Activity in Japan's services sector expanded slightly in July as companies worked off business backlogs and as new orders showed signs of steadying after a sharp decline in June, a private business survey showed on Wednesday.

The IHS Market Japan Services Purchasing Managers Index (PMI) rose to 50.4 in July from 49.4 in June on a seasonally adjusted basis.

The index rose above the 50 threshold that separates expansion from contraction for the first time in two months.

The index for new business rose to 49.7 from 47.3 in the previous month, which was the lowest since September 2011.

"The latest survey data pointed to a slight improvement in business activity at Japanese services firms. New orders declined at a weaker pace, contrasting with the sharpest contraction in nearly five years seen in June," said Amy Brownbill, an economist at Markit.

Employment in the services sector fell at a slightly faster pace in July, however, while companies were the least optimistic about the business outlook in over four years, citing weak domestic and global demand and uncertainties over the impact of Brexit and China's economy.

The composite Japan index for output in both manufacturing and services rose to 50.1 in July from 49.0 in June, showing the first expansion in five months.

Japan's government will launch a stimulus package worth more than 28 trillion yen ($273.36 billion) in an attempt to boost domestic demand with infrastructure spending and cash transfers to low-income households.

Services accounted for 70.1 percent of Japan's gross domestic product, while manufacturing had a 18.7 percent share in 2014.

(Reporting by Stanley White; Editing by Kim Coghill)