paula: good morning, i am paul allen in sydney and we are counting down to asia's market open. shery: i am shery ahn in new york. welcome to "daybreak: asia." worries about fed tightening cause stock concerns. the rate hike may be more aggressive than expected. cryptos stabilize after a weekend rout that has a raised

more than $1 trillion from the market value. plus we speak exclusively to the suntory president and ceo about the pandemic, wage inflation, and changing consumer trends. paul: markets just opened in australia and unsurprisingly we are seeing some selling, the i.s. -- the asx 200 already of. we saw some selling last week. new zealand has started and has gotten weaker ever since, of more than 2%. nikkei futures are flat as our futures for the s&p. the aussie dollar is at 0.7176 . we will see how things evolve, but right now of one third of 1%. haidi: the roller coaster ride for cryptos continue.

shery: many of them were crushed in a brutal selloff that has raised more than $1 trillion from the market value. bloomberg's su keenan joins us with the latest. we are seeing some stabilization in asian trading. what is going on? su: we know that even for the diehard bitcoin supporters who are used to volatility, the last 74 hours were a very rough ride. in fact, if we look at the one-week losses for bitcoin which again, have stabilized a bit, it is still set for the worst one week in eight months. you are looking at the bloomberg right now, which shows that 50% drop on saturday, just 24 hours ago, it was below the $34,000 level, 50% below its peak, which was almost at $69,000, close to the $70,000 level in november. let's look at the one-week losses, they are brutal.

more than $600 billion in market value wiped out from bitcoin's peak alone. it could take some time for a bottom to form, analysts say, and for confidence to return. if we look at the past few days, you can see the rout started last week and continued through the weekend and that is when bitcoin fell as low as 34,000 dollars. other digital assets also slid, either back down as much as 12%. solano falling down 13%. coinbase, it is a digital coin exchange and it recently went public. it was down 13% friday. margin positions were being liquidated and that caused a wave of additional selling pressure. we have mentioned that solano, one of the largest blockchain networks was hit by instability because of the rush of selling, the fed be more hawkish. it started to weigh on bitcoin

prices, with all the volatility and selloff in tech assets, we saw bitcoin going along for that bearish ride. paul: you mentioned the fed, the sale-down in tech, but what about the other assets intensifying the selloff, what are analysts saying about where it goes next? su: it is a question. let's drop into the bloomberg. so many had said bitcoin was in its own world, yet it continues to show a real correlation with assets like tech stocks, when there is a-of sentiment. the federal reserve again -- when there is risk off sentiment. russia is putting limitations on mining. but on monday, bloomberg reported that the white house is wading into the mix. there could be an executive order as early as february

putting out a white house plan, ordering various federal agencies and regulators to issue reports on the regulation of bitcoin, any security issues, and how it may impact the economy. so if we look at how it coin and its rival coins are trading right now, there is still a bit of red on the screen. although again, bitcoin is firming up, as is its rival, ethereum, but analysts say we could go as low as $30,000. a noted crypto billionaire, mike no regrets said $38,000 would hold last week, but as we know, that was broken over the weekend. back to you. paul: bloomberg's su keenan there. futures are flat at the open as investors face the possibility of faster tightening from the fed. let's get to our chief rates correspondent for asia and contributor to mliv, garfield

reynolds. we have heard from goldman sachs who are looking for rate hikes this year, but now it seems there is a risk they could be tightening at every meeting this year. have market got this priced in at the moment? garfield: markets have already started, because we have got this situation where the fed has said that it will tighten to cool down inflation, the recent inflation readings were pretty scary, and there is a strong expectation that omicron will, if anything, worse those readings. but again, until we actually get to this month's fed meeting and potentially until the mark when they do raise, there will be uncertainty about what that actually means. i think one of the reasons the market is struggling is because of quantitative tightening. the fed has said it will be far

more aggressive to move to trim its balance sheet. it would like a steeper curve, yet what has been going on the last couple weeks have been a flatter curve. with all that in the air, there is an easier way to price rate hikes. i think the market might be focusing on the wrong area of danger, that is kind of what they have got to go with, and therefore we get the speculation. shery: at the same time, we have the pboc working in the other direction. what is important for asian investors, what will they be watching this week? garfield: the biggest thing for all investors, in particular, the pboc, there was a lot of back-and-forth earlier this month about whether or not to trigger fresh easing measures,

and concerns about the way china's economy is going, what is going on with the real estate disaster. all that has moved toward some resolution. yes, the pboc is responding and it looks like it will go on responding. we have seen some resilience in china. some hope perhaps they can turn things around. but this week, the fed will be thinking about all that -- the fed will be all that matters, because obviously, the u.s. is a huge part of the global markets. the fed has been setting the pace and it comes to the tightening move for global central banks. so everyone will be watching what comes out from the statement and in the press conference. shery: an exciting week. garfield reynolds, chief correspondent for asia and mliv contributor. if you would like to hear more of his thoughts, go to markets live, that is on mliv .

you can get a markets rundown in one click and there is commentary and analysis from bloomberg's experts editors. a new outbreak in hong kong is severely testing the covid zero strategy, with 140 new cases reported sunday, the most in more than a year. for the latest we bring in our chief north asia correspondent, stephen engle, in hong kong. what is the latest situation? stephen: of course, with the city that is adopting this zero covid strategy, it is a big test for this government, obviously as we are seeing in china, which i will get to in a minute. keeping both delta and omicron at bay is proving difficult during these winter months, which have been relatively cold and wet here. hong kong is battling both strains -- delta and omicron -- after going, before december, we started numbers going up. they had gone seven months with very few if any daily

transmission. so we'll 140 cases reported yesterday, 125 of those deemed locally transmitted, as well as 94 tied to this cluster, the container port area of hong kong. again, also affecting residential areas, two apartment blocks in that district have been locked down. this is the biggest daily tally since july 30 of 2020. so, zero covid have -- has been working to a fairly good degree, but this is a severe test. one epidemiologist i saw quoted in the local media here says this so-called fifth wave could last three months before it starts abating. and of course, companies around hong kong are ordering people to work from home, including the banking committee. morgan stanley is saying that noncritical staff in some groups were told to.

