Japan's economy grew at a faster pace than expected in the first three months of the year as rising business investment and consumer spending helped to broaden an export-led recovery.
But analysts said high oil prices and the prospect of interest rate rises in the United States and China loomed as risks in the months ahead.
Gross domestic product (GDP) grew by a real 1.4 percent in the quarter, beating a median forecast of 0.9 percent in a Reuters poll. It was the eighth straight quarterly expansion, the longest stretch since nine consecutive quarters in 1995-1997.
"Consumer spending and private capital investment were the upward surprises," said Peter Morgan, chief economist at HSBC Securities.
"This data would suggest that the economy is still looking pretty strong overall, even if it is still primarily being driven by export growth," Morgan said.
On an annualised basis, GDP expanded 5.6 percent, beating a forecast of 3.6 percent and outstripping US growth of 4.2 percent in the same period.
Robust exports of high-tech goods such as flat-panel TVs and DVDs, especially to China, have spurred investment and lifted corporate profits, which are slowly feeding through into rising incomes and more jobs.
Japan's imports have also grown, indicating that domestic economic activity is picking up.
Domestic demand's contribution to January-March real GDP growth remained firm at 1.1 percentage points, after 1.3 percentage points in October-December.
Business investment gained for the seventh straight quarter, increasing by 2.4 percent over the previous three months, much better than a forecast of 1.6 percent.
New investment has been helped by record profits at many Japanese car, electronics and other firms in the year to March.
Matsushita Electric Industrial, the maker of Panasonic products, said on Tuesday that it and a partner would invest some $830 million to build a plasma display panel factory that Matsushita had said would be the world's largest.
Conditions are also improving for the consumer. Unemployment dropped to 4.7 percent in March, the lowest in three years.
Tuesday's data showed that private consumption, the largest part of the economy, grew at a better-than-expected 1.0 percent.
Falling prices, a problem for the economy for over four years, are also moderating, though there is no sign of rises yet.
Nominal GDP, which does not take into account price changes, expanded 0.8 percent in the three months to March, the fastest pace since the October-December quarter of 1996.
But the GDP deflator - seen as the broadest measure of prices - was minus 2.6 percent, the 24th consecutive negative figure. It was minus 2.4 percent for the year to March, the biggest negative figure since 1981.
For the fiscal year that ended in March, the economy grew at its fastest pace in seven years at 3.2 percent, beating the government's forecast of 2.0 percent.
October-December GDP was revised up to 1.7 percent growth on the quarter from a previous 1.6 percent.
Tokyo shares rose on the figures, with the Nikkei average ending up nearly two percent. The dollar was trading more than a third of one percent lower at 113.94 yen.
Analysts cautioned that higher oil prices and the prospect of interest rate increases in the United States and China loomed as potential risks for future growth.
"We expect growth to slow down in the next quarter as various negative factors surface, such as record high oil prices, falling stock prices and possible interest rate rises in the US and China," said Kenji Arata, an economist at Informa Global Markets.
The recent fall of the yen to eight-month lows against the dollar has raised concerns that Japan, entirely dependent on imported oil, will be especially hurt by higher energy prices.
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