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By Leika Kihara<\/p>\n
TOKYO (Reuters) – Japan’s service-sector sentiment improved in December but companies expect conditions to sour ahead, a government survey showed on Tuesday, a sign the rising cost of living was weighing on household spending.<\/p>\n
Separate data showed corporate bankruptcy cases hit a decade-high last year due partly to rising raw material costs and an intensifying labour shortage, highlighting the strain of rising inflation on Japan’s corporate sector.<\/p>\n
The slew of data comes ahead of the Bank of Japan’s two-day policy meeting concluding on Jan. 24, when some analysts expect the central bank to raise interest rates from the current 0.25%.<\/p>\n
BOJ Deputy Governor Ryozo Himino said on Tuesday the central bank will debate whether to raise interest rates next week, flagging growing positive signs in Japan’s wage outlook.<\/p>\n
“The likelihood of Japan’s economy moving in line with our projection is heightening gradually,” he told a news briefing.<\/p>\n
An index measuring sentiment among service-sector firms, like taxi drivers and restaurants, stood at 49.9 in December, up 0.5 point from the previous month in a second straight month of increases, the government’s “economy watchers” survey showed.<\/p>\n
But a gauge of firms’ sentiment on the economic outlook fell 0.6 point to 48.8, as higher prices of fuel and food weighed on consumption, the survey showed.<\/p>\n
The “economy watchers” survey is closely watched by markets as a leading indicator of household spending and the broader economy, due to the polled firms’ proximity to consumers.<\/p>\n
A separate survey by private think tank Teikoku Databank released on Tuesday showed corporate bankruptcy cases totaled 9,901 in 2024, up 16.5% from the previous year to mark the highest level since 2014.<\/p>\n
Japan’s economy expanded an annualised 1.2% in the three months to September, slowing from the previous quarter’s 2.2% increase, with consumption up a feeble 0.7%.<\/p>\n
Core inflation remains above the BOJ’s 2% target for nearly three years due partly to rising import costs from a weak yen.<\/p>\n
Policymakers hope that workers’ regular pay, which recently has been rising at an annual pace of 2.5% to 3%, keeps increasing and supports consumption. While rising wages would underpin consumption, they would squeeze smaller firms that are unable to earn enough profits to retain workers via pay hikes.<\/p>\n
(Reporting by Leika Kihara; Editing by Bernadette Baum)<\/p>\n<\/p><\/div>\n