. work from home starting today, hsbc is reducing its amount of employees in the office in the city from 50% to 30%. goldman sachs is also extending its split teams for march through february 4. we will see how this plays out. again, it is another challenge for this government in trying to maintain this zero covid approach. now in china, bigger challenges really, because you are seeing this cluster in a district that is 20 kilometers away from a key downhill ski area for the olympics, which started 11 days from now. you saw 56 new cases reported saturday, 63 on friday, and 2 million residents of this district will be mass tested, or are being mass-tested as of yesterday. 72 people also who have arrived within the so-called olympic bubble, they, according to state media, also tested positive. the concern is for this

district, you have this cold storage unit, and also cargo trucks and logistics spread out from there, and you are seeing cases tied to this outbreak in a few other provinces. if it starts going more towards central beijing and into the olympics area, it complicates that big spectacle that will be starting just 11 days from now. paul: alright, our chief north asia correspondent stephen engle there. vonnie quinn now with the first word headlines. vonnie: thank you. the latest covid wave in the u.s. may soon peak, but however, president biden's chief medical advisor says the turnaround will not be uniform. states in the south and west are still seeing a rise in cases. but dr. fauci said they should soon ease. he says the worst case scenario is a deadlier variant emerging. u.s. secretary of state antony blinken has rejected measures to escalate sanctions on russia

over its military buildup around ukraine. he argues it would limit western options in the future. he told nbc that officials are tracking the security situation in the ukrainian capital hour-by-hour. the white house is also said to be weighing, to pull families of diplomats out of ukraine. russia has dismissed allegations by the ukraine for plans to install a pro-moscow leader in the ukraine. many ukrainian politicians are already subject to western sanctions. the ukraine says that a former mp is a potential candidate. russia says nato countries are the ones escalating tensions around ukraine. turkeys finance minister is said to see the inflation rate peaking at 40% in the months ahead, that is according to economists and analysts who attended a meeting with him. he says inflation may not fall below 30% until year-end. turkeys cpi was 36.1% in december. some wall street banks predicted the lira could push it beyond

50%. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. shery: coming up in our japan ahead segment, we speak exclusively with suntory's ceo about never getting the pandemic, wages, and prime minister kishida's new capitalism. japanese pmi and investor profits are among the economic data do this week that will offer a health check on the roads second biggest economy. we will talk about what to expect with hsbc's fred newman. this is bloomberg. ♪

paul: it is a jampacked week ahead for investors on the

eco-data front, highlighted by the feds first meeting of the year. here in asia we will also get fourth-quarter gdp numbers from south korea, growth numbers from taiwan, the philippines, and the hong kong. the main focus will be on chinese industrial profit numbers from december. help us gauge how companies are coping with the broader economic slowdown and recent omicron outbreaks. bloomberg economics expects a steady reading for profit growth. for more, let's bring in fred neumann from hsbc. we do have those industrial profits shortly after that pmi number for the month of january. what are you expecting to learn about the health of the chinese economy? fred: pme numbers -- pmi numbers will be key because the manufacturing side to see some stabilization if not gradual improvement, or in january. milder weather in china this winter might help manufacturing activity.

but on the services side, of course, the big headwind, the ongoing periodic lockdowns in certain localities will be pressing consumer spending. so services weaker potentially, but manufacturing still holding up decently enough. paul: i just want to break in and get into a bit of breaking news, we will get back to you in just a moment. we are just hearing that the u.s. department has ordered diplomats's for families to leave ukraine amid tensions with russia. the state department is ordering families to depart the embassy and ordering direct hire employees to leave as well. this is according to an internal cable obtained by abc news, the u.s. ordering the families of diplomats to leave the u.s. embassy in kyiv. just returning to your observations, we have seen a bit of easing in china already. we have got the yuan returning varies -- remaining very strong.

what more action do you expect from policymakers? fred: more focused on fiscal policy, to be honest. yes on the military side, a bit of tweaking at the beginning of the year, interest rates coming down marginally, but the big boost really coming from the fiscal side. we need to see two things. one is we need local governments being given the fiscal resources really to maintain, if not to accelerate spending on infrastructure, that is certainly something that would signal special bond issuance. the other one is national support, national financial support for infrastructure spending. those are two key areas that would stabilize it. and the big one, the real estate market where we still see not necessarily monetary measures, but financial regulatory easing, in order to help the sector breathe more easy and help put a

floor under economic growth. shery: despite all the actions taken by china, we have seen inflationary pressures actually easing in the last month or so. i wonder why we are seeing a big discrepancy when it comes to inflation in most of asia, which seems to be rather tame, against, say, happening in the u.s.? fred: asia is really, maybe india excepted, for the most part, a low-inflation area now compared to the rest of the world. in part this has to do with the fact that consumer spending is not strong enough in the region, depriving companies of pricing power, and of course, households of purchasing power because of weak wage growth as well. remember, developed markets, notably in the west, massive

fiscal stimulus had amplified the effect of higher commodity prices. here in asia, that fiscal stimulus on the household side was not anywhere near as large, so that is why we don't get the cpi pass through as much as in other parts of the world. shery: what are you expecting on the currencies front, especially with the fed tightening, could weaker currencies in asia boost their inflation? fred: at the margins, certainly. wouldn't worry about too much. inflation is still at a very comfortable level here. central banks don't necessarily have to worry about a breakout of inflation anytime soon. what the central bankers will be watching here, of course, is higher u.s. funding costs. to what extent does it disrupt capital flows, or put downward pressure on local currencies not from an inflation perspective, necessarily, but certainly, nobody wants to see depreciating currencies. we are all about financial

stability. so it is key to have decent, stable, foreign exchange rates. therefore, central banks might become defensive here. we saw indonesia last week signaling a rise in rrr's, not because of inflation, but because the fed is tapping the brakes. shery: will that move the exacerbated now that we have the federal open market committee meeting this week and potentially a signal of a rate hike? fred: absolutely. we know the fed will not change policy this week but two things, they will likely announce that they will raise interest rates in march. markets have priced that in. but the big focus is going to be on the comments by jay powell, where he might unveil details around two key quantitated tightening it. when the fed starts to shrink its balance sheet, that is when things can get dicey. all eyes will be on the press conference to pick up on that qt

strategy this year. shery: we will be watching. fred neumann, all was catching up with you. you can catch up with all the stories you need to know to get your day going in today's edition of daybreak. bloomberg subscribers, go to dayb on your terminals, and also on your bloomberg anywhere app. you can customize your settings so you only get the news you care about. this is bloomberg. ♪ is is bloomberg. ♪

paul: let's look at some of the movers on the asx, couple of resource companies to watch. south32 declining almost 7% after its output report and full year 2022 guidance. south32 saying manganese forum output will be lowered to 3200

kilotons. this is because of covid-19 disruptions, weather disruptions, as well, that have been preventing the rebuild of manganese stockpiles ahead of the wet season. manganese is a key ingredient in steel-making. gold, nickel plate about 15%. this company is saying gold production will be down 420,000 ounces. a decline in gold production forecast for the coming year from region, shery. a quick check of the headlines. fortescue metals group has agreed to purchase a battery tech firm to decarbonize its market. the iron or producer is pursuing a plan to become a clean energy producer in the next decade.

