Japan elections and UK jobs

0:00Wake Up To Money from BBC 5 Live Hello, welcome to Wake Up To Money. It's a tale of two Prime Ministers today here in the UK. There's turmoil at the top of government for Sir Keir Starmer. His Chief of Staff, Morgan McSweeney, has resigned, taking full responsibility for advising the PM to appoint Lord Peter Mandelson as the UK's ambassador to the US. What does this mean for business confidence? And over in Japan, the mood couldn't be more different. Sana Itaki's gamble to call snap elections has paid off and it's pushed Japanese stocks to record highs. Also, we'll be taking a look at Super Bowl 60.

0:37But we're the stars of the show, the Halftime Ads.

0:49Yeah, we'll be speaking to the creative director behind that one.

0:57Good morning. Welcome to Wake Up To Money. It is Monday the 9th of February. It is just four minutes past five. Lots of chat about Super Bowl 60 this morning. But if you haven't seen the result, I'm not going to ruin it for you. We're going to be talking about that later on in the programme. Now, it didn't make any of the papers because it was too late in our time, of course. But what does dominate is Morgan McSweeney resigning yesterday. I've got the front page. The FT here, Starmer battles to save Premiership after top aid. McSweeney steps down. Times, PM's top eight quits over support from Mandelson, DM, the Daily Mail.

1:33How long can Starmer cling on? Lots of questions this morning. With me this morning is Tynika Fricke, Senior Fund Manager at W1M. Good morning. Good morning. Tynika, when you've got government unrest, does that hit the markets? It's certainly not helpful. But in the case of the Labour Party clearly being in place for a while, very clear policies set out, particularly when it comes to financial discipline and discipline around taxes. So I would by and large think that the UK market will sort of shake this off a little bit. And one good measure of that is we could look at the UK bond markets, because usually when there's any concern about governments means that yields tend to go up because there's more concerns.

2:28And they're completely flat. At the moment, there's no concern, but clearly this is unhelpful for the party themselves. And when there is movement in the bond markets, it's not just an abstract thing. It does affect people like you and I because it does affect the cost of borrowing, doesn't it? It does. It does. And there's this, in particular from a government point of view, we tend to look at the longer term, so the 10 year and the 30 year. So for us, that is more equivalent to what happens in our mortgage rates rather than what we get in cash. on our bank account. Also with me this morning is Nicky Fuchs, co-founder and chief executive of Office Space in Town, which operates serviced offices primarily in London.

3:12Nicky, good morning. Good morning, Leanna. Thank you for having me on. Well, no, it's a pleasure to have you back. Nicky, I mean, your ear must be to the ground, particularly when you've got all these different businesses in your serviced offices. I'm going to ask you the same question. When there is a bit of government unrest, does that mean that some businesses, they don't want to make decisions possibly? I think the perfect example we've had is the budget that lasted nine months last year. I think that impacted most small businesses, definitely decision making. They were concerned about making decisions with the uncertainty that was surrounding the economy due to the politics.

3:54Now, you're in the post-budget world. How has things been since then? And have you seen businesses are more likely to make decisions and they're more likely to commit to office space? Yes. Well, as a business, office space in town has had a good start in 2026. We've had good sales so far with a broad spectrum of industries taking up space. And we've started our quarterly roadshows with our clients. I've got one today in London. and generally people are hunkering down and getting on with life, as we do. As business people, the uncertainty, you have to lean into it after a period of time. We're also getting just some jobs numbers at 5.35 just later on in the programme.

4:41We will be talking about that. From what you're seeing, are businesses hiring again or just holding steady? I think with the employment rights bill hanging over everybody's head, I think a lot of businesses are perhaps investing money in technology rather than people. And with the national minimum wage, the impact that that's had from when they increased it for 16 to 21 year olds. And that obviously rolls through their entire payroll. I think people are holding back, definitely. And how does that translate for your business? if people are holding back, are they not having as many people in the offices?

