But growth was soft. Thats not something the fed wants to hear. Similarly you take a look at data out of japan, tokyo cpi, even accounting for the start of education subsidies, something the boj might not want to hear, but we are still seeing stocks powering ahead today and this is six in large part to what we got on the earnings front, you had microsoft and alphabet. It really showed how ai is fueling growth. Stocks are reversing, some of the softness from yesterday. We are seeing chinese tech, really stealing the limelight and hong kong markets headed for their best week since 2022. The yen is hovering flat against the dollar as we wait for what we get from the boj, lets take a look at stock Market Movers because i think that is what highlights how quickly sentiment can turn for some chip related names and how closely they are still tied to their u. S. Peers and big tech names. Yesterday, they slid and today recovering. Lets look at jgb futures as well. As i said, we got data out of the u. S. Overnight and that complicates things for the fed. It also puts pressure on treasuries that selloff, yields higher, reading into what we are seeing from japan, its also about traders bracing potentially for the start of signals on quantitative tightening. We are anticipating hawkish signs because he has to keep the yen depreciation and check. Haslinda thats right, the anticipated conclusion coming up. Lets dig in with mark cudmore. This on the back of the yen, at 34 year lows, but the weak yen is helping inflation in japan. The boj, a rock and a hard place. Mark youve raised an interesting point. I think all of the hoop law about a weaker yen is a little overhyped, dont think its as problematic for the japanese economy as they think. The country still does not have high inflation, is not have runaway inflation. It is a problem in terms of it is the worst type of inflation so that is an issue and of course it is a major commodity importer. I think there probably wont be intervention. I expect the boj will probably attempt to be marginally hawkish but in typical fashion, they will mess it up. What the boj is good at is confusing and disappointing. [laughter] they will confuse and disappoint and after the press conference, dollaryen will be higher. But it wont run away because the market is betting intervention. You have all of these hedge funds that will have downside puts in dollaryen and i expect you get the pop in dollaryen next week instead. Haslinda you say boj is confusing but hes been clear, hes data dependent and the data we got today was not pretty. Tokyo inflation below expectation, below 2 , that makes it really complicated. Mark it does. I think the low inflation prints today Morgan Stanley did a great job of warning about this, there were some oneoff adjustments, they were spot on and i only saw as the number came out so i didnt have much of a preview. It was a soft print. The fact is japan does have proper inflation now. Is it really sustainable, is it entrenched . How much it disappears when you get a softening yen . What they dont want to do is enact a policy change that sees the yen surge across the next couple of years. They will worry if the yen keeps depreciating at the pace from the last couple of years, but there Perfect World is probably to keep a cheap yen at this level. The rhetoric weve had has done its job easily but is not a Sustainable Management possibility. Haslinda is it true the yen intervention playbook is very different from 10 years ago . Mark absolutely. First of all we are talking about different ends of the spectrum. 10 years ago we were looking to weaken the yen as a currency. Its easy for a central bank to weaken its own currency. On a strict theory basis, just print infinite amounts and no one wants it anymore. But a Central Bank Strengthening its own currency theory will tell you on an infinite basis that is a possible that is impossible. You cant keep printing other peoples currencies to prop up your own. Its different when you are intervening to strengthen the inverses weakening. The bank of japan, everyone knows whatever they do its only for a finite amount of time. They have to pick their moments well which is why i believe you dont get intervention until the year narrative changes in the u. S. And i dont think we are there yet. If they fire their bullets now, sure, dollaryen turnaround for the shortterm but you get the whole discretionary Macro Hedge FundCommunity Going brilliant, thank you, you are letting us sell yen, we appreciate that. [laughter] haslinda thank you so much for your candor. The bank of japan is likely to make any revision in its inflation forecast. Our next guest thinks the number will be above 2 for the next three years. Why . Thank you for having me. To the point on the possibility of boj revising its inflation forecast the next three years, i think its likely the boj will put an inflation anchor around 2 given we are seeing more evidence of this Virtuous Cycle forming in japan. By putting Inflation Forecasts at a higher level compared to the previous outlook, it perhaps gives the market a signal that the boj is gathering more evidence and getting more confident and comfortable about japans inflationary trajectory. Haslinda the thing is, it is not likely to be comfortable with the inflation print out of tokyo today, right . I think we have to put this in a broader scope. The Japan Economy has been deanchoring from the deflationary impulse the past few quarters and now is on the path to increase inflation in a new print. The boj governor has been mentioning that the boj is not adopting a data dependent approach in terms of future rate policy decisions good we think the inflation finding path will continue and as we mentioned about wage growth being fairly optimistic, its very likely it is more likely than not that the boj inflationary trajectory is going to be on a gradual rise going forward. Haslinda what are you exactly looking for for the end of the year . 