Strong corporate spending meant the Japanese economy grew by much more than initially estimated in the first quarter. But experts fear the recovery could be short-lived because consumer spending dropped.
First quarter gross domestic product (GDP) came in at 3.9 percent, compared to the same quarter last year and sharply up from an original estimate of 2.4 percent.
The figures are a welcome boost for Prime Minister Shinzo Abe's government as well as the Bank of Japan, which are hoping that stimulus measures have led to and can sustain any recovery.
"This is a pretty positive figure and shows the recovery is picking up pace," Takeshi Minami, chief economist at Norinchukin Research Institute, told the Reuters news agency.
"Non-manufacturers are boosting spending on expectations that private consumption will recover, so this should serve as a key driver of growth," he added.
Capital spending rose 2.7 percent from the previous quarter, much more than a preliminary estimate of 0.4 percent. A recent Finance Ministry report showed a notable increase in spending by retailers and wholesalers investing in infrastructure and refurbishing projects.
But despite higher wages, private spending, which accounts for nearly two-thirds of Japan's economy, rose a mere 0.4 percent in the first quarter. It has led some experts to believe that any recovery is short-lived.
"Core consumer spending fell to the lowest level since last summer in April, and industrial output may well have contracted this quarter. We therefore expect a sharp slowdown in GDP growth" in the second quarter, Marcel Thieliant of Capital Economics said in a commentary.
ng/uhe (Reuters, AFP, AP)