a key iphone assembler says it may achieve an unprecedented performance in the first quarter. it has built up inventory to combat pandemic-induced supply chain disruptions. the chairman says factories are so busy, workers are likely to just get two days off for the upcoming lunar new year holidays. this bank's's third profits rose 30% boosted by rising interest earnings. net income of 832,000,008 estimates. icici deals mainly with retail loans and has been growing rapidly, helped by mortgage and car lending. reliance industry's net debt rose above zero for the first time in a year as a choose to repay its debts. its liabilities were due by march 2025, but paying them

now will save over $100 million annually. the company also posted a profit jump. next, the japanese prime minister and president joe biden minist- [announcer] imaginebiden will having fuller, thicker, more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music)

paul: we are tracking the fallout from the global supply chain crunch. a key iphone assembler sees unprecedented performance in the first quarter as manufacturers around the world raise the build up inventory over fear that various outbreaks and other entities could further disrupt their supply chains. the new zealand government is warning businesses to be prepared for labor shortages and supply disruptions as omicron takes hold.

the finance minister is urging companies to ensure business continuity plans are in place and has pledged government support. another shortage is emerging in the u.s. supply chain -- parking spaces. while president biden's infrastructure bill was supposed to ease things for the trucking industry, parking spaces have been overlooked. paul: let's step back and look at the broader picture as well, because the latest data from oxford economics shows that supply chain stress levels in the u.s. remain elevated. shery: proving that living with covid is proving tough for a gridlocked economy, but the trend also shows the crisis could have already peaked. you can read more of those stories on our newsletter supply lines. paul: intel is seeking to restore its competitive edge and rebalance the chip supply chain. the ceo spoke to bloomberg about plans for a manufacturing hub outside columbus, ohio. >> there really is, i will say,

enthusiasm for this project. right now i am here in ohio with the governor and the state legislator leader, ohio state leaders, and they are just thrilled to see this project coming to life. but will we get the chip -- on? the announcement is breathing energy and momentum and enthusiasm across the legislators, and president biden and secretary of commerce r.i.m. under armour just adamant we will get this done, the senators, good bipartisan and bicameral support. so we are optimistic. and as i communicated today, we want to make this project done bigger and faster and we are putting our chips on the table already. >> let's talk more about the project specifically, specifically what you want to produce out of this plant. will it primarily be chips for your own business or more centered around the foundry business and external customers?

>> it will be both. what we said today's we will announce two modules. it is a large location, 1000 acres. i hope to build out a full eight fabs or more in this location. it would be 100 billion over the course of the decade or so, so a massive project. initially 3000 jobs. 7000 construction workers, supply chain, etcetera, i mean, it is just fabulous. the product will be almost leading-edge chips. we will be going below the previous era. potentially the largest manufacturing location in the world. we will use the output from our internal products, but we will also be for external customers. it will cover both. we are expecting industries, like the auto segment, very prevalent here in ohio, as they do more av, connectivity,

infotainment, that they are increasing the use of leading-edge chips as well. so we suspect it will satisfy a full range of industries, products, customers, and be a massive cake for making this, as we call it today, the silicone heartland. >> why the heartland? when you think about it economic incentives offered by ohio, why ohio? >> we looked at 35-40 sites, many states across the nation. we were looking for a large, flat location like we found here, one with great energy, the ability to have strong support from the local government, labor costs. but more important than labor, talent. we have the president of ohio state university us. essentially all the midwest universities are within just a couple of hours of the new location we picked. so it is quite central. and of course, ohio came forward very aggressively with support

and economic benefits to really make this competitive. that is what i said for the u.s. chip sector. we are not looking for handouts, we are looking to be competitive on u.s.! fracturing, u.s. ip, to let us compete and reestablish a globally balanced and resilient supply chain. and i think today, was a huge step forward in that direction. >> talk to us about how quickly the u.s. can regain that, how quickly you think supply chain issues that have been such a headache for your industry, for all the supply chains you then have served the auto industry and many others, when can that be finalized? how quickly will we see growth? >> this year we said we want to have shovels in the ground. this factory will not come online until 2025. consumers think, that's a long way out, that it takes a long time to build such an advanced manufacturing location. that is part of the problem of the near we are facing, it takes

a long time to build these very advanced and sophisticated facilities to expand the semiconductor supply. now the industry has done a great job, we have gone to 20% growth last year. however, we still expect that through 2023, we will still be facing supply shortages. we just cannot ramp up fast enough to this global surge in demand. covid interrupting supply chains , and of course, work from home, everybody needs apc now at home. not just mom, but the kids, everybody needs one. shery: that was the intel ceo pat gelsinger speaking to bloomberg's romaine bostick, caroline hyde and taylor riggs. let's get to vonnie quinn with the headlines. vonnie: chinese officials have ordered all 2 million residents of beijing's district to be screened for covid after workers at a cold storage plant there tested positive.

it shows early signs of spreading to other provinces, adding pressure on authorities to contain the outbreak less than two weeks before the winter olympics. home, reported the highest daily number of covid cases in the year, 140 infections on sunday, with three quarters of them linked to an outbreak in a high-rise housing estate. the jump is unnerving authorities, who have not reported any local transmissions for more than seven months, until late december. the city is currently under a limited lockdown. italian media mogul silvio berlusconi has abandoned his head for presidency. 's decision strengthens the prospect that prime minister mario draghi could be reelected. berlusconi said in a statement that italy needs unity to combat covid, and he wants to avoid his name triggering divisions. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg.

