It's not just the sun that's rising in Japan -- economic growth exceeded preliminary estimates for the first quartile of 2004.

As economists blessed business confidence about future progression for contributing to the growth, gross domestic product was revised up from 1.4% to 1.5% for the January-March quarter. This can be interpreted as a 6.1% rise in real, annualized growth.

The Cabinet Office's upward revision of contributions from private inventories by 0.5% largely accounts for the economic expansion, as auto and machinery production upped their output in line with increased exports to China and more demand at home.

However, optimism was countered by slower capital expenditure – revised down from a 2.4% to 1.7% rise – caused by low spending at banks and construction firms, although the Cabinet Office maintained that capital spending was rising steadily.

Economists had hoped for better news on this in the wake of a Ministry of Finance report that revealed a 10% rise in private sector capital investment for the first quarter compared with the same period in 2003.

Despite the overall positive mood, economists are sure it won't last. "We don't think the economy will grow at a 6% annual rate for the rest of the year" says Ryo Hino of J P Morgan, instead predicting growth of 3% for the next two quartiles of the year, then 2.5% growth for Q4.

As usual, there is much bickering over the exact nature of the likely slowdown. Credit Suisse First Boston expects Q2 and Q3 growth of no more than 1%, with a further decline to 0.3% in the last quarter.

What will come as music to commercial ears is the opinion that growth will still be sufficient to "deliver the economy out of deflation".

Data sourced from: The Wall Street Journal Online; additional content by WARC staff