that's well above the boj target of 2%.ut the bank has kept its key interest rate below zero, only tweaking yield curve control policy to keep long-term interest rates low. japan's rising inflation was initially due to higher prices of imported goods, but morita of nomura security says it's clear that service prices are now also heading north. >> translator: i think the main factor leading inflation will change from the price of goods to prices of services, which tend to reflect wage hikes and potential growth of inbound tourism. that means inflation is likely to become more sustainable even if the rate declines. >> reporter: morita also expects wages to the yeas which may persuade boj officials to believe that a sustainable inflation target is achievable. if that happens, it'll finally be time for them to change their monetary policy. >> translator: as japan's economic recovery continues, we expect base wages could be raised by 1.8% at annual negotiations next year. we forecast the boj could scrap its yield curve control p

a deeper inflation trend will keep the boj on edge of her prices.an inflation slowing and lined with boj's cooling price view. keep a watch on those numbers. let's get more on the latest japan inflation reading for bloomberg senior economist. your take on it? >> i think a slowing down of core inflation is exactly what the market and the boj was expecting, but i think the pace of the slowdown is tempered by recreational japan. japan is having the first summer holiday without covid. that is pent up demand, and that will be temporary, but demand factored into inflation is showing a different dynamism, so the boj skipping electorate. what is trickier is on top of the summer holiday demand, also the recent yen slide will probably elevate import prices and make the boj's task harder. david: the background in your opinion to this current yen slide, you see any further material depreciation from the current level? >> right, having the boj done the ycc, i think they are confident selling the yen, because having that done, we do not expect another boj policy

japan has got the boj releasing the summary of meeting minutes.nvestors will be passing over those lines carefully. any clues coming out around the prospects for exiting the program of yield curve control. japanese yen is holding steady as investors await. in terms of what else we are watching, change on. take a look at the big name companies reporting over the coming days across asia. earnings season is winding down in the u.s. and europe. in asia it's starting to kick off. $2.8 billion of market cap confirmed by reporting over the coming week. key names, alibaba, sony, just some of the names. at softbank in the mix. let's take a look at what is happening in the rest of their region in terms of u.s. ones as well. we've got futures kicking off. mild gains at the start of trading. it's that story of a mixed jobs report that came through. fed officials are mulling the outlook for rates. brent crude, wti little bit higher. details on why that's happening but in terms of what elsewhere watching, it's in inflation report kathleen that is due out and tr

does this move the needle for the boj?inly a slight negative and they need the labor market to remain tight. and for that virtuous economic cycle they need inflation to be accompanied by a tight labor market. that's a prerequisite for that. back in the july meeting, the boj expected the labor market to remain tight, and it's is -- it's a surprise that we are seeing it rise for the first time in four months. we are up 1.29%. as far as today's state is concerned, it looks like a surprised negative for the boj. >> where does this leave the boj ultimately when it comes to that search for that virtuous economic cycle? >> one report does not completely change the whole picture, but like you mentioned, it definitely is a key part of the path towards normalization. one thing that keeps coming up is next year's spring wage negotiations between businesses at the labor unions in japan. and a lot of economists think that unless there are strong results next year as well, it's difficult for the boj to move towards that normalization pa

we did think that what the boj delivered last friday was yen support. trading on the day. we had bouts of yen weakness. there were hedge funds outside betting on a very major change. to us it is significant to raise to 1% for the 10 year. the fact is, they have said themselves that it's the 1.0 level that is the key to them now there. that is a notable change, particularly if they keep underestimating the strength of cpi. it is a multi week, multi-month story perhaps for the yen to make a recovery. for the most part we did see about 24 hours ago a little bit of support for the yen against the u.s. dollar on the ratings downgrade. but while treasury yields are trending back upwards again, that does suggest yen weakness. >> you are also saying you are euro short, short yen -- give us a little bit of the background for your rationale here. >> we think obviously the market is very divided on the pound near-term. and had a good year overall. we do think it's getting stretched on some of those cross assets, sterling yen. we are seeing signs of inflation easin

. -- the boj's target. host: thank you to bloomberg's april hong in singapore. time for our morning roundtable. i am joined by james in beijing, mark in singapore and maria in brussels. getting deeper into the china story, we are seeing stocks on the mainland and in hong kong surging after this announcement of more stimulus. the stamp duty on stock trades is a shot in the arm. can it last? >> it is a good question. this has been rumored for a couple of weeks. you are seeing a rise domestically because of this expectation and now you see the result of that. it is only domestic investors reacting to this. we still see international investors pulling money out of the chinese stock market. there is no sign at the moment that this kind of reduction of a few points in the stamp duty on stock trades will turn that around when all of the drivers for global investors are pointing the other way. the rising interest rate differentials. a slowing domestic economy. there is no good growth reason as to why anyone would want to be more exposed to the chinese stock market at th

