Japan's jobless rate held steady in January and the availability of jobs improved to a two-year high, adding to signs that the economy is gradually recovering from stagnation.
But household spending marked its fourth straight month of annual declines in January, the longest losing streak since a 14-month drop in 2008 and 2009, suggesting that improvements in the economy will be slow to broaden out.
The recent spike in commodity prices also clouds the outlook for the fragile economy as it threatens to squeeze corporate profits and dampen consumer sentiment.
The Japanese economy is moving upward little by little, Economics Minister Kaoru Yosano said in a news conference.
But we need to be alert about a surge in crude oil futures prices that will likely be reflected in physical prices, and with a certain time lag, have a major impact on the Japanese economy.
The jobless rate was unchanged at 4.9 percent in January, matching a median market forecast, while the jobs-to-applicant ratio rose to 0.61 from 0.58 in December, marking the highest reading since January 2009, government data showed on Tuesday.
In another positive sign, wage earners' total cash earnings edged up 0.2 percent in January from a year earlier, posting an 11th straight month of gains buoyed by a big rise in special payments, labor ministry data showed.
Improvements in the labor market and personal consumption are likely to continue, but there are risks to this scenario, said Atsushi Matsumoto, an economist at Mizuho Research Institute.
If oil prices continue to rise, this would damage Japan's economy and possibly harm consumption.
Separate data showed household spending fell 1.0 percent in January from a year earlier, less than a median market forecast for a 1.4 percent drop and December's 3.3 percent decline.
Yosano, a veteran lawmaker, also warned that a current impasse in parliament could eventually cause a shutdown of parts of the government if it became prolonged.
Some say the upper house's rejection of a bond issuance bill would result in a Japanese version of a 'government shutdown.' I am very worried about such a possibility.
Japan's economy likely rebounded in the current quarter from a mild contraction in the final quarter of last year, as exports and output recovered from a soft patch on solid demand in Asia.
The encouraging signs have prompted the government to upgrade its economic assessment and dampened expectations of an imminent monetary easing by the Bank of Japan.
Some analysts, however, are unconvinced.
We will probably see weak figures for the first half of the year, as we come off a high base from government subsidies on environmentally friendly goods, said Takeshi Minami, chief economist at Norinchukin Research Institute.
Unless we see an export-led improvement in the economy for six months or a year, we won't see the growth filter through to household spending. When wages and overtime pay start to go up, then consumer minds will change, but we haven't seen that yet.
(Additional reporting by Kaori Kaneko; Writing by Leika Kihara; Editing by Edmund Klamann and Edwina Gibbs)