Japan's economy will show continued strength in GDP data for the January-March quarter but its pace will slow almost by half to 3.5 percent from the previous quarter's surprisingly high rate, economists said.
Japan's gross domestic product, due out Tuesday, was expected to show a slowdown in the growth of exports and corporate spending on factories and offices, the twin engines of the current economic recovery, they said.
But the data should show a continued pickup in consumer spending, which accounts for roughly 60 percent of the economy and thus holds the key to making the recovery more sustainable.
The Japanese economy, the world's second largest, is forecast to have grown by 0.9 percent in inflation-adjusted terms in the three months to March, or at an annualised rate of 3.5 percent, according to the average estimate of 13 research houses polled by the AFX-Asia news agency.
For the past fiscal year to March, GDP growth is estimated at 3.0 percent, much higher than the government's official forecast of 2.0 percent.
"The growth driver in the January-March quarter was domestic demand, as both corporate capital spending and private consumption remained solid, while exports maintained a rising trend on the back of the strong economic activity in key countries," said Taro Saito, economist at Nippon Life Insurance research arm NLI Research Institute.
In the October-December quarter, the Japanese economy grew by a revised 1.6 percent in real terms, or at an annualised rate of 6.4 percent, its fastest pace in 13-and-a-half years.
In the three months to December, Japanese net exports - exports minus imports - accounted for 0.4 percentage points and domestic demand 1.2 percentage points of the 1.6 percent growth in total domestic output.
Economists expect much of the impetus behind the growth in overall domestic demand in the January-March quarter to come from increased consumer spending, the single largest contributor to GDP, thanks to improved labour market conditions.