this is been the boj's concern that the economy will pick up.onomy being driven by exports and not so much by demand, that is the concern that the governor has been expressing, that they have to see final demand, they have to see consumer spending, they have to see their confidence. that's one of the reasons why the boj is waiting to see how wages continue to do over the rest of this year going into the all-important spring wage negotiations next year, are they strong enough, do they support the idea that not only exports are going to do better, and of course a weak yen, which is been the big story the last several days, that's good for exporters, but in terms of imports, what if the yen weakened so much on the prices of food and energy go up, what if that continues to apply where it doesn't really help the prime minister's popularity. that's one of the delicate things that boj has to be balancing as well and we might have a trade that we could put up. what was expected on this report and where we got, and more than double the forecast, this is

does this cooling inflation mean a longer wait for the next move by the boj?it fits into the boj's view that prices will cool and more time has to be taken before deciding to normalize policy, but it is not the end of the story. there are pockets of sticky prices in today's data. we have subsidies on energy prices. if you take those out, we have inflation in the 4% range, and we saw core inflation excluding energy has accelerated to 4.3%, getting stronger. another subcategory we saw this morning was service prices. if you have higher input prices abroad causing cost push inflation, that is one thing, but when you see service prices across the board going up, that is a sign inflation is widening its influence throughout the economy, and those prices hit 2% for the first time in 30 years last month. that is another hurdle that the boj needs to cross before you can think about normalizing policy. we are not talking about any sudden move next month, it would be more like next year, but we are stepping closer in that direction. lizzy: where does it leave interventi

we have one boj member saying the treatment should be discussed early.ortant to continue with the current easing measures. this is from the june policy meeting. one boj member, saying we must avoid a surge in rates. ycc and how they potentially exit. the minutes of the next meeting will be more interesting. we are not seeing any further policy shift and 2023 -- in 2023 shift that we saw last week. take a look at how u.s. futures are trading at the moment. we had so much to deal with, including the move from fitch to downgrade as well as the market file that we saw. we are seeing broad positivity. perhaps sentiment is fragile going into the start of cash trading in asia. we are seeing some vulnerability to the downside. this is bloomberg. ♪ >> this is "daybreak: asia," counting down to asia's major market opens. expecting reaction now from fitch's cut of the u.s. credit rating. perhaps one example of what we might expect might the what happened in 2011 from smp. we saw global stocks tumbling. we have treasuries gaining ground because people were risk-aver

we saw it everywhere, so the boj has to normalize a little bit. i personally do not think it is so much about them intending to tighten policy in japan in a meaningful way. i think it is much more about weaning themselves out of the yield curve control policy and regaining all sovereign control, if you will, of their own monetary space. the reason i am saying this is because the yield curve control system basically makes you a passive -- or hands over control to the fed and other central banks. and i think that is what they want to achieve. and by making -- the first step was to make unclear where the exact target is, but i do not think they will allow yields to rise a lot higher, at least in the near term. so every time they see something that they do not really like in the market, they will come in big time. the message is we are in control of the market, and we are going to show you that we can remain in control of this market. so i think this is what is happening and it will stay for a while like this. david: and by design, do you think that w

do you think the doj has it right when they talk about -- boj's right when they talk about inflation in japan not injuring? because we have been burned by the word transitory before. louise: exactly. i think in the case of japan you are right. we have seen pretty animated inflation by japanese spenders for a while. we see it as sectors that drive more of the upside to inflation and it really is transitory. think about what is driving even though recent trends. higher-than-expected core cost cpi, reaching an absolute threshold of energy in japan. this reflects the fact that some travel subsidy programs put in place during covid have started to fall away. so you are really transitory. i think that would fold down inflation going forward. to the extent that we believe this will create a meaningful drag on inflation for a sustainable time, i think that is still a huge uncertainty. that's why is think the b will continue to be quite patientoj in assessing whether it needs to move in a monetary sense to combat this inflation. paul: louise, we have to leave it there. thank you for joining u

the boj cannot go back now. they have to keep moving. jgb yields moving towards the top of a new trading range. fair value is probably .6%, .7%. that potentially provides a calming effect for the bond market this week. in terms of my best case, you mentioned inflation coming out in the u.s. and inflation also due in china. i think the u.s. inflation report is probably reasonably well behaved. i think what we are going to be talking about at the end of the week is the chinese numbers. that signals the chinese economy is obviously heading towards this disinflationary cycle. the headlines if we are going to see at the end of the week, i think that will be more the focus rather than the fact that -- i think that provides support for the bond market and that is more important in terms with the boj did to what comes next. rishaad: what comes next? 23% rise in the price of crude oil since the middle of june. that's an interest rate hike in many ways. how cognizant do you think central banks are of that? it does feedthrough eventually. tony: abs

should we brace for a live september boj meeting? mark: we definitely should. you say, it is the yen which is really the turning point in this whole situation. there has been a hint already from the new boj chief, he has spoken about the yen in a way that his predecessor did not. mr. corrado was careful to avoid discussing and it is usually the ministry of finance who is responsible if there is intervention to be done but clearly from the inflation point of view a week yen feeds directly into that. and he hinted at the fact that maybe the bank of japan would need to do something from their side to help support the yen. that clearly raises the stakes for the september meeting and subsequent meetings this year because the yen weakened against the dollar significantly this week and on a trade-weighted basis is extremely low. so definitely you are beginning to see some hence and there is another boj speaker today suggesting that inflation is getting towards the point where there is traction on the upside as well. he was talking about may be some changes in 2024 but

