Gross domestic product expanded an annualized 3.5 percent in the three months ended Dec. 31, the Cabinet Office said today in Tokyo, faster than the 2.3 percent median forecast of 27 economists surveyed by Bloomberg News. The government's initial estimate in February was for 3.7 percent growth.
The yen rose after the report damped speculation that the Bank of Japan would cut interest rates later this year to revive economic growth. The Nikkei 225 Stock Average jumped the most in a month on speculation the U.S. Federal Reserve's decision to pour as much as $200 billion into the financial system will help exports to Japan's biggest market.
The yen rose to 103.08 at 10:38 a.m. in Tokyo from 103.40 before the report was published. The Nikkei climbed 2.7 percent.
The economy, the world's second largest, grew 0.9 percent from the previous quarter, unchanged from the government's initial report on Feb. 14.
Net exports, or the difference between exports and imports, added 0.5 percentage point to growth, more than the 0.4 percentage point first reported.
Investment in factories and equipment grew 2 percent from the previous quarter, less than the preliminary estimate for a 2.9 percent gain. The cut reflected a Finance Ministry report last week that showed businesses pared spending in the period.
Consumer spending rose 0.2 percent, unchanged from the preliminary survey.
Emerging economies, the destination for more than half of Japan's exports, helped shipments abroad quicken in January even as U.S. sales fell for a fifth month. Machinery orders from overseas rose to a record in the month.
Housing investment plunged 9.3 percent last quarter, today's report showed. Housing starts have since begun to recover from the change in regulations that caused a logjam in the issue of building permits in the second half of 2007.
The central bank's benchmark overnight lending rate is 0.5 percent, the lowest among major economies. Today's figures came as a stalemate in parliament threatens the government's ability to find a replacement for Bank of Japan Governor Toshihiko Fukui, whose term expires in a week. Parliament's upper house today rejected Toshiro Muto, the government's nominee to replace Fukui as governor, increasing the risk of a leadership vacuum.
While exports have kept growing, profits are being squeezed by a stronger yen as well as record oil and raw-material costs. Wholesale inflation accelerated to the fastest in 27 years in February, the Bank of Japan said today. Corporate earnings fell last quarter, last week's Finance Ministry report showed.