The Japanese economy stepped up a gear with 5.5% annualised growth in the fourth quarter of 2005 as rising consumer spending helped keep the recovery firmly on track.
Japan's economy grew four times faster than the US, which saw annualised growth of 1.1% in the same quarter. It was the fourth straight positive quarter and reinforced hopes that the world's second-largest economy is finally on a sustainable recovery path after a slump stretching back over a decade.
Quarter-on-quarter, Japan's gross domestic product grew 1.4%, beating market expectations for 1.2% and significantly stronger than the 0.3% pace seen in the third quarter of 2005.
The data is likely to come under close scrutiny at the Bank of Japan which has signalled that an end to its current super-loose monetary policy could be close after consumer prices rose for two consecutive months.
Officials and economists expressed confidence in Japan's recovery in the wake of the upbeat GDP figures but government ministers, worried about a premature policy shift by the central bank, said deflation still lingers.
For the three months to December, domestic demand grew 0.8% quarter-on-quarter, up sharply from the moderate 0.3% pace seen in the previous quarter. Private demand showed robust 1.1% growth from the September quarter, when it grew 0.3%.
All-important private consumption, which accounts for some 55% of the Japanese economy, expanded 0.8%, up from the 0.4% growth registered in the three months to September.
A colder than usual winter has resulted in higher sales of kerosene and other seasonal items, officials said. Digital music players and flat televisions also remained popular, pushing up consumer spending, they said.
Corporate investment spending grew 1.7% in the three months, compared with 1.8% growth in the September quarter. The Cabinet Office said net exports pushed up overall growth by 0.6 percentage points.