i think the boj did a great job of confusing the market with what the end of yield curb control looksevery night it's a new target, which is kind of cool, and they got away with unwinding a really complicated policy without creating a lot of problems i think rates did go up generally at the long end because of the boj, and i think the fed is looking at that and probably smiling >> if the fed looked at this and wanted to take some lessons away, what would those lessons be what is their equivalence? >> long rates are less anchored globally if japanese investors can go home and get a 1% yield instead of a zero percent yield. that is so tightening, that the fed doesn't have to do because the boj is doing it for them at the next meeting, if the bank of japan has given you more, you don't have to do as much >> another maybe underreported or underappreciated development is this so-called deflation in china. it is one month's worth of negative numbers, but certainly they do not have inflation china is a big export economy. goods prices have been negative. goods prices have not been as negativ

so they are already looking for the boj leaning towards more tweaks and yield curve control. you remember that happened in december of last year, where they yen got down, dollar-yen got down to a 140 six handle, that happened enough that the former governor of the period japan did this tweet in december that help stabilize things, but now with the new governor, with these inflation numbers looking better, staying higher, that's what people are looking for, the yen weakness has already spurred the finance minister, and his lieutenant, to say, we are watching out for extreme moves in the currency, that's what we don't want to see. that's why traders are watching the yen so closely. paul: bloomberg's global economics and policy editor kathleen hays. this got some breaking news about the up coming ipo, we've got softbank's arm believed to have lined up 28 banks for what's going to be the biggest 2020 ipo. i won't read out all 28, they here's a few of them. we know that barclays, goldman, j.p. morgan, but there are 10 second-tier underwriters, citigroup, deutsche bank and jeffries

you have the big unknown in that equation and we about this before, the boj monetary policy, with theoint remove his yield curve control and when they do that, that will have a massive impact. this is a nothing riveting scenario but when it happens, it happens. there are a lot of question marks in this scenario. guy: i feel we have much talk a lot about the euro recently. it feels like as a hostage to the other pair is trades against. the risk seems to be growing. yields moving higher. what does that mean for italy? gas press volatility appears to be increasing. there seems to be more challenges growing for the eurozone over the last few weeks. i wonder if you feel those are fully reflected at this point. sonja: not quite yet. we started the year with everybody being very pessimistic on europe. things were better than we thought, everybody got optimistic. i think there is some downside for the euro from current levels, maybe not a whole lot. a lot of the bad news is priced in. i think there is potential for downside risks. at don't think the ecb is going to hike rates in december whic

what i would tell the boj is we don't like they are doing enough.we think about how that impacts emerging markets, the bigger impact will be u.s. treasury yields. the rise in global yield tightening does negate some of the carry we are seeing across asia or previous some of the higher yield stories across asia . however, at the end of the day, the move overall is still not enough. if you look at the fundamental story for asia, asian central banks are not yet cutting rates. this is a different story to what we are seeing relative to dutch america. management talking about cutting rates yet, there are still some talking about hiking rates. to a certain point, that will help the carry story for asia. it's not because the boj is now tweaking therefore if money goes back the whole em stories done. our view is for emerging markets, there are specific stories specifically in asia still positive stories. growth momentum is still doing well. in the second half for the likes of north asia, we are looking for tech to come back. we are seeing flows come back al

valerie: the boj responded. i thought that was interesting if we look at the breadth of the move since they responded last time. it had a five-basis point increase in the 10-year yield prompting that intervention. if we see options next week maybe not be received by the market as well as we thought, and every time we get one of these big options, we have yields ticking higher and higher. you can see more pressure on the bank of japan. it's not really the reason we thought we would have pressure, we thought it would just be hot u.s. data, not necessarily this wave of treasury issuance. funnily enough, treasury yields are continuing to rise this morning. the 10-year yield is up another four basis points, after claiming nearly 15 this week already. lizzy: let's take our focus back across the pond. across the road actually to threadneedle street. it's bank of england day. the bank is expected to hike by a quarter-point today to 5.25%, as well as its latest forecast for the u.k. economy. silvana has been replaced. yo

tom: let's start with the boj, this really started with the boj decision last week.e bank of japan has done is they've reduced the global demand for sovereign bonds, and they are doing it slowly, as you mentioned, not letting that 10-year rate to raise up to 1%. but that is the first step here to getting us to the point we are at right now where bonds are in turmoil. that reduces the demand service for treasuries, bonds. then, you have the refunding announcement which came along -- i should say the fitch downgraded which came along tuesday night. that is going to also reduce demand for treasuries. finally we get the refunding announcement with the treasury says they are going to upsize coupon auctions by $2.5 billion per month, so it is a supply issue as well. throw in some strong economic data and you are really getting a flight from quality at this point in time. we think that's going to be fairly limited because the longer this goes, the more it's going to jeopardize the economic expansion, the financial markets. but for right now, investors are stepping back and