5:22And does that then mean for you, actually, I'm renting smaller spaces? Not really. Post-COVID, people have introduced hybrid working. And although many, many people are coming back to the office and we're seeing our footfall increasing continuously in the use of our meeting rooms and event space, they have not taken desks for every person. so their headcount has less of an impact on their fixed costs in terms of office space with us and of course we're very flexible we move our clients you know when they need to be moved not just because their license has come to an end what what about you Tenneka are you you still hybrid yourself yeah we we're still hybrid but um you know we're sort of in expanding mode if anything We're sort of taking people on.

6:15But I think that will depend company on company. But I think what is certain that as advances in technology move quite quickly, that wherever you are, we are trying to be more efficient with what our people can do using technology. Now, Tineke, we're going to talk about Japan now. Japanese stocks have surged, haven't they? Yes, it's so exciting. Maybe not for all, but we are global investors and we have some investments in Japan. And, you know, the Japanese equity market has been a strong market, up 33 percent the last 12 months. And on Friday, they closed quite strongly. Clearly, you know, that's sort of a bit of a hope indication, hoping that the election would turn out to be a good one, which the market hoped that it would be a good win for the prime minister.

7:10And those hopes have been superseded. So super majority, a much bigger win than the equity market expected. So up 4%. I think it closes at six o 'clock our time. So we're still not there. I think it opened up stronger, nearly 6%. So we've given a little bit back. and it's led by those sectors where the Japanese Prime Minister has been very clear that she wants to invest. There you go. All right, Tineke, well, let's get into it because as Tineke just mentioned, Japanese stocks have surged to record highs after Japan's ruling party, led by Prime Minister Sanai Takechi, has won a landslide election.

7:49Takechi has pledged to step down if she failed to gain a majority, but the gamble has paid off. She now has a powerful mandate for economic policies, which include higher spending and taxes. Surinjana Tiwari is our Asia business correspondent and joins us from Singapore. Surinjana, so you've been watching this. Just tell us, I mean, this is quite a gamble. It's paid off for her. And now she's got this really powerful mandate for economic policies. How do we see this playing out? Absolutely. I mean, I will say politically it seems to have paid off. It could have gone either way. It was largely expected that she would get back her, you know, get enough seats, that she would win the election, that she would get a majority.

8:35That was even expected. But I don't think the number of seats that they managed to get, the LDP, was expected. And that's partly because she is personally very popular as a prime minister. It's very much driven by personality. She gets a lot of attention because of her appearance. But she's also really spoken to voters in terms of the cost of living crisis. She's promised to ease the high rising prices for households and people who are really suffering from that inflation. Of course, the Japanese central bank is very cautious when it comes to raising interest rates. And so that hasn't had much of an impact.

9:21Now, whether she's able to push through those really ambitious economic reforms is the other big question, because Japan's economy is facing such, such deep structural issues. And it's an interesting one. They were worried about a lower turnout, weren't they? I just see on the front page of the FT, there's a photograph of Japan completely, you know, just in snow. So what people did, they turned out and I believe younger voters turned out too. That's right. And, you know, 90 % of her of young people support her. So she has she has a lot of support amongst young people. But a lot of the experts, a lot of the economists that I've been speaking to, they have sort of raised caution that her proposals don't really work.

10:09And that's because Japan has one of the world's largest government debts, and she plans to increase spending in order to try and boost growth. And lots of experts are very concerned about that. Obviously, the markets, ever since she came into office, were also concerned about the weakening yang. They were also worried about the bond yields as well. And if she increases government spending, if the interest rates will have to be increased because inflation is not going to be tamed, then there will be concerns around the bond market as well. And of course, the bond market in Japan is very extensive and can affect, you know, decisions made in Tokyo can affect markets all around the world in emerging markets, as well as, you know, developed economies like the UK and the US.

10:56Well, let's talk more economics with Chris Shikluna, Head of Research at Daiwa Capital Markets Europe. He's also a keen Bank of Japan watcher. Chris, good morning. Good morning. Chris, can you explain Takeichi trade for us? OK, well, I think we need to consider different markets because investors in different markets seem to have very different views about Takeichi and policy platform. I mean, certainly if you look at investors in Japanese stocks, and of course, Japanese stocks have rallied today. Well, investors in Japanese stocks have certainly been long believers in Takeichi. They like her pledge to end austerity.

