© Reuters. A worker walks near a factory at the Keihin industrial zone in Kawasaki, Japan, March 8, 2017. REUTERS/Toru Hanai/File Photo

TOKYO (Reuters) - Japan's factory activity shrank for the eight consecutive month in January amid weak demand, but the service sector saw strong gains as new business picked up, a private business survey showed on Wednesday.

The au Jibun Bank flash Japan manufacturing purchasingmanagers' index (PMI) was little changed at 48.0 in January from a final 47.9 in December. The headline index has remained below the 50.0 threshold, which separates contraction from expansion, since June.

Both output and new orders, the two key subindexes contributing to the headline figure, remained in contractionary territory but their pace improved slightly from the prior month.

"Backlogs of work broadly stabilised in January, providing an early sign that output was starting to be supported by improved demand rather than the fulfilling of prior orders," said Usamah Bhatti, an economist at S&P Global Market Intelligence.

While input price inflation persisted in January, its level dipped from December when it hit a three-month high. Output charges went up but at the slowest rate since June 2021.

The au Jibun Bank flash services PMI increased to 52.7 in January from a final 51.5 in December, sustained by new business growth that was the strongest since September last year. Foreign demand for services expanded for the first time in five months.

Looking ahead for the next 12 months, the service sector's optimism was high.

The au Jibun Bank Flash Japan composite PMI, which combinesboth manufacturing and service sector activity, advanced to 51.1 in January from 50.0 in December.

The Bank of Japan maintained its ultra-easy monetary settings on Tuesday in a widely expected move, as policymakers allow more time to determine whether wage increases will broaden enough to keep inflation sustainably at its 2% target.

Japan Jan factory activity languishes, but service sector picks up - PMI