same for the boj, we're on the cusp of some critical levels for both.e're into the intervention sound, as it is known, for the japanese yen. it is also the australian dollar and new zealand dollar the weakest since november. across the rest of emerging asia, currencies are under pressure and interest rates are starting to price away the idea that central banks there will be cutting rates soon. if the fed is going to be cutting, asian central banks won't be cutting aggressively either. lizzy: i need some optimism. when we spoke yesterday, things in china were looking grim. even more so now perhaps, but are the reasons to be optimistic on china today? paul: no might be the easy answer. if you look at markets, they are not showing so much panic today. actually the yuan has more or less stabilized, equity market started off pretty weak in hung on, but even they have shown recovery today. we have seen stronger pushback again from the pboc against the weaker currency, and that seems to have kept it under control, along with more support from state banks. but

david: the rba is confusing today, but not compared to the boj. what did the boj just do?t was the objective and did they achieve it? >> they actually made a move to walk away from ycc. they effectively widened the band, but they want to do it in a controlled manner, that is why they bought the bonds. they do not want the markets to move too much. with the current fiscal year forecast, acknowledge and inflation is here. -- acknowledging inflation is here. rishaad: they have been so concerned about upsetting the apple cart that they have been looking at this monetary policy like a deer in the headlights. now that the environment has changed and they have the capability to do this, then they could incrementally tighten. >> if we are talking about hiking the short-term rate, that is a long way i had. at the boj, we need a lot more convincing. we think it will be a slow process. rishaad: they do not expect any move on ycc until april. would you be in that camp? >> you look at the latest move. they effectively widened the band to 1%. you ask anyone what is the fair value of the

no sign so far of too much from the boj. we are on alert to see whether they may weighed in with unscheduled purchases through the day to try to keep that cap on the yield curve. and elsewhere as well, the repercussions from those higher treasury and particularly the higher real yields will be felt across the yield curves into the rest of the world as well. lizzy: in terms of the yuan you have seen increase pushback against further weakness there. paul: there are interesting developments which were overnight and started towards the end of the day yesterday. we started to see the amount of liquidity in the yuan available in the offshore market starting to get mocked up. it'd largest additions were not offering as much into the market or they were taking down what was there. that pushed up the borrowing costs and funding costs and offshore markets. that has impact of making it more defensive to short the end. as the result, the currency gained strength overnight and has continued to carry through to today's ran session. we hav

that is if the boj sticks to establish stance.overnor ueda did not talk about that at jackson hole but what are the risks to this view? mark: did you pick 1990 for me because i was there? no. [laughter] that was the year when q eight was invaded. that's when the dollar-yen went so high because we had an oil crisis because iraq was invading kuwait. if the bank of japan does nothing at all and don't change policy at all and make no effort to support the yen, goldman sachs might be right. we might see the dollar-yen at 155 somewhere around there. that is unlikely to be the case. you can already see the boj chief ueda is hinted that he does not like the feedthrough on the wiki on into the inflation data in japan and is getting worse. this month, the yen has weakened again. not just against the dollar. it is very weak and that is a risk to japan. oil prices are relatively high. this will show up in their data over the next few months. the chance are that not just the ministry of finance's response will for the yen but the bank of japan

it is about the supply-side story, the boj. what do you say? simon: inflation lingers always in the background. we have seen that this week area dies were on -- this week. eyes were on the massive profits we've seen in the u.s.. it has been clear about how it borrow so much, how they spend so much. we have seen that in the refunding announcement. it is huge. the net impact -- if you have governments running persistently large, fiscal deficits, inflation is a byproduct of that. they are looking at inflation right now. cpi has come down to 3%. that is a symptom of the reasons. it is impossible for the market to swallow a huge supply without extracting some extra premium, and that has liquidity implications. if you look at demand, for sinners -- foreigners have been jettisoning united states debt. 10% of the total banks have been jettisoning u.s. treasuries. the only sector that is adding to treasury positions are the household sectors, they are taking on debt duration risk. they are running down the fort folio at the fed as well. -- the portfolio

shery: is that because we expect the japanese yen to get stronger if the boj moves? lot of inflows that have gone through japan. if we see concerns about japan, you can see that flight to quality move out. again, across asia, what is becoming more and more apparent over the years is domestic trabant -- domestic demand and makeup is increasing so you don't see such abrupt movement should we see any global concerns arise. shery: when we look at japan, we look at china we think of korea and perhaps that competition between these northeast asian economies. where does korea stand in all of this, especially if you have a weakness? the yuan weakness for the japanese yen? catherine: korea is a fascinating market in the smaller tech space. a lot of korean companies have huge market positions in nietzsche industries. again, that's where we tend to be positioned versus your well-known, large mega cap companies in korea. from our perspective, it's about valuation. korea, taiwan were looking cheap last year. we saw inflows coming through. it's all about the quality of the compani

