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TOKYO : Japan's economy grew at a faster than expected 3.3 percent annualised pace in the first quarter of 2008 despite a global credit crunch and US economic slowdown, official figures showed Friday.
The world's second-largest economy remained in sound health as robust exports to China and other emerging markets offset weaker demand in the United States for Japanese cars and other goods.
A rebound in housing investment and rising consumer spending also helped to ensure a third consecutive quarter of positive growth for Asia's biggest economy, which is gradually recovering from recession in the 1990s.
Analysts noted, however, that consumer spending had been helped by the fact that 2008 is a leap year, giving shoppers an extra day in February.
"I'm concerned about a future slowdown in the economy. I think that one of the major reasons for the strong growth in the first quarter was the leap year," said Mamoru Yamazaki, chief economist for RBS Securities in Tokyo.
"It will not be a surprise if the second-quarter GDP becomes negative," he warned.
Gross domestic product (GDP) grew by 0.8 percent in the three months to March from the previous quarter, the Cabinet Office estimated.
Market forecasts were for a quarter-on-quarter expansion of about 0.7 percent and an annualised pace of 2.7 percent.
At the same time the government revised down its estimates for GDP growth in the fourth quarter of 2007 to a quarter-on-quarter rate of 0.6 percent, from 0.9 percent previously.
Earlier in the year there had been worries that Japan's economy might contract in the first quarter due to the global slowdown, but most analysts are now confident Japan can avoid a recession in the first half of 2008.
Weaker economic growth is seen as inevitable, however.
Leading indicators like machinery orders "suggest a slowdown ahead," said Tomoko Fujii, head of economics at Bank of America in Tokyo.
"Exports surprised on the upside but I would expect a slowdown as well. Consumption was exaggerated by the leap year day so everything suggests that we should see a much weaker number in the second quarter," she said.
Consumer spending grew by 0.8 percent in the first quarter from the previous three months, while exports soared 4.5 percent, despite weakening demand in the US economy which has been hit by a housing slump and credit crunch.
Private residential investment surged 4.6 percent as construction activity recovered following a lull last year caused by stricter building regulations.
Corporate capital spending on the other hand fell by 0.9 percent as companies became less willing to invest in new factories and equipment amid an increasingly tough business climate.
"Increasing oil and commodity prices will damage corporate profits. That will be negative for capital expenditure," said Yamazaki at RBS Securities.
Despite the unexpectedly brisk growth, analysts believe the Bank of Japan is unlikely to raise its super-low interest rates any time soon given the uncertain outlook for the global economy.
"I think the BoJ is firmly on hold," said Fujii at Bank of America.
The central bank has kept its key rate at 0.5 percent, the lowest among major economies, since February 2007. - AFP/ir
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