Also because the F1 audience is strongly concentrated in Europe, where Honda's market share is miniscule. Contrasted with Indycar, which is US-based, where Honda has a much larger presence.
"European pessimism" is this weird common knowledge about the decline of Europe. It's been written about in I, Robot. There is population decline but their GDP numbers look on-par with the United States.
It's the major/minor events rather than numbers that seem to push this mindset of inevitable decline.
Is it bad government policy? Or culture?
To extrapolate that to a decline of Europe in terms of "European pessimism" is... Quite a leap.
Even more as there is no definition of what "decline" you are meaning here, if it's for green technology I can definitely tell there isn't a decline in Europe, if it's cultural that is a much bigger topic (and much fuzzier) to talk about.
When I lived in America, Honda was much more of a trusted brand there. Detroit went after them hard via the Takata defect, so I’m not sure about now.
Some degree of protectionism is expected, of course. I mean, you won't find anyone driving a Ford or Chevy in Japan except as a novelty. But there is a line which, when crossed, gives the impression of desperate anti-competitive measures. Everyone has to decide where they draw that line, I guess.
Honda leaving Formula 1 will have zero effects on the amount of investments in Europe, not to mention it won't have any significance regarding companies reducing investment in Europe.