00:00We saw that weak number out of Japan in terms of growth.
00:02Are we primed, basically, for a sort of a very bullish case within Japan
00:05for the new sort of prime minister to come in and really do some damage?
00:09Or do you think that maybe that's oversold a bit?
00:11Yeah, I think there's definitely a bullish case to be made for Japan.
00:13You know, we've just kind of seen that in the post-election reaction to equity markets.
00:17I think the bigger question for the market is, you know, what happens with borrowing costs?
00:21You know, we've done this kind of 180 throughout January where we kind of saw this rise
00:25and we've come back down again.
00:26And, you know, part of that is a vote of confidence in the Takeuchi government
00:29because the market's kind of taken it at her word that, you know,
00:32all this extra stimulus won't be funded by increased bond issuance.
00:36So, you know, they're talking the talk, but we need to see them walk the walk.
00:39And I do think there are some potential concerns on that front.
00:43You know, we've seen some reports suggesting that Japanese bond issuance
00:45is going to ramp up massively over the next three fiscal years.
00:49And the market is kind of still not really kind of engaging with that prospect.
00:53And then, you know, from a data perspective, we saw some soft Japanese GDP data over the weekend.
00:58And so, you know, the Japanese economy is already starting on a softer footing than assumed.
01:02Does this require even more fiscal stimulus to get the Japanese economy going?
01:06I think that's the question the market really needs to wrestle with.
01:09We need some answers, essentially, from Takeuchi as to whether or not
01:11she's going to push ahead with fiscal stimulus, how much, how they're going to fund that.
01:15And so far, we don't yet have those answers.
01:17But it seems that markets are starting to kind of preempt preempting to some extent with that move in
01:21particularly JGBs this morning.
01:23It's pretty pronounced in terms of yields down and money moving into the sovereign debt of Japan.
01:28Let's switch focus to the UK and whether or not there is an opportunity.
01:31I mean, Goldman Sachs thinks that bonds can rally further from here,
01:34that gilts can rally further from here.
01:35And the wage data seems to confirm that there is further to go.
01:38And markets are now pricing an 80% chance of a cut from the BOE in March.
01:43Are you comfortable with the pricing, at least two additional cuts from BOE this year?
01:48And March is looking almost locked in at this point.
01:51Yeah, I think March is basically locked in.
01:53I mean, the bar for a March cut was relatively low.
01:55We saw that in the February BOE announcement.
01:58Only requires one more voter to get there.
02:00And we're seeing some signs of softening from Bailey, from Mann.
02:03I'm pretty sure one of those will move over.
02:05But like you said, the question is, do we get another cut?
02:08And I think 50 basis points by year end is relatively reasonable.
02:11I think the data today was unambiguously dovish.
02:15But, you know, I don't think we'll probably get it until the end of the year.
02:17Throughout the cycle, we've seen the Bank of England continue to lag the data.
02:21There's this institutional scarring from being too slow to act when inflation was on the rise.
02:25So I do think it will take a little while, but we will get there.
02:28And until then, I think the front end of the UK curve may be actually slightly more anchored.
02:32Very briefly, Adam, we're watching Fed speakers as well later today.
02:36And what they have to say may be about AI and the labour market.
02:38Yeah, hugely important.
02:39So we've got a couple of Fed speakers today speaking on AI.
02:42A big part of the year, the Walsh case, is AI productivity equals low inflation equals lower rates.
02:47So we're looking for these comments today to see if other FMC officials are on board with that view.
02:52And therefore, will he be able to get people on board with a rate-cutting agenda
02:55that he's been put forward by the US President Trump administration?
02:59Adam, thank you very much indeed.
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