Japan economy grows faster than expected in Q1 as firms ramp up capex

By Tetsushi Kajimoto and Leika Kihara

TOKYO (Reuters) - Japan's economy expanded more than initially expected in January-March on solid growth in capital expenditure, underscoring the central bank's view that a recovery from last year's recession is gaining momentum.

The economy grew an annualised 3.9 percent in the first three months of this year, Cabinet Office data showed on Monday, more than a preliminary estimate of a 2.4 percent gain and exceeding a median estimate for 2.7 percent growth.

Capital spending rose 2.7 percent from the previous quarter, much more than a preliminary 0.4 percent increase and bigger than a 2.3 percent expansion projected in a Reuters poll.

The data is welcome news for the government and the Bank of Japan, which are hoping that expectations of a steady economic recovery will spur companies and households to boost spending.

A pick-up in capital expenditure is key for the success of premier Shinzo Abe's stimulus policies, which aim to reflate the economy out of stagnation by changing companies' perception that deflation will persist.

On a quarter-on-quarter basis, the economy grew 1.0 percent in the first quarter, more than a preliminary reading of a 0.6 percent increase and a median estimate of a 0.7 percent growth.

(Editing by Eric Meijer)