Tokyo: Japan's economy grew more than expected in the first three months of the year, data showed on Wednesday, as it crawls back from a brief recession, but observers cautioned that a strong recovery may still be some way off.
The 0.6 percent on-quarter expansion was bigger than revised 0.3 percent growth in the last three months of 2014, and beat market expectations for a 0.4 percent rise.
In annualised terms, the world's number three economy expanded 2.4 percent in January-March as capital spending and the housing market showed signs of strength, although exports dipped slightly and consumer spending was weak.
The relatively upbeat figures outpacing a lacklustre 0.2 percent annualised rise in the US economy during the same period may cool expectations of imminent stimulus from the Bank of Japan (BoJ), after a sales tax rise last year hammered consumer spending.
The sales levy hike Japan's first in 17 years plunged the economy into recession and threw Prime Minister Shinzo Abe's growth-boosting programme, dubbed Abenomics, into question.
Investors embraced Wednesday's growth figures, sending the benchmark Nikkei 225 index 0.82 percent higher in the afternoon, as Japan wraps up its latest earnings season with many firms reporting strong profits, largely owing to a weak yen.
"The January-March (gross domestic product) growth data were good... And buoyed sentiment," said Takuya Takahashi, senior strategist at Daiwa Securities.
"Corporate earnings for the fiscal year to March were (also) generally good and many companies took measures to return surplus to shareholders," he added, referring to share buybacks and dividend hikes.
But some analysts are warning that, despite the pick-up, Japan's full-year growth may come in flat, as firms' rising inventories underscore still-lacklustre consumer spending.
"The acceleration in GDP growth last quarter was mostly due to a jump in inventories, and a range of indicators point to a slowdown in the second quarter," Marcel Thieliant from Capital Economics said in a commentary.
"Industrial production in March was four percent below its January peak, and the drop in the manufacturing PMI (purchasing managers' index) to a multi-month low in April suggests that conditions are unlikely to improve quickly."