paul: the u.s. and japan are pledging swift resolution to trade and tariff discussions, while pushing on china's efforts to change the status quo in the east. let's get more from our reporter in tokyo, isabel reynolds. prime minister could she do had been seeking a meeting with president biden's since he took office since october. . in the was a videoconference. what did they achieve? >> as far as what we could see, it was a particularly cordele meeting and they were able to agree on quite a number of issues. as you know, the japanese places great stock in developing great personal relationships with allies. and they rely on the u.s. heavily. biden is expected to visit japan, in the spring when japan hosts a meeting of the quad

leaders, which includes india and australia. they also agreed, as you mentioned, to push back or continue to push back on china's actions in the south china sea and the east china sea, and biden reiterated treaty commitments to defend japan, which also include the east china sea islands, and other areas. and also as the u.s. had wanted, they expressed a willingness to coordinate together to pressure russia not to become more aggressive against ukraine. it is not clear what kind of actions japan could take in that forum, but at least there was a commitment on paper. shery: what about the issues from the u.s -- previous u.s. administration, the tariffs imposed, was their progress on that front?

isabel: as we know, the tariffs came in 2018 under president trump. at the same time, similar tariffs were applied to other regions, including the e.u. the e.u. at the time retaliated quite hard and put its own tariffs on u.s. goods. japan did not retaliate. what we heard from japanese officials, they felt they didn't retaliate so they feel they deserve a better deal. it seems like we could be seeing extended negotiations to sort that problem out. shery: bloomberg's isabel reynolds joining us from tokyo. coming up have another big guest joining us this week, japan ahead segment, suntory's president will tell us how one of the world's largest drink makers is dealing with the pandemic and changing consumer trends, in a sustainable way. but conversation is next. this is bloomberg. ♪

paul: you're watching "daybreak: asia." japanese markets will be opening in just 18 minutes from now. to look at how trade is shaping up, we have nikkei futures looking flat at the moment. we have the yen currently trading at 113.74, this is the

greenback. futures are moving to the upside on the positive territory, by 0.3%. the japanese 10 year, not a huge amount of change, just up a few basis points. shery: some of the stories we are watching in japan today, the latest polls show the approval rating for prime minister fumio kishida's cabinet dipped slightly to 52%, while the number of people disapproving of his performance went unchanged, 36%. officials are still assessing the damage from an earthquake with the magnitude of 6.6 that struck off the coast of japan's southern island of kyushu over the weekend. " but cases hit another record, tokyo found 11,000 infections on saturday, despite the the impact is on the global beverage industry. our next guest is the president of suntory, one of the world's

largest beverage makers. joining us exclusively is takeshi niinami , the president and ceo of suntory holdings. great to see you. thank you for your time. >> thank you for having me this morning. shery: we have seen at the omicron variant and the latest wave have an impact not only on consumer trends, but for your business. you expect booster shots to make a difference? takashi: booster shots will make a huge difference. i think it has been accelerated by the leadership of the current prime minister, kishida, and i am hopeful that our business will come back, perhaps the end of february, because we expect the peak time will come around that time. then the government will shift to the reintegration of the

consumer, that will help us. we have seen a huge comeback of the business in december, when were moving towards normalization. so i believe business will come back. i am very much hopeful. we have to wait may be a month or so to see a huge comeback. and based on the pent-up demand, which will come from the huge savings at the household level, that accumulates already to around $300 billion because of the huge accumulation. that helps us a lot. shery: here in the u.s., we saw even before omicron, that different variants caused labor shortages. a lot of the leverage on u.s. workers. are you seeing anything similar in japan as you have these wage

negotiations happening during springtime? takeshi: it is happening, but not at the level of the u.s.. we need more truck drivers and workers and employees for the restaurant business, for example. so currently, there wage hike is happening in those segments. and i believe that many companies in japan will raise wages. bonuses around the time of june and july, we will see the rate -- there wage hike. that will be under negotiation between business and labor unions. shery: are you seeing that pressure on your company, as well? takeshi: well, it is big pressure from the government. but i like to motivate our workers and our people and our employees, because they did a great job during the --, which

was a huge challenge for employees. so we will raise wages for our employees. paul: so you are going to raise wages for your employees, when will that happen, and by how much? takeshi: well, i can't tell you, because we have labor unions and so on, but it is more than the government is asking for. still, we can't say at this moment. but [laughs] on an annual revenue basis. paul: wage growth is officially a major issue confronting the japanese economy. . you have been advising a number of administrations on microeconomic matters over the years. what change do you feel japan needs more? takashi: mobility of labor. we have seen growth segments

like health care. those segments need good talent. at this moment, japan's immobility of labor is a huge issue. the government and the private sector will work together to provide education and training programs for those who are willing to change jobs. i think this year will be a year of stronger mobility. shery: we think some of those issues are being considered by prime minister kishida and his "new capitalism" that focuses on people as well? takeshi: definitely. the prime minister thinks more of the people should be more paid and more offered jobs, and i think his new idea is very much welcomed by the business community. and japanese corporations are now thinking to pick up lots of

things for employees. and now, big corporations like us, starting to allow some businesses to, for the sake of our employees, get something different from businesses outside our company. shery: if we are talking about potential wage increases, we are also talking about inflationary pressure, not only a bit more in japan, but much more around the world. how are you offsetting those costs at suntory? takeshi: that is a good question. there is thinking for manufacturers like us in japan, not to pass on those costs to consumers. but in february we'll see price hikes from businesses to consumers, so generally speaking, the consumers will be

able to accept it to some extent, the price hikes. we have to consider. that in the beverage industry, we have to be more considerate to raise prices. we have to see what is going to happen in february. but we will consider. but i can't tell now that we will raise prices, because still the beverage industry has so many competitors in japan. paul: what sort of pressures are you also facing from the current supply chain and also in weakening yen? takeshi: that's right. first of all, and foremost, is the crude oil price, which affects a lot of commodity prices and think, we have to think about energy costs. china is still shut down.

southeast asia is the center of the supply chain. so they are still under the huge challenge. that will linger still. so we are still worried about supply chain issue challenges. but it should be toward the peak time of the supply chain issues. probably in the second half, we will see the easing of the supply chain. but still, oil prices will be decent for us. so our government and our business in japan will be under the challenge of the price hikes and what to do with the interest rates controlled by the bank of japan. should we start tapering or whatsoever? but we have to start to talk about that. paul: another one of your key outputs in the beverage industry is water.

