Japan's economy lost some steam in the first three months of 2007 due to a downturn in capital spending.
The Bank of Japan, which had a meeting to examine the growth figures, later wrapped up a two-day meeting and left interest rates unchanged at 0.5%, as widely expected.
Gross domestic product, the broadest measure of the economy, expanded 0.6% in Q1 from the previous quarter, slightly short of economists' expectations of 0.7%.
The annual rate of growth in Q1 was 2.4%, slowing from a revised 5% the previous quarter, which was the fastest rate in nearly three years.
Exports and personal consumption remained firm but capital expenditure, which has been the engine for growth, fell for the first time in five quarters, limiting overall growth.
After the meeting, Japan's central bank chief underlined the need to raise interest rates later despite the absence of inflation, even as data showed the rate of Japanese economic growth halved in the latest quarter.
'I'm not saying we can raise rates any time when prices are falling. But if we examine everything, it is possible to raise rates even when prices are falling,' Bank of Japan Governor Toshihiko Fukui told a news conference.
He reiterated that if people expect interest rates to stay low even while the economy is expanding, that could cause unwelcome sharp economic swings and misallocation of funds.
