*

Big manufacturers' business mood at +7 vs f'cast +6

*

Big non-manufacturers' sentiment at +19 vs f'cast +17

*

Mixed data highlights challenges in driving up wages

(Adds analyst quote, details)

By Leika Kihara and Tetsushi Kajimoto

TOKYO, Dec 14 (Reuters) - Japanese manufacturers' mood soured in the final quarter of 2022 to its lowest in nearly two years, a central bank survey showed, as cost pressures and the prospect of slowing global demand clouded the outlook for the world's third-largest economy.

But service-sector sentiment improved for three straight quarters in the October-December period, the Bank of Japan's closely watched "tankan" survey showed on Wednesday, as the impact on consumption from the coronavirus pandemic faded.

The outcome illustrated the divergence between robust domestic demand, which is making a delayed recovery from the pandemic's scars, and the darkening outlook for exports on fears of global recession, analysts say.

It also highlighted the challenge policymakers face in prodding companies to raise wages and compensate households for the rising cost of living - a factor the BOJ sees as crucial for inflation to sustainably hit its 2% goal.

"Japan's economy isn't in bad shape, with firms maintaining their bullish spending plans. Companies will also raise wages next year," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

"But the key is the outlook for overseas economy, as domestic demand isn't strong enough to compensate for the hit from any big slump in global growth," he said.

The headline index for big manufacturers' sentiment fell to plus 7 in December from plus 8 in September, the tankan showed, worsening for the fourth straight quarter and marking the lowest level since March 2021. It compared with a median market forecast for a reading of plus 6.

The big non-manufacturers' confidence index rose to plus 19 from plus 14, beating market forecasts of plus 17 and hitting its highest level since December 2019, the survey showed.

Both big manufacturers and non-manufacturers expect business conditions to worsen ahead, the survey showed, reflecting rising raw material costs and fears of weakening global demand.

Although some firms complained about the hit from rising raw material costs, others saw relief from easing supply constraints and progress made in price increases, the survey showed.

Sentiment among big hotels and restaurants rebounded to the highest level since 2019, as the removal of COVID-19 curbs and the opening of borders lifted consumption, it showed.