water sustainability and long-term use is something that concerns you. how do you propose to manage this going forward? takeshi: right, we are so worried about the fact that in 2050, 40% of the world's population will suffer from water shortages. so we started two initiatives. one, replenishment of water. we started an initiative to replenish the water as much as we use in the world, supporting forests, in japan, 21 forests. to improve soil quality so that we can create the ecosystem of generating natural water. that system is now under operation in many countries -- u.s., china, southeast asia, and europe.

the second initiative is to educate the children, for them to understand the importance of natural water. we have been operating in south east asia, including japan and china, and we have taught already 290,000 children. and they are teaching their parents in their regions. so we will be expanding this initiative to other countries. overall, we would like to awaken the world to the importance of natural water. that will be a huge blessing. we want to be a spearhead to awaken the world. together with the reduction of greenhouse gas emissions. shery: you are talking about spearheading these efforts. what is the challenge when you have, say, western countries leading the way with it comes to regulations on sustainability, and not asian countries? takeshi: right.

i believe asian countries have different claim eight, different situations of sustainability. -- different climate, different situations of sustainability. we cannot resolve other issues in asia only by bringing in conventional renewables like solar panels, like water and wind power. we need more technologies, like hydrogen. we have to keep thermal electricity generation plants for the time being. you need radiation. so the current rulemaking by the west is not suitable for the asian situation. like in the raining season, the geography.

we have to have our own idea. that is why we set up a sustainability leaders' council led by ian bremer. shery: we can't let you go before asking about succession. will you continue in the ceo role, or could succession go to the founding family? just quickly as you can. [laughter] takeshi: i will be ceo. for sure. [laughter] surprising question. sherry: ok, we can take that as you may. thank you so much. takeshi niinami, suntory president and ceo, we love having you on. thank you. you kindly sent to the conversation on tv , available to all bloomberg terminal subscribers.

tune in for "japan ahead" every week to hear about the leading names in japanese business. that is monday at 8:00 a.m. tokyo time on bloomberg tv. the market opens in seoul and tokyo are next. this is bloomberg. ♪

shery: welcome to daybreak: asia. paul: asia's major market opens -- measure markets have opened for trade. stock looks set for further declines on worries of fed tightening. goldman's warning rate hikes may be more aggressive than expected. u.s. ordered diplomat families to leave the embassy and etf citing a continued threat of

russian military action against ukraine. a ceo sees a business recovery from next month with booster shots to release pent-up demand. we are exclusively from the ceo. shery: we are seeing some downside pressure at the open with the nikkei down 3/10 of 1%. the japanese yen is losing ground against the u.s. dollar at the 113 level. this as we continue to watch for the bank of japan pmi to come out in half an hour. we are watching the topics closely because it is near the correction territory having fallen almost 10% since its recent peak. take a look at the kospi, which is losing ground and extending the declines. all ready at the lowest level since 2020. we are watching the bond market because we have seen a lot of volatility. with all bonds advancing because

the finance minister warned they would take all available steps to curb excessive volatility. we are seeing korea's debt dropping to a three year low on concerns of more bond supply. the government is submitting the budget proposal to lawmakers. paul: on the topic of bonds, take a look at the u.s. 10 year. appears to be stabilizing. 17705 at the moment. as markets become increasingly skittish about what the fed may do next. we have been trading for an hour in australia. dsx of ia half of 1%. itm materials leading the index lower. we have heard from a couple of companies today. both lowering their production guidance on a couple of their products. new zealand staging something of a comeback. was off to percent. off by 1.5%.

if we take a look at oil, stabilizing around 85, 80 one. some giddy predictions about where the oil price might go next. shery: we do have an alert on the bloomberg right now from a couple of companies as we are hearing the shorts so favorite developer agile is going to sell stake in its holding of gong show lehigh. we have seen challenges for the company as we continue to see developers in china try to raise new funding and manage refinancing needs. there will be selling their jv stake. agile group selling a stake in those holdings. we are watching a cruise operator who has announced the resignation of their chairman, ceo and deputy ceo. resigning as chairman.

some changes at the helm as we continue to see the covid hit cruise liner trying to restructure its business. paul: goldman sachs sees a risk of more aggressive tightening from the fed. economists say the policymaker may take some sort of action at every meeting until the inflation picture changes. janet yellen thinks the fed will be able to wring down pressures. larry summers says it will be a tough ask. >> it is important to note professional forecasters think inflation will substantially abate next year. part of this view is likely driven by the expectation that the federal reserve will continue to account for these pressures as it fulfills its dual mandate.

>> inflation is at rates of lower than 7%. i don't exit the system without substantial -- they don't exit of the system without substantial economic turbulence. no one is pulling harder for the fed to strike this balance and get it right than me but it is not going to be an easy one. paul: larry summers, the predecessor of -- a predisaster of janet yellen. let's bring in the head of joint aipac equity research. the fed meeting is on wednesday. you along with most other people consider march to be a live meeting. what happens after that? what is the path of fed cuts and how aggressive you think the balance sheet runoff is going to be? >> we are looking at four rate hikes this year. the first of those happening in march. the key thing for the fomc meeting this week is signaling.

and ultimately forecasters will get more confident in their views once we get through to the end of the week. that will give the market something to latch onto. this week is quite -- is quite critical. paul: if things are more aggressive, what are the risks of another tension here? is the stage that yucca -- the stage set? >> i think it depends on the stock market. the company's most vulnerable to increasing rates are those companies which are aggressive valuations where the market is looking to value future cash flows on high multiple. that is driven by the cost of equity, which is influenced either real rate. -- influenced by the real rate.

asia, we feel they are much more insulated from the fed than those in the u.s. shery: what about not only the fed influence but also the pboc influence? the gtv chart on the bloomberg shows the southbound flows on we have seen. perhaps a more easy monetary policy and fiscal policy around china. >> in terms of the pboc, unlike other central banks, the pboc is more of a government agency. if you look at central banks any other parts of the world including japan, including the u.s. and the u.k., there is a perceived independence where the pboc is another instrument of government power and works in tandem with other fiscal policy.

