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Following optimistic outlooks by Japanese consumers and businesses, which were triggered by falling COVID-19 cases, the country’s government lifted its economic view for the first time in 17 months. 

Forecasts about private consumption and business conditions improved despite the government stating some risks related to the supply chain and raw materials prices.

On Monday Japan's parliament approved the first extra budget of the 2021 fiscal year, with a record spending of $317 billion, to help the economy withstand the fallout of COVID-19, further straining the industrial world's heaviest debt burdens.

The 36 trillion yen budget earmarks funds to help the economy withstand the fallout of COVID-19, further straining the industrial world's heaviest debt burdens.

In the third quarter of this year, the economy narrowed by a yearly rate of 3.6 percent, higher than the initial estimate of 3 percent.

German slump

Germany’s central bank warned that the economy might shrink this quarter due to rising coronavirus cases which are prompting people to stay home. 

Some service sectors were considerably affected, Bloomberg reported, citing the Bundesbank.

Business confidence in Europe’s largest economy also dropped in December and the central bank cut its growth forecasts for this year and the next.

However, the economy is expected to recover in the spring with private spending going up significantly. The bank also predicts the supply chain disruptions to cease by the end of next year.

Income expectations dropped as well, with the firm stating that higher energy and food prices are dragging consumers’ purchasing power.

In another related development, consumer confidence in Germany is expected to be at a negative 6.8 points in January, down by 5 points from December’s figure, according to GfK, a German market research firm.

The confidence index number for January came in significantly lower than the -2.7 percent forecast in a Bloomberg poll.

Mixed outcome for Turkey’s economy 

The consumer confidence index in Turkey plummeted to 68.9 in December, as all sub-indexes worsened, the Turkish Statistical Institute said.

This comes against the backdrop of President Tayyip Erdogan’s decisions to cut interest rates amidst strong inflationary pressures.

Financial situation of households, as well as its expectations, worsened by 3.6 percent and 5.3 percent respectively. The general economic situation sub-index also deteriorated by 2.2 percent.

However, the country’s currency regained some of its value on Monday, going up by 20 percent. This followed the President’s decisions on introducing a program that aims at protecting citizens’ lira-denominated savings. 

The government will compensate losses made by deposit holders in case the currency’s drop becomes higher than interest rates promised by banks.

Some $1 billion were sold in markets after the newly-made decisions.

Global trade slips

Volume of merchandise trade dropped by 0.8 percent in the third quarter of this year, dragged by supply chain disruptions, shortfalls of production inputs and rising COVID-19 cases, according to the World Trade Organization.

This follows four consecutive expansions in volume, the WTO added. Trade volume was 11.9 percent higher in the first three quarters of this year when compared to the same period last year.

In addition, trade value continued its expansionary trend as a result of hikes in exports and imports prices.

However, the international organization mentioned the new omicron variant as a possible risk to world trade.

Korea’s inflation

South Korea’s Finance Ministry predicts that inflation in the next two years will be higher than the central bank’s forecasts due to supply chain disruptions.

The ministry expected inflation for this year and the next to be at 2.4 percent and 2.2 percent respectively, according to Bloomberg.