11:37They love her promises of more investment to boost growth and enhance resilience. They like the fact she's identified several strategic sectors such as defense and AI to benefit from extra policy support. And they also welcome the fact that she's committed to consider a two-year cut in the sales tax on food. So that's all well and good. But if you speak to an investor in Japanese government bonds or in the yen, I think it's fair to say they've been pretty agnostic, if not downright skeptical, about Takechi's intentions because Japanese government debt is so high. and those investors want to know how Takechi intends to finance her plans for extra public spending.

12:23So if you look at the market today, Japanese government bonds indeed did weaken a bit today and the losses were only restrained after the Minister of Finance suggests that she doesn't want to be funding the promise cut in the sales tax for a higher borrowing and the yen only recouped its initial losses after the Minister of Finance and its senior currency officials threatened intervention to support the exchange rate. So you can see there's a clear difference in view between how the markets view her, depending on whether you're investing in stocks or if you're investing in bonds or the yen. And of course, you're a close watcher of the Bank of Japan.

13:03Does this election make life easier or harder for it? Well, to some extent, it makes it easier because as for investors, to some extent, the big win for Takeichi provides greater certainty about policy making going forward, at least in terms of fiscal policy. It reduces uncertainty because I think both Bank of Japan and investors know that when Takeichi puts forward a concrete plan, she ought to get it through the parliament. So there is a degree of greater certainty about the outlook here. But of course, what happens to the yen if we have significant weakness of the yen or if there's a problem in the bond market, the Bank of Japan is going to find that a little bit more difficult to deal with.

13:54Certainly, they've been wary of the fact over recent months that the weakness in the yen has been injecting a bit more inflation into the Japanese economy. And so, it has been increasing the likelihood that we'll have a rate hike from the Bank of Japan again sooner rather than later. Yeah, Chris, actually, when you mention inflation, I think that's an important backdrop, isn't it? Because, listen, this is the world's fourth largest economy. But, I mean, it's had zero inflation for years, didn't it? And in fact, its interest rates were in the negatives. That's right. But over recent years, particularly since Shinzo Abe was prime minister, Japan has had significant success in terms of shifting out of that deflationary loop and very much normalizing as an economy.

14:45I mean, if you look over the past few years, we've had inflation that's been consistently above the Bank of Japan's 2 % target. We do expect actually it to fall back below 2 % over the coming few months. But there is a question about whether or not it will actually then remain somewhat lower below 2 % or whether it will in due course return back above 2 % due to various pressures such as the weaker yen. So, Janet, that's really what brought a lot of people to the polls, isn't it? It is that inflation. People aren't used to inflation in Japan and they're kind of worried about rising prices, aren't they?

15:27that's right and the big concern as well is that wages just haven't been growing and you can see it last time i was in japan just late last year you can see it in the convenience stores for example there's a small snack called onigiri which is basically rice wrapped in seaweed and that has always been known as being 100 yen students and office workers really rely on that as a staple and some convenience store managers were telling me that they've had to raise the price so it's no longer that snappy sort of 100 yen and the other ones that want to keep it at 100 yen have had to shrink it. Now again, Sanai Takaiichi has said that she is going to cut those consumer taxes and especially for food and beverages which will provide some relief but long term there are lots of concerns about how she's going to fund that kind of tax cut, even with the finance minister coming out and saying she's not going to issue a new bond in order to do that.

16:28And it's only going to be for two years. But you've really got a balancing act between ordinary people and the markets and those investors who have not been thrilled about the Japanese economy for so long. And everyone is really hoping that those investors come back and those industries that Takahichi who really wants to invest in will get the required investment and the innovation in order to help boost growth. What about its relationship with the UK? Sir Keir Starmer was there two weeks ago. There was a prospect for better trade relations between the two? I think that was a really good sign.

17:05Sir Keir Starmer was also in China inking a number of trade agreements. And he wasn't the only one. Obviously, we've had the Canadian Prime Minister in China recently as well. And he managed to sign a number of quite significant agreements, especially on electric vehicles. Look, I think Donald Trump's trade and tariff war has upended global trade. It's certainly reshaped supply chains in this part of the world. And so when it comes to alliances, they're also being reshaped. And Japan's in a really interesting position because it's an Asian economy. It's a big exporter. It's a big manufacturer of goods, especially cars and electric vehicles and defense equipment, as you've already mentioned.

