1st LD Writethru: Japan revises economic growth up to 3.9 pct in Q1

Japan's economy expanded at a faster- than-expected pace in the first quarter owing to increased corporate capital spending, underpinning the view of the Bank of Japan that the economy is on a recovery track with the downside effects of last year's consumption tax hike, the Cabinet Office said Monday.

The economy grew an annualized 3.9 percent in the January-March period this year, the Cabinet Office said, ahead of a preliminary estimate of a 2.4-percent expansion made in May, marking the second successive quarter of expansion following a tax hike triggered contraction last year in the six months to September.

The latest government data showed that corporate capital spending marked a significant uptick, a boon for the central bank which believes that increases business spending is key to the nation's economic recovery and will spur more consumer and household spending.

Business investment, according to the revised data, rose 2.7 percent from the previous quarter, beating a preliminary estimate of 0.4 percent growth.

"In the long run, we see firms' capital spending picking up. Firms' appetite for business investment is solid, underpinned by positive earnings," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

But private consumption, which contributes 60 percent to overall GDP, gained an unchanged 0.4 percent, as households remain frugal due to only minimal wage increases despite the government's recent push for companies to increase base salaries.

The revised data also showed that housing investment grew 1.7 percent, from an initial 1.8-percent increase, while exports expanded 2.4 percent and imports increased 2.9 percent, unchanged from initial projections. Endi