if we see a 150 per dollar level for the japanese yen that could trigger the boj to intervene in the. a busy week as we wrap up this august session for the united states. haidi: it was really want to forget for asia as well when it comes to price action. all of the stress will flow into september when it comes to the chinese economy and whether these policies will have a positive impact. take a look at australian bonds, we have seen positive action. there have been ongoing concerns about china's slowdown. we are also seeing treasuries managing to hold on ahead of the index rebalancing. pretty little changed. we head into a pretty volatile start to treating on this first day of september. that is it for daybreak australia. daybreak: asia is next. this is bloomberg. ♪ >> how do we charge back into ukraine as soon as the european authorities say it is safe to fly there again? nobody knows when that will be. but when the russians invaded last year, we would be ukraine's biggest airline the week after they tell us it is safe to go back there because we will charge in there. initially, we

the boj does not like it. we had comments saying at these levels the yen is not helping, it is a drag on the rest of the economy. what policymakers would like to see is stabilization and a reversal, hoping the fed will move closer to cutting, and that will do the job for them. if that does not happen, the alternative it's a z yields come higher, and except we will have to move further away from yield curve control and maybe get towards liftoff to give the yen extra support to help the economy and give more confidence back to the rest of the financial markets. lizzy: as we look ahead to jackson hole, it is friday, we could liven up the end of the week with a game of bingo one homely time jay powell will say the words "they dependant." do you think powell will mention those words again? paul: bond investors are interested to know anyway the fed views where interest rates will be and how much of a premium will be embedded into the market going forward, and whether or not powell will mention it himself is up for d

they see the yen falling to 1999 levels as the boj stays dovish.orecast of 155 from 135 against the dollar. of course in the most recent session, the dollar trading near flat. shery: that is exactly the call i wanted to turn to when it comes to yen. they're expecting the yen to weaken two levels last seen a more than 30 years ago. this if the bank of japan sticks to the dovish stance. strategists projecting as heidi mentioned they had to reach 155 per dollar over the next six months which would be the weakest since june of 1990. they previously expected the japanese currency to trade around 135. also a three year veteran stock picker says every thing is coming together for a rally in equities. head of emerging and frontier markets john malloy favors companies including alibaba, tec and baidu. you can see the upside we've seen in the previous session. the risk reward is favorable for em equities even as mainland stocks in hong kong listed tech shares have the worst august in eight years. haidi: dhs richest man has elevated the role of his three chil

you will probably see the boj intervening again.mption pattern it is rare to see recreation and leisure coming out at the top in terms of their credit card spending but i does what we are seeing at this time. if you look at the u.s. and european experience, after covid, that is the area that has seen the biggest surges. and japan is at that stage. one would believe that the japanese inflation is increasing on the upside further. that would probably demand a tightening in boj policy. around q4 the policy might be tightened in a most significant manner. we are recommending investors to be buying japanese yen. haidi: i want to get back to the property sector because we have developing news when it comes to country garden. reportedly having high cic for restructuring. this as we know a default risk is looming. we know country garden is expecting to see a first-half loss of up to $7.6 billion. is this as bad as it gets? how much worse does it get for the broader property sector if this is to worsen? country garden was seen until recently

>> he actually said that this is going to be a tough decision for the boj considering currency in ratetioned. but he did say that, in terms of the boj monetary policy change, that might eventually happen given that he in his own words things that deflation is probably worse than having inflation. and if the boj actually makes monetary policy changes, that's going to mean that japan is actually exiting deflation and heading into stable inflation. which might actually be negative for the market in the short-term term, but in the long term it's going to be positive given japan strong economy. haidi: does he think the markets will stay strong for the rest of the year? >> it seems like japanese market is going to remain pretty strong for the rest of the year, given factors like the tsc reform, the macro environment in japan strong economy. but let's hear from him directly. >> geopolitical or mac or reasons that the economy is recovering, and the reallocating of the investment from china to other places. and also, japanese inflationary pressure is coming. shery: our asia credits reporter own

the boj was tweaking, the downgrade on u.s. debt also -- all of which is what goldman is saying is not showing meaningful moves to sustain what we saw last week. that is interesting i think as we count down to all of these options coming out. rishaad: one $3 billion coming into the market. we are seeing steepening take place. but not in your usual end of cycle steepening when you see the yield curve become less inverted. this is a bearish one. instead of the two-year remaining where it is, you see a longer duration. bond prices are going down. you see a lower end of the yield curve, this is quite interesting. it is not the only share down, you have cpi down not just out of the u.s., we are also looking at what is going on with the yen. numbers out of china and beyond as well. trade is going to be rather important. yvonne: looking at the estimates for trade. david: soft numbers are expected out of china. it -- i also bring up the fact that taiwan is coming out with exports today. i believe i remember correctly, we should be seei

alicia: well, i'm sure the boj is concerned about the yen.s we see slightly less cpi -- it increases slightly less. it was feeding that inflation, eating up on households, disposable income. i would say that a little bit less than before. knowing that this is a problem they need to deal with, they started dealing with it. we all fear that move away from 0.5 at the boj 10 year yield. they are starting to move in a reasonable way. quite impressed by the fact that it is not long. which we all feared. i would say to end that, is not going to go to three or five. that yield curve -- that 10 year yield for japan cannot go beyond 1.5. the market knows that. i think so far, it will be slow but steady -- steadily getting to a rate around 1.5, at most may be an overshoot at 2%. paul: i just want to get your thoughts on one of the big central-bank decisions this week, the bank of korea. we are expecting to see a hawkish hold there. do you see inflation regaining traction in korea or on the other hand, one of its biggest trading partners, china, is in de