17:47But also it trades with China very closely and China's influence is rising, you know, whether the U.S. likes it or not. And so it's a real balancing act between the U.S. and China for Japan. It seems that Takechi is keen on looking towards the US. But again, experts that I've spoken to said that she shouldn't ignore China and the future influence that it might have, especially in the region. It is a major exporter. And Chris, Sanaa Takechi, she says she's comfortable with a weaker currency. But is there a point where weak yen stops helping exports and starts causing problems? Well, it depends whether you're a firm that is producing entirely domestically or if you're a firm that's relying on imports of various components.

18:41And then, of course, the wheat yen injects additional costs into your business. So I think one needs to look at the impact from one business to another. But certainly in terms of the overall macro economy, there is the risk that the weaker the yen goes, the greater nervousness that investors in Japan's bond market get. And we end up with some kind of unpleasant link between the two, a loop between the two. And that becomes a greater loss of confidence in the economy. So I think a couple of weeks ago, we had what was called a rate check when the Federal Reserve on behalf of the Japanese economy gave a clear signal that they might be ready to intervene around the 159, 160 mark to the yen.

19:38That's in terms of the dollar exchange rate. and there's a good chance that if the yen slides down towards that level again that we will indeed get actual intervention just to draw a line in the sand and to demonstrate to investors that there is a limit to the weakness of the yen that the authorities are willing to tolerate. Now, Sir and John, some people are saying that this is a win also for Donald Trump because he endorsed Takeiichi, didn't he? that's right and there were lots of questions about about that endorsement it's very unusual for a foreign leader to endorse another prime minister but as i said you know he has recognized that um the two countries are important trading partners especially uh they're also strategic partners to again counter uh china rather and uh takeuchi has also made some comments about taiwan which has really increased tensions between China and Japan and has affected tourism as well.

20:40Another big contributor to the Japanese economy, Chinese tourists coming in and especially group tours, which have stopped as a result of that diplomatic spat. But I will say that, you know, Donald Trump did visit Japan late last year when he was on his Asia tour. And the two sides signed an agreement on critical minerals, which is really interesting because that's aimed at reducing the dependence on China, of course. But also it shows that the two are willing to work together. And it also plays to what Takeichi has talked about as well, increasing investment in critical industries within the country.

21:19Rare earths play a big role in that, in the likes of electric vehicle making and defence making and aircraft making, for example. and also that working together with major trading partners in order to try and ease those supply chain constraints. All right, Srinjana Tiwari, our Asia business correspondent from Singapore. Thanks so much for joining us. And Chris Shikluna, Head of Research at Daiwa Capital Markets Europe. Been an absolute pleasure. Wake up to money from BBC Radio 5 Live. And we were talking about Japanese stocks, how they've been going up. But US markets have been choppy last week.

21:55tech stocks in particular. Going into Friday, the S &P 500 was heading for its worst week since October before rebounding sharply. Tinika, I'm going to come to you on this one. Can we talk about this? Like why, well, basically a lot of people were saying the reason is because people are worried about AI and AI taking the role of tech companies that are currently already here. Can you just explain this to me? Because it can be complicated, can't it? It is complicated because there's different perspectives. I think the one perspective that probably everyone kind of agrees on is that there's a lot of progress in AI and that it will change a lot of things.

22:37But what we're not so sure of is who will be making money on this and who will have business models that will be completely changed. So what we saw last week, we had results from Amazon, for example, but also Alphabet, which is the Google owner. The results were fine. But there was a huge increase in the amount of investment that these companies are spending on AI. So Amazon spending$200 billion, huge sums. It was sort of about 36 % more than expected. and Google spent about$91 billion last year and they're going to double that. So$180 billion. So that's a lot of investment and the market is just not sure, you know, what money they're going to earn on that investment.