50 basis points for the next two years . I think the boj policy Rate Decision is not going to be conducted in isolation, it also depends on what the fed does going forward. The base case of a soft landing scenario where the fed will eventually start to cut rates, we think the boj will also likely hike its rates in a gradual manner. In the base case we think the boj is likely to hike its rate once this year, and again likely in q3 or q4. Haslinda we know the and is in focus, 155 and change, how much intervention do you think is needed and what is the level you think japan is comfortable with . Is it below 150 . I think for the japanese yen, its not just a weakening yen in asia. We see weakening pressure across asia and fx. That is essentially driven by a stronger dollar momentum right now. In terms of intervention, i think the japanese authorities might focus much more on the pace of depreciation to make sure it is not disorderly compared to asian peers. I think there are no specific levels we are looking at but rather the pace of depreciation matches more to them. Haslinda fair to say if the yen depreciates steadily toward 160, the boj and ministry of finance would become for bowl with that . Mark it depends where the u. S. Yield lands, its accommodation of the boj allah see mix and what the fed does. Haslinda in terms of tucci qt, what do you see the boj doing . That will be the focus for the boj meeting this month. We will hear more on their plans to scale back qe, but we think the boj are likely to continue to adopt a gradualist approach which means once they are firming up, seeing more inflation gathering in the economy they will conduct cutie in a gradual manner as well. Haslinda are right, you are sticking around. You can turn to your bloomberg for more on todays boj decision. You can get commentary and analysis. Ahead, we turn the spotlight on asean economies as they look to defend their economies. We will have more on the biggest risks later this hour. Keep it here, this is bloomberg. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh haslinda chinas top diplomat warns the u. S. Secretary of state that problems are marked even as relation stabilize. The chinese relationship is beginning to stabilize. The two sides have increased dialogue, cooperation. This is welcomed by our peoples and the international community. At the same time, the negative factors are still increasing. The relationship is facing all kinds of disruptions. Haslinda our Senior Reporter joins us on the line with the latest. Its about balance, he says. What you make of those comments . Ian i think its oscillating between stability on the one hand and volatility on the other. We are seeing a stabilization drive for the u. S. And china, but at the same time there is growing concern in the u. S. , especially with the election, the rhetoric on the u. S. Side is increasing when it comes to chinese economic support for russia, the china sea, there are things china has been doing the u. S. Doesnt like despite pushes by biden to stabilize relationships. There is growing demand to make it clear to china and broadcast the u. S. Isnt going to put up with some of this chinese behavior. On the chinese side, you have a very clear message today laying it out for blinken, saying this relationship can go in two directions and its up to you guys. To some extant we are where we always are on u. S. China relations. Things seem to be moving steadily forward, there is no big blowout like when Speaker Pelosi went to taiwan. We are still in a situation where one of those incidents put the relationship from a steady path over into something more volatile. I think that was clear from a comment on both sides. There are factors on the chinese side and the domestic and economic challenges they have, ukraine facing a resurgent russian push. And the philippines and others seeing aggression in the south china sea, you have a potent mix. There is a stabilization drive like weve seen over the last six or seven months. Haslinda thank you for the update. Lets bring back our guest from fidelity international. She believes chinas outlook from four controlled optimization is supported by policy measures. Talk about these targeted policy measures. For chinas case, our base case for stabilization remains intact. We have seen support from sectors reflected by activities and supports and in terms of growth we are on a gradual recovery path. Services, consumption and industry activities are on track and property sectors continue to face pressures. Under this scenario i think the policy is determined on yield Growth Drivers, which means targeted easing policies will be rolled out to support these Growth Drivers, to stabilize the growth going forward. Haslinda those new drivers wont be kind, yes the target of 5 this year, what are we looking at in the coming years . Peiqian i think it is a balancing play in the shortterm , where policymakers balance the negative or structural headwinds coming from the old Growth Drivers well continuing to nurture the new growth driver to become more important part of the gdp growth. Going forward i think we are still in a reanchoring process. Its probably more challenging to estimate chinas potential growth rate going forward. As the new Growth Drivers become more important, its hopeful china will continue to reestablish long term, medium to high growth rates. Haslinda weve been talking about Antony Blinkens visit to china and for the u. S. , it is about overcapacity, an issue its been ringing up to china. How do you view this issue . Is it sector specific . Peiqian from an economics perspective i think china does face overcapacity in some sectors. By our evidencebased research, overcapacity is more evident in the property related industry and supply chains and thats partly because of chinas longterm drive to shift its growth away from property driven growth models. That is inevitably creating overcapacity and deflationary concerns. Other sectors, such as the manufacturing sector, were not seeing excessive overcapacity on that front. Recent performance is better than expected and a reflection that china is ramping up capacity in the manufacturing sector. Haslinda take a look at the new on yuan, it has been strong