Leading economists are split over whether the improvement in Japan's financial fortunes is just short-term.

Ryutaro Kono, chief economist at BNP Paribas Securities in Tokyo forecasts the economy will peak during the final quarter.

He predicts that current growth will not be strong enough to stamp out the six year cycle of deflation.

"Japan's industrial production lags that of the United States by several months. If exports stall, expenditures both by the corporate and household sectors will lose steam."

By comparison economics professor Hiroshi Yoshikawa who also sits on the Government's Council on Economic and Fiscal Policy is among those who expect economic growth to continue.

The University of Tokyo professor predicts growth of between 2% and 3% which will continue until at least spring 2005.

On the upside, first quarter personal consumption -- especially in clothing and computers -- rose 1%. Gross domestic product grew 1.4% in real terms.

In March unemployment fell to 4.7%, the lowest for three years - but the number of job offers to job seekers was the same.

The gloomsters also point out that employee earnings for the first quarter fell by 2.8% year-on-year.

They also say uncertainty over foreign markets, especially the United States and China, are likely to have a negative impact on growth.

Data sourced from: Asahi Shimbun (Japan); additional content by WARC staff