Japan business mood worsens as new Omicron variant clouded outlook

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Japan business mood worsens as new Omicron variant clouded outlook

Since 2018, Japan's large manufacturers held the highest level of confidence, but slippage in the outlook signaled that the omicron variant has clouded views on the country's economic recovery.

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According to the Bank of Japan's quarterly Tankan survey, the sentiment among big makers of products stayed at 18 this month, while the outlook index fell to 13 this month. The index subtracts the percentage of pessimists from the percentage of optimists.

The Tankan provides a key piece of information for the BOJ policy board members as they decide the fate of a special Covid funding program as early as Friday. The emergence of the new variant last week has made economic uncertainty extremely high, according to Deputy Governor Masayoshi Amamiya.

Japanese businesses had seen more optimism compared to the summer until the emergence of Omicron. There was reason for guarded bullishness due to the continued economic recovery in the main U.S. and continued economic recovery in their main export destinations from the U.S. to China.

Prime Minister Fumio Kishida also likely helped boost corporate sentiment by unveiling a larger-than-expected economic package last month, which offered record fiscal support for the economy.

The survey of Tankan was taken from Nov. 10 to Dec. 10, so at least some of the businesses responding factored omicron into their answers. The variant was flagged as a variant of concern on November 26.

A separate report from the Cabinet Office showed that orders for Japanese machinery rose for the first time in three months. Bookings are a sign of planned capital spending.

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