next, they say the boj is a long way from raising rates and finally, the oil jump after the big drawown u.s. stockpiles. all that and more on the daybreak newsletter which terminal subscribers can find by going to dayb. ron fitch cut in the u.s. credit rating over worries about the nations budget deficits. we will bring you the latest market reaction. plenty to discuss. >> i disagree with secretary of the treasury yellen's notion that this was arbitrary. >> the fitch rating downgrade came as a surprise. >> the things that do surprise us a bit in terms of estimates. >> there is a governance problem, and that is truly a problem that we will face going forward. >> this comes at an economically sensitive time in the last thing that yellen needs but from a market perspective. >> the u.s. economy continues to show resilience. i think markets will brush off. lizzy: those were bloomberg tv guests reacting to the u.s. downgrade by fitch. we're going to stay on that story. bloomberg mliv strategist mark cranfield joins us now. the irony is this gave treasuries a lift at first. how much do

maybe not at the september meeting of the boj, but certainly soon afterwards. dollar-yen. whether it reaches 155 before then, who knows? but the yen is so weak that even the bank of japan is paying attention to it now. rishaad: we are watching that space. mark cranfield. just getting back to what we have with china and the economic outlook, it really is dimming at the moment. if we look at the latest bloomberg economics survey, prior to that, we had a 5.2% gdp growth penciled in, but we are looking at 5.1%. the forecast is trimming expectations not just today or but for trade as well. cpi also, modest inflation being factored here. economists also seeing gdp expanding 5.1% this year, being weaker the following year at 4.5 percent. let's dial into this and get to the views of our next guest. we are now joined by christiaan tuntono from allianz global investors. thank you for joining us. how have your forecast for this year ultimately evolved with regard to china? christiaan: before we talked about a forecast. we have to put everything into context. the market wo

we might be closer to that boj policy winding than we think. cautious about the way the japanese yen goes despite the fact that we see this weakness of around 146. but of course we are following what's happening around china. plenty of eco-data earnings out of the country. the weakness in chinese brokerage shares has continued despite china's recent efforts to boost its capital markets. for more on this let's bring in our asia stocks reporter. why are we seeing this weakness in these brokerages and how alarming is it? john: good morning. the weakness in chinese brokerage shares is quite surprising to a lot of market watchers because it's supposed to benefit the most directly, and the potential increase in trading volume at the potential boost through their earnings and not attracting investors back to the sector. since chinese brokerages see the movement for onshore trading, this is telling at it shows us how the broader sentiment is in the offshore market right now. haidi: there are a lot of broader concerns prevailing when it comes to market

front and center is the currency reaching 145.07, the level that prompted intervention by the boj.not going to happen this time or not any time soon police. 147 is a level we're looking at. the yen currently 144. 94. it is down 10% versus the dollar year to date. what a turnaround and that currency. david: it is time to had to japan, right? it is time to head to japan. haslinda: time to go shopping in japan. david: yeah and eat and whatever floats your boat i guess. speaking of weaker currency, this one just crossing the terminal, the rupee as fast 83 for the first time -- is past 83 for the first time since october. these currencies are hitting year to date lows. we are there on the aussie dollar and now they are on the rupee head of the open. that is one to watch. the other thing i want to mention is where haslinda is, the singapore equity market is now down 1.9%. you add on the losses that we had on friday and about 1%, let me give you a status on that do some math with the here. that is the worst day since about 2022 february when we fell 3.5%. that takes us all back there. let

we're keeping watch on boj.control once again and surprised the market. if they were to normalize monetary policy further, that would have positive impact on the yen but perhaps negative impact on equity markets. rish: what are you excited about, and don't say ai, please. eddy: we did suggest to investors to broaden beyond u.s. mega tech and ai stocks to other sectors including energy, health care, staples. because we do find more value in these non-ai and tech sectors. haslinda: thank you for being with us. maybank group wealth management cio, eddy loh, here in the lion city. keep it here with us. this is bloomberg. ♪ ♪ (upbeat music) ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) -awww. -awww. -awww. -nope. ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. % of 23andme health customers surveyed reported taking healthier actions. constant contact. more exercise. eating healthier. and simply getting more sleep. because they know he

with respect to the boj in particular, widening the band also makes jgbs more attractive.ign perspective. there's potentially flows that leave the u.s. and go to japan, and i think it's just this sovereign bond unwind. markets got comfortable that inflation was moderating, the fed's almost done raising interest rates thinking that it was all clear, and i think this rise in longer term yields took us all by surprise because of the bank of japan moving quicker than we thought. but maybe for the first time ever, u.s. stats and deficits actually matter, and i say that for the first time ever because it was the 1980s when people were first talking about, oh, my god, the u.s. budget deficit is getting out of control, and here we are 40 plus years later, and it hasn't mattered, but meaning this time it does matter. >> jed, greg was on talking about debt to gdp. it's never been this high and he thinks by 2030 it could be 130, 135% is there any way to stop that? >> the only way is to grow out of it because those debt levels are still going to rise by that pace, particularly because