from a top-down point of view, one of the things the chinese administration wants to continue with is a policy to ensure social cohesion. be mindful the chinese equity market unlike others in asia is owned domestically. it is in the interest of the government to keep that market with a bit of energy behind it simply because it is owned by domestic retail investors. there well-being and their comfort is a party for the government. shery: this week, we are also watching semi conductor earnings from sk hynix, samsung electronics. what are you seeing on that front and does that change your outlook for certain geographies given what is happening with chipmakers? >> there is a disconnect between valuations we are seeing in the u.s. and what we are seeing in asia. if you look at the asia market,

so take msci asia japan, these companies are trading on very modest valuations. for that reason, even if these companies don't deliver what we perceive as fantastic results, there were always be support for them should tsmc, the taiwanese constituent, which is 45% the local index, this is a company growing its revenues at 20%, which is extraordinary for a company has been around a long time. has a strong balance sheet and pays dividends growing faster than inflation. have a lot of comfort around the big tech names in asia. i think where there is scope for disappointment is in some of the higher valued companies and the mid-cap space. -- companies in the mid-cap space.

in china and in india, you have some of these mid-cap names trading on u.s. valuations. from an index point of view, they are so modest. if you look at the tech space holistically in the asia-pacific, i think it is much more sensible valuations and that gives us a great deal of comfort. shery: jim mccafferty from nomura. we do have an alert on the bloomberg. we have learned u.s. officials are saying russia could decide to invade at any time. u.s. officials saying to bloomberg russia could decide to invade at any time. you're talking about the tensions with ukraine. russia continuing its military buildup and sending troops to the ukrainian border. also coming after the u.s. state department over families of -- ordering families of diplomats in ukraine to leave the country

due to continuous threats of russian military action. this as we sold the meeting in geneva with russian foreign minister sergei lavrov and antony blinken did not yield an agreement. i u.s. officials saying russia could decide to invade at any time. it's get to vonnie quinn with the first word headlines. vonnie: staying with russia, it has dismissed allegations by the u.k. had plans to install a pro-moscow leader in ukraine. officials say russia maintains links with many former ukrainian politicians, some of whom already subject to western sanctions. the u.k. says a former ukrainian mp is a potential candidate. russia says nato countries are the ones escalating countries -- is tensions around ukraine. workers at a cold storage plant in china tested positive.

the growing cluster of the chinese capital show early signs of spreading to neighboring provinces. putting pressure on authorities to contain the outbreak less than two weeks before the start of the winter olympics. hong kong is recorded the highest daily number of new covid cases in a year. 140 infections were reported sunday with three quarters linked to an outbreak at a high rise estate. the sudden jump is unnerving hong kong authorities who had not reported any local transmissions for more than seven months. the city is under a limited lockdown. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. shery: still ahead, south korea's government is looking for more than $11 billion in extra budget should will take a local -- in extra budget. we will take a look at what it would be used for. next, we speak with elizabeth gains about the company's

decarbonization drive and it's purchase of -- and the purchase of williams advance engineering. this is bloomberg. ♪

paul: australian mining company fortescue is pushing ahead with two transition -- with plans to transition to an energy attribute or. let's bring in the ceo of fortescue. thank you for joining us today. you have a timeframe in mind for when fortis q will have a fully battery-powered fleet? >> we have had a goal for some time to achievements or emissions by 2030. that is an industry-leading

target. the acquisition certainly allows us to continue to accelerate our drive to achieve the net zero emissions and eliminate the use of diesel across the mining fleet. we are on an accelerated path. we have been working with williams advanced engineering since early 2021 as they worked with us to support electrification of our mining fleet. this is an important development. we are still on the ambitious goal to achieve net zero emissions by 2030. this will help us accelerate that journey. paul: williams engineering, u.k. based. a long way from where you are in perth and from where your main operations are. are there any plans to bring that company to australia? >> our plan is the team will continue to operate in the u.k. they have been working with us since early 2021.

we know we can work with them should they have access to technology. they have a great team of people who are leading experts in their field. we intend to maintain their presence in the u.k. not only as we de-carbonized fortis q's mining -- fortescue's mining operations but also sell this analogy to others as we advance the decarbonization of heavy industry. shery: is that a factor in why you decided for full ownership of the company instead of having contracts with manufacturers like your rivals have done? >> absolutely. we are diversifying to a green energy and resources company. this is a further demonstration of the diversification strategy. this was not about entering into an agreement with williams advanced engineering. this was about seeing the opportunity.

knowing this was about our strategy. it will fit very well with our broader decarbonization plans. also with fortescue future industries. that is part of our journey to develop this renewable energy business working with companies like williams advanced engineering. we have made a number of announcements. this is another demonstration of that strategy and diversification. shery: how challenging is the backdrop right now for fortescue especially when it comes to chinese demand not to mention supply chain disruptions and labor shortages the pandemic has created? >> we have seen strong demand for our products. have seen robust demand. we will announce our quarterly production report tomorrow. the team are performing incredibly well. we continue to see strong demand. there is no doubt there are challenges around labor shortages in western australia.

we have been managing that for some time. we have robust covid-19 management plans in place. we will work closely with the state government as we deal with the changing landscape in terms of when the border restrictions will ease. there is strong demand for labor in western australia. here locally and access on the east coast will become important. paul: strong demand for labor. the western australian government pushing back the border reopening. the lesson from the eastern states of australia is once omicron gets hold, it is hard to contain. where you sit -- were you supportive of that decision to keep the border shut? >> the money and resources industry has had a mandate for vaccinations for some time. anyone entering a manning site -- a mine site has got to be vaccinated. we have worked closely with the state government to implement

the policy. we have very high rates of vaccination. the health and safety of the australian community and the west australian population is critically important. we will work with the state government. we were looking forward to reopening knowing we have a high rate of vaccination. we have other procedures in place to ensure we fully test anyone who travels to one of our sites. we have been working through that for some time shared we would like to see at some point -- shery: thank you very much for joining us on a very important day. the ceo of the company. coming up next, cryptocurrency stabilized after a brutal selloff over the weekend losing more than a trillion dollars in market value. we will discuss. this is bloomberg. ♪

