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Business sentiment among workers with jobs sensitive to economic trends in Japan posted the largest drop in nine months in December, as a resurgence in novel coronavirus infections hit consumption during the year-end holiday season, government data showed Tuesday.

The diffusion index of confidence in current conditions compared with three months earlier among “economy watchers” such as taxi drivers and restaurant staff fell 10.1 points from November to 35.5, down for the second straight month following an 8.9 point drop in the previous month, according to the Cabinet Office.

The latest monthly decline was the sharpest since a 13.2% fall was logged in March last year when the virus began to spread rapidly, clouding the economic outlook.

A reading above 50 indicates that more respondents reported improving conditions than worsening ones.

“Amid the virus spread, people refrained from holding year-end parties and were asked (by the government) to spend the holiday season ‘quietly,’ which we believe affected the sentiment in the service industry,” a government official told reporters.

The official said business sentiment also worsened after the government decided to suspend its Go To Travel subsidy program from Dec. 28 in an effort to prevent the spread of the virus during the New Year holidays. The campaign was launched last July to boost the virus-hit domestic tourism sector.

The Cabinet Office downgraded its assessment for the second month in a row, saying, “Weakness has been seen in the economy recently.” In November, it said the economy has shown some weakness in its recovery as the impact of the pandemic remains severe.

The diffusion index gauging business sentiment for the coming months edged up 0.6 point to 37.1, following a decrease of 12.6 points in November.

Record daily numbers of new cases prompted Prime Minister Yoshihide Suga on Thursday to declare a second state of emergency covering the Tokyo metropolitan area effective the following day to Feb. 7, increasing economic uncertainty.

The previous state of emergency was declared in early April, when the economy watchers index plunged to 7.9, the lowest reading since comparable data became available in January 2002. It dealt a heavy blow to the Japanese economy until it was fully lifted in late May.

In the reporting month, an upscale-restaurant worker in the Tokai region was quoted as saying that demand for year-end parties “disappeared” due to a resurgence of virus infections since late November, and people became less willing to dine out with others.

The Cabinet Office polled 2,050 workers from Dec. 25 to 31, of whom 1,794, or 87.5%, responded.

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