If not now, yen?

0:00Today, the Bank of Japan raises rates to a 31-year high. But that doesn't offer any relief for the yen. And markets brace for a crucial meeting between President Trump and President Xi, with Iran, AI and trade all on the table. This is Reuters Morning Bids bringing you unfiltered market news and analysis straight from the Reuters newsroom. I'm Peter Devon in London. And I'm Elena Cassas. It's Friday, September 18th. So Peter, markets were expecting a rate rise from the Bank of Japan, but it wasn't perhaps as hawkish as it could have been. Two members of the board descended there, one that are closest to the Prime Minister, Sanaita Kaishi, and two of the more hawkish members see their terms coming to an end fairly soon. So while the market clearly wants the Bank of Japan to keep raising rates, and we know that US Treasury Secretary Scott percent wants that as well, the path ahead isn't all that clear, is it? Well, this is the sixth rate hike under a Bank of Japan Governor Eurede. That's the most in a bite a half a century. But again, that has not a stall on the spot, like Eurede.

1:01It's about this two members dissenting. But if you look at the statement here, it says that the Bank of Japan will continue to high grades if it's outlook for inflation and economic growth are met. And I think that statement itself is quite hawkish, especially with inflation expected to come in at 3% by the end of the year because of that prolonged pressure from the yen. But again, expectations were so high for today, for it to be so hawkish that they just weren't met. And we've really failed to see the reaction in the end that the Bank of Japan might have been hoping for. It's actually got weaker, which of course increases inflation pressure and worries about the cost of living in Japan. Now, a lot of this will come down to fiscal policy. Prime Minister Seneta Kaishi continues to pile on more borrowing, which of course the market's a nervous about. And she was elected to having promised to reduce Japanese people's cost of living. Now, Reuters was able to report that the Treasury Secretary Scott percent explicitly put pressure on the Japanese government in phone calls back in June saying that that borrowing needed to come down as if you're like a condition or at least part of his joining in at the

2:01yen intervention that we saw back in the summer. So is the US going to continue to put pressure here? And what will that mean for the Bank of Japan? Well, I think Takichi has definitely dialed back her maybe rhetoric from before she was elected, where she called Reuters stupid. But again, her focus is on economic growth and making sure there's no big swings in the Japanese market. And that's completely contrasting to the Bank of Japan here. We talk about the political fight between the Fed and Trump. There could be a new one brewing between Japan's governments and the Bank of Japan. I think though the real pressure comes from the Fed as well, more expectations coming in from Reuters from the Fed. And if the Bank of Japan just can't keep up, that means more pressure on the yen. And that means, of course, that pressure could continue to come from the US, where we know the Treasury Secretary is concerned about Japan potentially selling US government bonds. So that bilateral relationship may get more complex in the future if the US intervenes in Japanese monetary policy any further. Now another really complicated bilateral relationship for Washington is going to lead all market headlines next week. President Trump is set to meet with Xi Jinping in the US on Thursday.

3:04They've got a lot on the table, haven't they? Well, there's a lot to talk about here. There's AI, there's trade, there's Iran, there's a Yuan. Let's start with trade here. I think the expectations are that the trade truths that is due to expire in November will be extended. And I think there's three main points in terms of trade to watch out for. If there'll be further agreement of Chinese purchases of US agricultural products, including soybeans, BYD are said to be involved in the talks here. So there could be sort of spotlights on Chinese electric vehicles entering the US markets, as well rare earth metals. Will the US get more access to those big Chinese stockpiles? So it's going to be about cars and commodities, I think. Of course, AI is going to feature prominently. This is really interesting, isn't it, that apparently Beijing are considering bringing a delegation of executives, including, as you say, from BYD, from Xiaomi, which has also moved into EVs, from CATL, from companies that are having regulatory and tariff problems selling in the US. As you say, Chinese EVs are essentially blocked from the US market. So it's a response, in a sense, to President Trump having bought executives from micron

4:06and Qualcomm, US companies that are struggling with regulatory problems in China, when he went to Beijing earlier in the year. But it's interesting to see then what might be on the table in terms of regulatory compromise if those executives think it's worth making the trip. Well, the competition is getting fiercer and fiercer about this AI rivalry between the US and China. And there's a rare point of agreement between the two sides. They're both criticizing the regulations that some of these big AI leaders say that they want to come in and slow down the developments. But I mean, both sides realize that AI is crucial to national security. I mean, Qualcomm President Trump, he says, who wins on AI wins. So I think that means that neither side is going to slow down, and also they're both going to undermine each other. So I don't really see, I think they're going to dance around the subject really. The big question though, I think, is there going to be lesser restrictions on semiconductors access to that that would be a big win for the US and China. But particularly for Nvidia, and we know from Reuters sources that Nvidia's Jensen Huang will be at the meeting as well. And we should mention, of course, that a key aim of the US in these talks is to try and

5:06get China to use some of its leverage in the Middle East to help bring down energy prices. China of course is the customer for 80% of Iran's oil exports. That does give it leverage here. Reuters have reported this morning that China is asked Iran to put pressure on its hostly allies to try and prevent them from blocking the Babel Mandeb Strait, which is of course the key route that Saudi Arabia has been using to get its oil out since the strait of almost was blocked back in the spring. President Trump is desperate to get that oil flowing again to stop prices at the pump in the US from rising ever further. And he will want China to play a role in that. Well, if we look at oil prices this morning, they're lower for the third day. And I think it's definitely in that way, didn't see moment for these big diplomacy talks next week. I mean, President Trump speaking in interviews saying he's got a big decision to make in terms of more escalation on Iran. And we want to see what China's part in that is quite interesting to note though that JP Morgan's oil analysts are privately saying that they just don't know how this is going to end and they can't forecast anymore. They see a lot of the red lines that they thought the US administration won't cross

6:06just keeps being broken. I mean, oil above 100 bucks, gasoline above $5 and treasure yields raising above 5%. They just don't really know. So the question now is if there's no sort of move forward into diplomacy or de-escalation next week in these meetings at the UN General Assembly meeting as well as between US and China, how long is this going to last? Looking for more investing options. For today's recommended read, check out Ron Bousso's column on how those record diesel prices could be Trump's Achilles heel. That link is in the show notes. And for more of any of today's stories, hit the waters.com or the waters app. Follow us on your favorite podcast player and a few on a smart speaker just ask for the latest market news from Reuters. I'm moving back on Monday.