>> this is a risk asset up and down. it is even more of a risk asset now that most of the crypto market cap is ethereum and other stuff that is basically technology where we are pulling forward massive assumptions of global growth into the present. shery: that is the cio of star killer capital. take a look at trading. seeing a little bit of a bounce in the asian trading session with bitcoin above $35,000. ether above 2500 good bitcoin has lost 50% from its all-time high last november. the pullback was pretty broad. you can see the last trading session solarana was down 13

percent. the network was hit in instability. in the asian session, we are seeing a little bit of an upside for other currencies trading at the moment. let's take a deeper dive into the roller coaster ride. su keenan joins us with the latest. is anyone calling a bottom yet? su: short answer, no. many are saying you need to wait to see how stocks perform before you can begin to see some sort of stabilization of bitcoin. there is the bloomberg chart. it is political clear -- it is pretty clear a drop 50%. bitcoin did. it may take some time for confidence to return before expecting any kind of bullishness. let's look at the one week losses because they are brutal. you see red across the screen. not just for bitcoin and ether

but coinbase, which is an exchange. it is a stock that went public a couple months ago. it is in exchange for digital coins. you also see the index of a wide range of digital coins down more than 20% just in the last couple of days. if we look at the gist of five j -- five day chart for bitcoin, market value has been wiped out. you see it was just below 70,000 in november. really came down hard in this past couple of days. stabilizing. where we go from here is an open question. you had a jill -- yet other digital assets slide. -- you had other digital assets slide. coinbase taking its own hit shared what you had was a lot of concerns about macro issues. i hawkish fed and margin positions being liquidated.

that cause an additional wave of selling. paul: you did ask where to from here. what are analysts and investors saying about the next move for crypto? su: if we dive back into the bloomberg, you will see the correlation of bitcoin to stocks does depend on where these assets are going. many have said bitcoin, crypto is its own world. it is moving with the market when there is a risk off sentiment. bloomberg also learned there is new cause for concern in addition to the other tightening scrutiny we are seeing around the world. people close to the white house say the biden administration is preparing to release a government wide strategy as early as next month. sources say it could come in the form of an executive order, which would require a number of agencies to work back on their security issues on how we can regulate this, what the effect of the economy is and that would

have a chilling effect. one analyst said it was an across-the-board selloff. there was no place to hide. you are seeing a little bit of green but some say it could fall as low as 30 from here. paul: su keenan there. an alert on the bloomberg terminal. cathay pacific releasing some numbers. a full-year loss between 5.6 and 6.1 billion hong kong dollars. that compares to a loss of 21.6 billion a year ago. cathay pacific saying passenger flights have reduced to 2% of pre-covid levels. cathay pacific expecting to add 5% more flight cargo capacity. shares broadly flat over the european -- over the european -- over the year. hong kong reports the highest tally of covid cases in a year. we will have the latest from

hong kong in moment. this is bloomberg. ♪

>> we are getting the latest pmi numbers out of japan. these are preliminary numbers but we are seeing concrete -- seeing contraction already after being in expansionary territory for the last three months. 46 point six after expanding for three months. manufacturing in january stayed expansionary.

a slight improvement for the previous month, up 54.6. we have seen policy emergency taking hold across japan as we see more omicron infections and the broad pandemic hit. we see that reflected in the january preliminary numbers for services and the composite number falling into contractionary territory for japan. >> the latest covid surge in the u.s. might peak shortly but dr. fauci says the turnaround will not be uniform. states in the west are still seeing rising cases but dr. fauci says they should ease. he warns that this is a deadlier variant emerging.

and prime minister mario draghi could be elected as head of state. italy needs unity to combat covid and he says he wants to avoid triggering divisions. turkeys finance minister has seen inflation rate peaking at 40% in the months ahead. he said inflation might not fall below 30% until year-end. the cpi hit 36% in december and some predict the currency crisis could push it beyond 50%. the eu executive arm is exploring whether trading partners including the u.s. could move natural gas pipes to the region. this is to ease the pressure from rising geopolitical risks. the eu needs to remain vigilant

and prepare for emergencies. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. i am vonnie quinn. paul: the u.s. has ordered diplomat families to leave ukraine, saying russia could decide to invade at any time, and the u.s. embassy in ukraine will continue operations but officials still believe a russian invasion could occur at any time. antony blinken says it is too early to step up sanctions. >> the purpose of sanctions is to deter russian aggression. so if they are triggered now, you lose that deterrent effect. >> bruce einhorn has the latest. this does sound serious, with the families of diplomats being ordered to leave.

does this mean invasion is imminent? >> know, but it means the u.s. thinks it is quite likely. so they have said that family members should leave the embassy and the state department has urged u.s. citizens in the country to consider leaving ukraine. and antony blinken talked about when to impose sanctions, and that is in reaction to others saying sanctions should be imposed now in order to let pretend no that the u.s. is serious. blinken says the point of sanctions is to hold them as a deterrent. >> we saw that geneva yielded little in terms of anything around ukraine.

when is the next opportunity for some relief from tensions? >> the good news from that meeting is that at least they agreed to continue talking. over the weekend the u.k. said they have intelligence that moscow is plotting to install a pro-russian ukrainian leader, something moscow has denied and they call it western provocation. boris johnson is planning on talking this week with other leaders of the g7 in an attempt to finalize sanctions, something the western allies have not quite agreed on what the sanctions would be. paul: russia and china have a reasonably close relationship at the moment. with the olympics 11 days away,

could this change the picture? >> china is russia's largest trading partner and russia increasingly relies on china as pressure builds from the west. the winter olympics are scheduled to begin february 4 and conclude on the 20th. russia is scheduled to have military exercises with belarus. but it is not just the olympics, it is the paralympics after it. the chinese have called for a traditional halt to all hostilities worldwide, something the russians have agreed to. whether they stick to it is another question. but presumably president xi jinping would not be happy if a russian invasion overshadowed the beijing olympics, given how

much china has committed to this in terms of resources and the covid zero strategy. if a russian invasion took place during the olympics, it would make the world pay attention to what is going on elsewhere, not the games in beijing. >> let's delve into what is happening in china. the olympics are 11 days away and beijing is already battling a spreading coronavirus cluster. let's bring in stephen engle in hong kong. how bad is the outbreak? >> it could overshadow the winter games that start next friday, 11 days from now. you have a growing cluster in one district of beijing. beijing is extremely sprawled out. this is in the southern part of

