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Japan's economy watcher sentiment posts sharpest drop in 18 months

The Central Government Building No. 4 that houses the Cabinet Office is seen in this file photo in the Kasumigaseki district of Tokyo's Chiyoda Ward, on April 26, 2017. (Mainichi/Kimi Takeuchi)

TOKYO (Kyodo) -- Business sentiment among workers with jobs sensitive to economic trends in Japan marked the steepest fall in one and a half years in August as the nation saw record levels of COVID-19 cases, government data showed Wednesday.

    The diffusion index of confidence in current conditions compared with three months earlier among "economy watchers," such as taxi drivers and restaurant staff, plunged 13.7 points from July to 34.7, the first drop in three months, according to the Cabinet Office.

    The decline was the biggest since a 14.0 point fall recorded in February last year, when coronavirus infections started increasing in the country and the economic outlook began to deteriorate rapidly. The latest benchmark index reading was the lowest since 31.2 logged in January this year.

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

    From around late July, the number of new daily infections continued to rise across Japan amid the spread of the highly contagious Delta variant and eventually exceeded 25,000 in mid-August, though cases have started to fall recently.

    The government's latest COVID-19 state of emergency now covers 21 of the country's 47 prefectures, having expanded from just Tokyo and the southern island prefecture of Okinawa at the beginning of August.

    The Cabinet Office polled 2,050 workers for seven days from August 25. Of those, 1,830, or 89.3 percent, responded.

    The slump was more noticeable in the household spending-related sector, such as retailers and restaurants, rather than in the corporate and employment-related fields, a government official told reporters, adding that heavy rain across the nation in the reporting month also hit business sentiment.

    The office downgraded its assessment for the first time in four months, saying the economy has shown "some weakness in its recovery." In July, it said the economy was "picking up."

    A department store worker in the southern Kanto region near Tokyo was quoted as saying that the number of customers and sales of items such as clothing and groceries were "going into freefall" due to increased COVID-19 cases in the area and extensions of the state of emergency.

    The diffusion index gauging business sentiment regarding the coming months was down 4.7 points from July at 43.7, falling for the second straight month.

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