Bank of Japan Governor Toshihiko Fukui reiterated that Japan's economy is expanding moderately, but gave no new hints on whether the central bank will raise interest rates next week.
A of data released earlier in the day also offered few clues on the timing of the next rate hike, with numbers on consumer sentiment failing to wipe out concern over slack personal spending.
A survey of Japanese service sector workers, called "economy watchers" for their proximity to consumer and retail trends, produced a diffusion index of 48.9 in December, unchanged from November's reading, the Cabinet Office said.
The index stayed below 50 for the second month in a row - a worrying sign for the BOJ since a reading below 50 suggests more workers are pessimistic about business conditions than are optimistic.
Personal Consumption Rising
Fukui, in a speech at a meeting of the BOJ's regional branch managers, said personal consumption was in an uptrend although it was rising only modestly.
Still, the economy is likely to sustain long-lasting growth with support from both domestic and external demand, while consumer prices are expected to remain in an uptrend, he said.
"The BOJ will carefully examine economic and price developments" in guiding monetary policy in a way that contributes to sustained growth under price stability, he said, repeating the central bank's standard line on policy.
Fukui's assessment on the domestic economy was unchanged from the central bank's latest monthly report released in December.
A quarterly BOJ report examining regional economic conditions showed that the economic expansion, albeit moderate, was spreading across the nation.
The report, issued after the branch managers' meeting, was more cautious on personal consumption, saying it was somewhat weak as unseasonably high temperatures hit sales of winter clothing in some areas.
But it also said retail sales in the year-end and the new year period were buoyant in many areas.
While the report and the branch managers' meeting do not usually have much effect on monetary policy, they came under closer scrutiny by market traders eagerly searching for clues on the timing of the next rate rise.
Many market traders expect the BOJ to raise its overnight call rate target to 0.50% from the current 0.25% early this year.
But they are divided on whether the bank will hike rates at the Jan. 17-18 board meeting or wait until later, as recent indicators have painted a patchy picture of Japan's economy.
The BOJ last raised interest rates in July, which was its first rate hike in six years.
Government Warning Shot
Separate data released earlier in the day showed outstanding lending by most Japanese banks rose 1.7% in December from a year earlier, accelerating from November's 1.2% growth and reflecting companies' robust appetite for funds.
Money supply as measured by M2 plus certificates of deposits rose 0.8% in December from a year earlier, matching the market's consensus forecast and slightly higher than November's 0.7% rise, the BOJ said.
While economic indicators are key in gauging the timing of the next rate hike, the BOJ may also need to convince a reluctant government if it were to raise rates next week, analysts said.
The government has so far not voiced explicit opposition to an early rate rise, but Prime Minister Shinzo Abe did express the hope that the central bank would cooperate with government efforts to beat deflation and achieve strong economic growth.
"The government will pursue a growth strategy while continuing to work on reforms," Abe said on Thursday. "The BOJ surely understands our aims," he told reporters during a five-day