing in tokyo getting ready for the snap election on sunday. keep it right here. a lot more coming up. this is bloomberg. ♪

♪ this is daybreak asia, i'm kathleen hays in new york. yvonne: i'm yvonne man in tokyo. we talked about how this was a abe a couplertunes months ago, -- for shinzo abe a couple months ago, but tied have changed. given this rate we have seen in the opposition, especially with the party of hope. the latest polls say the best outcome for the ruling party in 30 years. this says shinzo abe up. to be the longest-serving prime

minister in japan. he could be here until 2021. kathleen: according to one of our guests, the party of hope will have influence because of the issues they raised, the things that caught on with japanese people. he will have a resounding victory, but there might be more hope than we might have thought. people there is a lot of that questioned why shinzo abe brought forward this snap election so early on. people were thinking he should stay as prime minister. 47% after this election. that's it for daybreak asia. the market is next with rich and heidi. this is bloomberg. ♪

♪ 9:00 a.m. in hong kong. on theapore, 9:00 eastern seaboard of the united states. >> i am haidi lun. this is bloomberg markets: asia. rishaad: asia-pacific markets assessed thestors earnings and global economy and the ra