that is something the boj has not really acknowledged for some time.lso, the other thing is i don't really seem to have a plan of what to do if the 1% yield threshold is reached. bond yields don't need to go to 1% because it is not justified. funny enough, markets don't agree. it will be a pretty good test for them. if inflation stays higher in japan. he could get pretty exciting. >> thanks to mark cranfield. 4.5 billion loss on higher turbine costs. the ceo joins us to talk -- joins us to discuss the results next. this is bloomberg. ♪ >> welcome back to bloomberg daybreak: europe. let's check in on these markets for you. u.s. futures pointing to eye-opening this morning. up for tenths of a percent. the s&p ended .5% lower on friday. dragged down by apples downbeat other. 50 futures are currently down .3%. we can talk about one of the big companies in germany. they reported their earnings this morning. it is scrutinizing its wind business for a strategic reset after heavy cost related to ongoing problems with turbines. the company has said this morning

lot of currencies depreciate amid the dollar strength over the course of this month so perhaps the boj are unlikely to act just yet. paul: still to come, our exclusive interview with argentina's leading presidential candidate. here about his bold fiscal plants. a, tough times for china tech. jd.com results disappoint. details coming up. this is bloomberg. ♪ kathleen: protests reported in beijing against one of china's biggest shadow bank's after it skipped payments on several products. it is underscoring how trouble in the property sector is spreading deeper into the financial industry. stephen engle is in hong kong. bring us up to date. what do we know? >> any time there are protests in china, it is rare and interesting, particularly in beijing, which is almost nonexistent to find these kinds of protests. in other cities perhaps far away from the nation's capital you will see protests, but we are hearing up to about a dozen protesters rallied around zhongrong international trust, major shadow bank that provides funding at very high interest rates of course. there long time cnet fairly

holding and the yen has become the central paint -- central point for traders on how they see that boj been trading as kind of a gateway [indiscernible] more to come. this is bloomberg. ♪ ♪ (upbeat music) ♪ ( ♪♪ ) woah. ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. wake up, achievers. you're making the most of every hour of your life. constant contact. except the hours that you're sleeping. so why do we leave so much untapped potential on the table? this is a next level bed, for a next level you. my circadian rhythm is kicking your circadian rhythms butt! it's not a competition. i know, but i'm still winning! so, it is a competition. save 50% on the sleep number® limited edition smart bed. plus, 60-month financing on all smart beds. shop now only at sleep number®. shery: chinese authorities ramping up efforts to bolster financial markets, urging the country's pension fund and banks to increase stock investments. to discuss this and other stories we are watc

we are expecting the tweak in the boj policy. terri: if you are talking about u.s.asury bonds, have been positive on that. lock in your 5%, do not think it's will be higher than that. you saw a little today because of the news coming out, lowering the rating for the u.s.. it pushes yields up. but most of those rate increases are in the rearview mirror. we do not think the fed needs to raise rates in july or in september. their tools are looking at backward data for forward-looking is also. they have done enough. you have seen the highest rates in the u.s., and lock those in. because we do not think they will go higher from here. haidi: you called what happened today a blip, is the fitch downgraded a blip in the longer implications it could have for marcus? terri: it was a great piece you put together before this segment that showed the various commentary. most of it was dismissive. i do not think we are quite as dismissive. we questioned the timing, there was nothing in particular that seemed to drive the decision. the rationale was valid. we think there are concern

the boj yield curve and downgrade and resilient growth and rising energy prices no doubt, these factors like the u.s. increase will put upward sector on yields that is bullish bonds and when you have the yield surges, that is an opportunity to buy the dip. >> we have seen the precedent. everybody thought it would be a straight line higher for yeield. it wasn't that we moved up with the 10-year and fell to the 3.5 and now trading at the 4 level again is this the opportunity for people to say if it gets above 4% on the 10-year treasury on the lodge ng side, take the yie and go does it trade in that range for a good while >> yeah. i think the key point is where are you looking for growth and the fed in terms of the 10-year treasury where we have been range bound in terms of the growth the expectation that growth will slow and that has come off in terms of we entered 2023 as everyone expected with recession, but that has been pushed that growth is weighing on yields you can't get a significant rally unless you have fed cuts we are stuck in the range until the recession point and the market

weakening trend, at least on the headline level, really telling us that it does back the case for the bojlicy settings. so that was the message that ada had from jackson hole on friday. in terms of what else we're watching, it is currencies this morning trading in a fairly narrow range against against the greenback. not too many moves really standing out here. but of course, tracking what's happening in the offshore yuan. given that we did see the pboc or rather china's regulators pushing through some different market reforms on sunday. so essentially cutting stamp duty for stock trades, lowering margin requirements as well, slowing the ipo process. these are just some of the measures that regulators announced, which is why we're also keeping an eye on what's happening with the china ten year yield. just ticking a little bit higher as we get trading underway. so perhaps a reaction to some of those measures that came through in terms of what else we're seeing today. while the focus is most certainly on fortescue, that is the stock that is standing out to us. so we saw a full year profit mi