the city, 20 kilometers away from some of the downhill skiing olympic venues. saturday 66 cases were reported in china on top of 63 on friday. we are waiting for the sunday numbers. they are focusing on this cold storage facility in the district and 2 million residents in that district have begun a mass testing campaign. the concern is this center with the cold storage, they have already found traced cases in neighboring provinces. so as truckers move goods around the country and from that cold storage facility, it has the potential to spread. so this is a worry for china, which has already had notes on

social media that international mail is the source. we will have to see how this plays out so close to the olympics, and overshadowing it. paul: hong kong is also battling a spreading outbreak. how will this further test their zero covid approach? >> it puts it completely to test. they are dealing with delta and omicron and they have a cluster in a container port district. and the main residential area, at least two blocks have been blocked down and at least 173

cases. so 140 new cases just yesterday, 125 locally transmitted. just short of 100 of them are tied to the cluster. there were only 26 cases saturday, up to 140 cases sunday. that is a fivefold increase. yes, they are testing more, but this has the potential to be what local media call a super-spreader event. we have to wait and see but obviously the banking community are taking precautions. many are expanding work from home arrangements. morgan stanley is doing that. noncritical staff told to work from home starting today. the maximum workforce in offices will be cut from 50% down to 30 and goldman sachs is also

expanding their work from home approach. paul: one of japan's largest beer makers is vowing to increase worker wages above government guidelines. this began with the government's virus response. we spoke with the ceo. >> i think this has been expended by the current prime minister. i am hopeful business will come back in japan perhaps the end of february. we expect a peak will come around that time and the government will shift towards the reintegration of the consumer, which will help us. we have seen a huge comeback of business in december when things

were trending toward normalization. so we believe business will come back. we have to give it a month or so to see it come back. and based on pent up demand at the household level, it has accumulated already to around 300 billion topple -- $300 billion. that helps us. >> here in the u.s. we have seen the pandemic because labor shortages and a lot of leverage has fallen for u.s. workers. do you see similar in japan as you have negotiations happening in the spring? >> it is happening, but not to the level of the u.s.. we need more truck drivers and

workers and employees. currently the rate hike is happening and i believe many companies in japan will raise wages. bonuses around the time of june and july will be the rate hike at that will be another negotiation between business and labor unions. shery: are you seeing pressure on your company as well? >> this is pressure from the government but i like that it motivates the workers and people because they did a great job during the covid time, which was a huge challenge for employees. so we will raise the wages for our employees. paul: so you are going to raise wages for your employees? when will that happen, and by

how much? >> i cannot tell you, because we have labor unions. but it is more than the government is asking for. but still, i cannot say at this moment. we are talking about annual revenue base. paul: so wage growth is a major issue confronting the japanese economy. you have advised a number of administrations on macroeconomic issues over the years. what do you feel japan needs most urgency -- urgently? >> mobility of labor. we see segments like health care that need good talent. at this moment, mobility of labor is a huge issue. the government and private sector will work together for

training programs for those who are willing to change jobs. i think this year will be the year of global mobility. shery: we have breaking news. we learned goldman sachs is promoting lucasarts field -- luke sarsfield. this promotion elevates him to the level of executives that will run key moneymaking operations. cohead of asset management business. next, the economic impact of

south korea's extra budget and the risk that comes with it. this is bloomberg. ♪

shery: broad pressure for the kospi in the korean markets.

now the lowest since december 2020, falling for a second concession -- second consecutive session. we have seen a weekly loss across the u.s. dollar as we see the risk of sentiment spread across the world but we are watching the government bond space. in advanced friday after a warning it would take available steps to curb -- we have the benchmark three year falling to a three year low monday given concerns about the debt burden with the extra budget expected. south korea's government will submit the proposal to parliament today, aimed at keeping the economy on track ahead of the presidential election in march. our next guest expects this to be more of a social safety net.

thank you so much for joining us. it has been an interesting thing to see in korea. we had the be ok start to tighten monetary policy but then the government increased the fiscal stimulus and the country. why are we seeing this divergence, and how does it impact the economy? >> i think the main reason for the divergence is to control the market. [indiscernible] because of covid, they want to ease the burden in the fiscal policy and that is why we see

this. shery: what will this do for the economy and the extra budget? >> i think the impact of the extra budget will be limited. the previous budget is only half the size of it. and we see rising interest rates. so the impact on the extra budget [indiscernible] paul: you say the budget is of moderate -- mazza stte -- budget is of modest size. will it be enough? how is the country coping with omicron and the supply chain disruption it brings? >> this is not to drive growth come more to provide a social safety net.

we expect to grow about 3%. i think the job market is resilient and construction was week last year but i think it will pick up this year because of policy. so i think the economy as a whole is resilient. paul: so amongst of the budget you described, commodity prices are rising. the bank of korea is probably the most aggressive central bank in asia at the moment. the kospi is off 6% in the last -- 12% in the last six months. do you see tradewinds -- do you see headwinds? >> i think the bank of korea has been more hawkish than others and will become more dovish than other central banks after the first half of this year.

i think the bank of korea will provide more liquidity. the kospi is because of the outflow of foreign investors and i think it seems overblown. i don't think it's because we have a weaker fundamental economy. i think it depends [indiscernible] paul: head of korea economic researchers in china, thank you. you can see news on tv and dive into any bloomberg functions we talk about. become part of the conversation by sending us instant messages during the show. it is for bloomberg subscribers only.

tv . this is bloomberg. ♪

shery: centauri says wages will be raised and guidelines due to an ongoing labor shortage. consumers we are told are more likely to accept price hikes because of the inflationary environment. the environment should improve

in the coming weeks. >> i am hopeful businesses will come back in japan mid february. we expect a peak time will come around that time and then the government will sift through reintegrating consumers. that will help us. shery: and iron ore producer is setting up to become a clean energy producer over the next decade. >> we have been working since early 2021 to create the battery technology to support this. this is an important development. we are on an ambitious goal to achieve green energy by 2030 and

that will certainly help us on this journey. shery: that will do it for us. standby for bloomberg markets--- bloomberg markets: china open. this is bloomberg. ♪

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>> good morning from hong kong. welcome to china open. yvonne: asian stocks declining on the fear that said policy might get tighter faster than earlier for saw. pboc was prompted to tem