BANGKOK (AP) -- A quarterly survey by Japan's central bank shows business sentiment has improved slightly, especially in major heavy industries such as automaking, fossil fuels and machinery, while services industries were less upbeat.

The survey released Friday by the Bank of Japan, called the tankan, might influence the central bank's decision on whether to raise its benchmark interest rate next week. It shows the difference between companies saying they are optimistic about business conditions and those that are pessimistic.

The latest survey's outcome undermined expectations for a rate hike, and the Japanese yen weakened, with the U.S. dollar trading at 152.90 yen on Friday, near its highest level in two weeks. Meanwhile, the benchmark Nikkei 225 stock index fell more than 1%.

"Expectations are for the BOJ to maintain its short-term interest rate at 0.25% next week, marking the fourth consecutive meeting with no change," IG said in a commentary.

Japan's economy grew at a revised 1.2% annual pace in the last quarter, helped by sustained consumer spending. But the outlook ahead is uncertain, IG economists noted, given U.S. President-elect Donald Trump's vows to impose higher tariffs on imports from many countries, which could jolt both the regional and the global economy.

"The mediocre increase in business conditions across all firm sizes in the latest tankan suggests that activity is unlikely to rebound meaningfully this quarter, following a slowdown in (the last quarter)," Toh Au Yu of Capital Economics said in a commentary.

One of the biggest obstacles for Japanese firms is a severe labor shortage as the work force shrinks along with the overall population, Toh said. The tankan showed a negative 36 sentiment for employment, unchanged from the previous quarter.

Still, overall business sentiment for both manufacturers and non-manufacturers edged up to 15 from 14 in the previous survey.

The sentiment index for large manufacturers rose to 14 in December from 13 in September, partly due to automakers resuming production following certification scandals in the industry.

Construction and real estate also improved.

But while automakers and other big industries gained ground, sentiment among retailers and other service industries deteriorated, falling to 33 from 34, though it remained in positive territory.

The index for retailers dropped sharply, to 13 from 28.

The Bank of Japan began earlier this year to shift away from a negative interest rate policy aimed at keeping credit super cheap to support the economy as the country's population shrinks, sapping demand. The ultra-lax monetary policy was kept in place for years to counter a long spell of deflation, when demand was so slack that prices fell.

But global price increases following the COVID-19 pandemic, coupled with a weakening of the Japanese yen against other currencies, has pushed prices above the BOJ's target of about 2% inflation, enabling it to begin shifting to a more conventional stance.

Japan racked up a trade deficit in October for the fourth month in a row, as the weak yen and rising energy prices kept import costs high.

Prime Minister Shigeru Ishiba has proposed raising Japan's basic tax-free income allowance, increasing take-home wages and paying subsidies to low-income families to help boost consumer spending.

But his minority government is likely to struggle to gain support from the opposition on budgets and other legislation, raising the risk of political deadlocks that could stymie economic initiatives.