. >> i want to go back to japan, and for the boj.the debate over what they should do with yield curve control was apparently heated. i'm not surprised. are you? >> it was a smart move. but the impact has not been fell. i think there is a lot of demand that is shifting to japanese government bonds now for domestic players, particularly those with high cost of hedging, the ethics of exposure, if they are investing in western for government bonds, that's a case of shifting more and more towards those domestic bonds. and for foreign investors as well given that the fed and the bank of england are still expected to keep rates higher for longer. there may be a case for the to ship a little bit towards the japanese government bonds, and that should keep the demand side of things pretty strong for them. they may not be able to -- the yields, they may not be able to reach that 1% level that they had given their flexible target for now. >> to what extent will the boj intervene? we have seen them doing it. >> currency pressure is quite detrimen

when it comes to the boj, did we hear from governor a way to -- udea giving hints? >> he said there will not be a policy change until something changes. he underscored the fact that the bank of japan is pretty sure that inflation may be a lot lower than its readings right now, and indeed on friday, got tokyo inflation below 3% for the first time in a long time, and that does seem to bear out what the governor said. she spoke for about 20 minutes on globalization. so we had interesting comments on some of the factors the bank of japan is considering. he called china' or down a disappointment and also said japan was at risk of losing out in the global rates to attract top companies, because perhaps it does not have adequate infrastructure, but no word about yield curve control or monetary policy changing. from surveys, we know traders and investors have already pushed their ideas were when that might change up to april of next year. he was certainly not talking about the again either. central bankers tend not to talk about their currencies, but there was no mention of

that weakness we are continuing to see in the japanese consumer is likely to keep the boj sticking withasy policy -- easing policy settings. they offshore yuan, looking towards the 7.3 level, the line the pboc so far indicated could be the one that they would draw a line at. also we have the monthly activities data in today's session that should confirm the weakness we continue to see in the chinese economy. it's not just in terms of the macro pictures, the micro is really what is happening with country garden. that is having a ripple effects. country garden very much in focus. dollar bonds trading in deeply distressed level. less than 10% of face value for a number of them. you own bonds have been suspended in trading -- yuan bonds have been suspended in trading. the government is looking to extend a maturing bond, the first time ever. it speaks to the volumes of this magnitude of this problem. it is also having bigger effects across the economy. paul: yes, that story casting a very long shadow over the asia-pacific and china in particular. the property crash in china is now ripping in

breaching past levels that solve the boj intervention last year.gh on the currency. the yen at 14639. pretty flat. let's see where it goes from here. david: it is enticing to go to japan. if you own property in tokyo, pick your japanese city. it is a difficult proposition. it is all relative is perspective here on the japanese currency. let's pivot to china. the bloomberg scoop is important. we have been talking about the troubled shadow bag they are planning to restructure some of the debt and they have hired somebody to have a look at their balance sheet and what that looks like stephen engle has the scoop. stephen: one of the biggest players in china's 2.9 trillion dollar trust industry. their units who also supply the trust project -- trust products to many chinese across the country are facing a cash crunch, liquidity crunch and they are not paying their redemptions. that is why we saw some of the protests late yesterday. what we are learning in the bloomberg scoop is they have hired kpmg according to sources to edit its balance sheet and find

this is expectation that the boj has on those ten-year yields that are starting to shake up the outlook as to potentially the bets for the negative rate policy will be abandoned in as little as eight months. that is really a story we are watching. watching for the big oil majors, especially trading in this sydney session after crude hit a nine month high with these escalating concerns that the war new crane could further check off global supply. overlaying all of this is geopolitics. we have china earnings including the likes of alibaba, smic as well as washing for the impact of this. one of our top stories after almost two years of discussion, president biden has signed a u.s. investment in some chinese companies. china has responded to the embassy in washington accusing the u.s. of weaponizing trade. let's bring in bloomberg's international economic reporter. of course we have been anticipating this order for some time. let's start off with what was actually in the substance of the year. >> just kind of amazing that we are finally here. this is a day that has been long delayed. we've

the boj, we did see the surprise change last week to the yield curve control program. any sort of normalization is expected to be gradual. a sharp rear appreciation of the japanese yen is not expected to take place. something else that is a positive for the stocks. kathleen: let's move on to look at the employment report. . what it means for the fed and what it means for the markets. the president and ceo of banyan capital management joins us to is one person put it the jobs report was not strong enough to convince the doves are wrong that the fed should be done with rate hikes or was it weaken enough to convince the hawks more should be done? what do you see for the markets in all of this? >> i think the job reporter was mixed but unemployment fell. 3.5% in july. it is still down. wages were up 4.4%. it is hard to imagine a 2% inflation number when wage inflation is up. the fed has been saying they were looking for a little over a percent unemployment number in the fourth quarter and that does not seem likely based on the night -- the number they came out last week. f