23:33You know, what is the return? So that's one side. So they got sold off because the market is just worried and it will take time, right, before we can make money on that. And what we also saw as, you know, AI progresses that Anthropic launched a number of new features on their AI, including some legal and financial plugins. So any company that does that, they fell by about 10, 15 percent. So a lot of falls in software companies, data analytics companies. So there is – and the flip side, so the market sometimes can think quite simplistically. So anything that's perceived as heightened AI disruption uncertainty, let's just sell those, shall we?

24:27So they get sold. So the concerns may mean we sell it rather than wait and see. And companies that don't have much AI risk, they tend to do better. So consumer staples and utilities and banks. So huge differences. So you could have shares up 20 % and shares down 20%. So very, very volatile. And these are questions that take time to work its way through. So we won't know who the winners and the losers are for quite a while, I suspect. Nikki, I'm really curious as to what you make of AI, Because obviously you operate service offices, but maybe you use AI in your everyday business. But then at the same time, you might be like, I don't want AI to take people's jobs because then they won't be in an office.

25:21I live in that counter argument continuously. We are obviously embracing AI wherever we can. Microsoft Co-Pilot, ChatGPT, looking at workflows. using it to help us. We're very focused on community. So using AI to help us find connections between all of our different clients and industries to help nurture those introductions between our clients within our buildings. So we're trying to be really thoughtful about how we use it. We have a very lean staffing level within our own business. So AI is not going to impact that because the human interaction in office space is so important. And so we aren't going to remove staff numbers as technology improves.

26:18We'll just realign how we interact with our clients. But AI as a whole, you know, for humanity, yes, it gives me grave concerns about how we're going to control its growth and implementation. Yeah, because, I mean, you're saying that you're not going to get rid of staff, but then you might see other companies that are. Yes. And it may very well impact our clients. Currently in the conversations that we're having, they're very much across the board saying we want to use technology to improve our systems and utilize our staff on a more client facing basis. So they aren't talking about cutting staff.

27:09And we have a wide range of businesses, as I said earlier, in the types of businesses that we've taken on this year, from financial services, recruitment, IT to law. So that's what they're saying. But, you know, it's still very early days. Absolutely. Wake Up To Money from BBC Radio 5 Live. Good morning. Welcome back to Wake Up To Money. If you've been listening, if you've just joined us, welcome. Did you watch any of the Super Bowl last night? this morning. I'd be impressed if you managed to get up for our show and also watch the Super Bowl but maybe you just haven't gone to sleep. We've got Nicky Fuchs with us.

27:44Nicky, have you watched any of it? Have you seen any of the coverage? Are you interested in the halftime show? I'm afraid I haven't. I was fast asleep in my bed, getting my beauty to sleep for today, Liana. Very important. But I did listen to the Charlie Pooh, I can't say it, Pooh. Yeah, yeah, yeah. And I thought that was beautiful. Yeah, I had a little, well, I had, I think I watched half of the halftime show with Bad Bunny. Wow. Yeah, it's like, well, I just watched it on TikTok, basically, on the way in on the taxi. I was really colourful. I have to say, we got great stuff. We got Lady Gaga was there.

28:21Nikki, Ricky Martin. Yeah. My grand favourite. Yeah, really, really colourful. Absolutely brilliant. And, you know, we had the result there in the news. But, no, absolutely great. I would really, really definitely recommend watching it. Of course, one big thing is the ads too. If you are a listener and you enjoy watching the ads from the Super Bowl, get in touch, text 85058, WhatsApp 08085 909693. And if you're listening on BBC Sounds of the Podcast, just use the hashtag WakeUpToMoney on social media. Tell us what your take on the ads are. Some of them are absolutely mad, but they have to be very eye-catching and they cost a lot of money at the end of the day.

29:06All right, let's move on. We're talking about hiring. The UK's hiring downturn eased a little in January. Permanent staff hiring falling at its slowest pace in 18 months. That's according to a report from KPMG in the Recruitment and Employment Confederation, or EC, out this morning. Joining us, Neil Calgary, Chief Executive of the Recruitment and Employment Confederation, which represents more than 3 ,300 UK recruitment businesses. Neil, good morning. Good morning. So what's your reaction to this latest report? Is this the best that we could have done? I'm pretty close, actually, considering we've had a long two to three year period of real treacle in the hiring market where it's never been absolutely terrible, but it's been going backwards for a long time.