against a basket of asian currencies. Does it reflect chinas fundamentals right now where it is trading at . Peiqian i think from a fundamental perspective, the renminbi is establishing a relatively stable momentum right now, in line with our expectations of chinas growth pattern being in a controlled stabilization scenario. Even though we are facing more yuan weakness pressure against the dollar, thats in line with other asian effects also facing weakening pressure because of Dollar Strength. On that note i think the yuan is fairly stable and its very likely policymakers will maintain such stability in the interim. Haslinda stable because of the fixes weve seen. In far as far as pboc policy, what are you seeing . Peiqian i think its likely they will maintain stability because it acts as an anchor to asian effects to some extent. The Monetary Policy, we look out for gradual easing going word with a focus on providing liquidity as a fiscal easing has been taking the heavy lifting of stimulus in the coming quarters and we look for marginal rate cuts as well, which are likely to come in the second half of the year and when the fed rate path becomes clearer. Haslinda it all depends on the fed. We thank you so much for joining us. Plenty more ahead, keep it with us. This is bloomberg. Haslinda of course we have a breaking news out of the boj, something weve been anticipating. The boj keeping rates steady, a range of zero to 0. 1 , that decision is unanimous. The risks to prices are skewed to the upside for fiscal 2024 is what they are saying. An overnight call rate at 0. 1 . It has dropped. The wording on buying the same amount of bonds as before. The decision is unanimous, keeping rates unchanged at a range of zero to 0. 1 . This was pretty much expected, the boj expected to hold rates after its first hike in march, its first since 2007. The focus now on the boj updated quarterly inflation and growth forecast, we are waiting for that presser at 2 30 local time. Lets bring back our guest, she will be joining us shortly. Lets get her reaction right now. As expected for the boj. Peiqian yeah, i think the boj decision is fairly in line with our expectations. The Rate Decision was unanimous and the boj definitely sees outside risk of inflation. Its likely the Wage InflationVirtuous Cycle is gathering were evidence. Haslinda boj also seeing underlying inflation is expected to rise gradually, a sentiment you expressed earlier. Peiqian yes, i think from what we observed in this years inflationary trajectory, weve been completely the anchored from deflationary expectations in japan, but we are still on a pathfinding trajectory to a new level. I think with more evidence on wage growth gathering pace, its likely it will contribute eventually to a higher inflation trajectory, which is likely to anchor again around 2 in the long run. Haslinda if it is as expected, why are we seeing the kind of reaction in the yen right now . It is touching new 34 year lows. Peiqian i think that is the market expecting or hoping for hawkish rhetoric from the boj given where the yen is trading right now. The boj is being very patient and adopting a datadependent approach and wait and see approach to see what is going on in the economy, especially on the inflationary front. Haslinda we are waiting for comments at the pressure the presser at 2 30, what you think the governor will address . Peiqian we are waiting for some key comments, firstly his view on Fx Development recently and the implications of domestic inflation and whether it will affect the boj policy mix going forward. Also more important, we are hoping to hear from the governor on his assessment of inflationary development, whether or not he sees a fundamental change in japans inflationary path. Haslinda any surprises for you . Peiqian so far the decision has been in line with expectations but again, i think the press conference in the afternoon is more important for us to seek any guidance from the boj going forward. Haslinda the boj says the risks to prices are skewed to the upside for fiscal 2024. What might drive that . Peiqian its likely coming from the imported inflation as we mentioned earlier, the and is facing weakening pressure. As a result we will definitely see imported inflation picking up and it will affect the headline cpis in the shortterm. Haslinda hang tight, lets get analysis on the yen from our chief asia fx and rate analyst. We saw the yen falling to a fresh low, the market didnt get what it wanted to hear. I think the clear message is they are not going to start tapering. Thats what you saw the yen weakening, the market didnt get what they want. Play think what is interesting, the statement itself is very interesting. The format has changed, much shorter, more concise. There are lines saying they will do what they said in march. So, that is going to stay. But having a shorter statement actually is preparation for them to sort of fade out the kiwi going forward. The qed going forward. Haslinda what can you see the minister of finance doing with this . Stephen from aps perspective, if you look at the last few weeks, the yen has dropped. The pace is alright, but if the yen drops further, 156 beyond that, probably they will have to be stand by. But the pressure with presser, we expect it will be hawkish. Haslinda it comes against the backdrop of higher for longer in the u. S. Now traders are expecting only one cut, perhaps none at all for the year. How much intervention is necessary to keep the yen at a level they are comfortable with . Stephen actually, until the fed cuts, we think there will be upside pressure. What happened two years ago, despite the interventions, it didnt help. The yen rebounded against the dollar temporarily but quickly dropped because the rate differential story is still the main driver. That is why it could not keep the yen from dropping. Haslinda in terms of intervention, what are you anticipating . Peiqian i think it is definitely on the radar, especially when the dollaryen is trading at such elevated levels. And beyond what they will do, we have to watch out for any potential moves