In December, Japan's overall economic assessment was increased for the first time in 17 months, as consumers and businesses were more optimistic about the outlook for declining COVID-19 cases at home.
Authorities have upped their expectations for private consumption and business conditions, with the services sector bolstered by the easing of coronavirus restrictions, but supply bottlenecks and raw material prices remain a threat.
In Q3, the world's third-largest economy fell somewhat faster than previously estimated. However, since pandemic restrictions were lifted by the end of September, experts forecast a rebound in Q4 of 2021.
The government said in its December economic report that "the economy is picking up as severe coronavirus conditions are gradually lessening." However, the government stated that any risk posed by coronavirus variants such as Omicron to economies and financial markets must be "closely monitored."
For the second month in a row, authorities upped their views on private consumption.
Before the cabinet approved the report, a government official said, "we upgraded our consumption assessment given the continued recovery in services ranging from restaurants to entertainment and other sectors, as well as the rebound in car sales amid reduced supply restrictions."
After the BoJ's quarterly tankan survey revealed that Japan's service-sector mood rose to a two-year high, the government updated its outlook on business conditions. Due to an increase in job advertisements, authorities also boosted their employment assessment for the first time in 15 months.
For the first time in 13 months, the government lowered its capital spending forecast. According to the source, firms' capital spending slowed in Q3, owing in part to a COVID-19 resurgence throughout the summer, which hindered business meeting opportunities.
On the back of weak housing starts, authorities reduced their views on housing construction for the first time in 27 months.