00:00Dan, I just want to finish on the FX market because we have been focused on the yen.
00:04Of course, we've seen policymakers at least try to step in to bolster the currency that hasn't yet materialized.
00:10What do you think the Bank of Japan then needs to do at this point?
00:15Should they be stepping in to hike rates and at least support the undervaluation of the currency at this point?
00:22How do you see this materializing?
00:26Sure. So Japan is really an incredibly interesting economic moment.
00:31And I've been spending a lot of time in Japan over the last year, actually.
00:35And I would describe Japan as really on a very significant long-term transformation path.
00:40We had 30 years of very low inflation or deflation in some cases.
00:48And we've seen a very significant sort of policy shift both on the fiscal and the monetary side throughout that
00:55period.
00:56On the monetary policy side, we had very low interest rates and an active use of the Bank of Japan's
01:01balance sheet.
01:02On the fiscal side, over the last decade, we've really seen a revolution in Japanese policymaking, often called Abenomics, of
01:10course.
01:10But I think the real benefits of Abenomics are really only now starting to show up now.
01:19And they're the result of many of the structural reforms, including corporate governance overhauls, that really took a long, long
01:26time to bear fruit.
01:27But now what we're seeing is much more dynamism in the real side of the Japanese economy.
01:33And that's reflected, of course, in the financial markets as well.
01:37And you've seen Japanese equity markets basically double over the last two years, for example.
01:42You've also seen the Bank of Japan start to move out of its very low interest rate regime that was
01:48in place for almost three decades and normalized policy.
01:53And so far, this process has been relatively smooth.
01:56Of course, as I mentioned, Japanese equities have been very strong.
01:59Inflation is still modestly above target.
02:02And so I would expect a continued normalization, which I think over time is going to result in a very
02:09nice equilibrium for the Japanese economy as it really moves from this difficult 30-year period into much more of
02:17a growth engine for the global economy.
02:20So then do you expect the central bank to step in and further their tightening cycle or step in at
02:28some point?
02:28I would expect the central bank to do what is necessary to achieve its mandate, which is, of course, to
02:34deliver on its inflation mandate while also being supportive of growth.
02:38And increasingly, you've heard from Japanese policymakers that they're prepared to do what is necessary.
02:44I, of course, am not going to get ahead of them.
02:46But I'm very confident in the Bank of Japan's ability to steer the economy in a responsible fashion.
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