Omicron disruption to supply chains was already holding back industrial production in some sectors in December. And with domestic cases surging since then the recovery will have gone into reverse at the start of Q1. But while next week the government will probably extend its light-touch restrictions to the end of February, signs that the virus wave is now nearing a peak support our view that Japan’s economy will quickly shake off its Omicron setback and surpass its pre-sales tax hike level later this year.
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