Big Japanese manufacturers¡¯ sentiment improved slightly in the three months to December, a quarterly Bank of Japan survey showed on Friday, boding well for the central bank¡¯s plans to gradually raise interest rates from near-zero levels.

Nonmanufacturers also remained upbeat on business conditions, though concerns over rising raw material and labor costs weighed on retailers¡¯ morale, the survey showed.

The data released ahead of the Bank of Japan¡¯s two-day policy meeting next week highlights how an intensifying labor shortage is becoming a headache for companies and a potential constraint to economic growth.