The economy grew a real 1 percent in the April-June quarter, the highest level of quarterly growth since the real 1.3 percent rise in the October-December quarter of 2000, the government said Wednesday.

The April-June expansion was greater than the 0.6 percent growth reported initially, according to data released by the Cabinet Office. It represented the sixth straight quarterly increase.

The figures also indicate that the world’s second-largest economy is staging a recovery, the Cabinet Office said.

The 1 percent growth, measured in terms of gross domestic product, translates into an annualized growth rate of 3.9 percent, according to the data.

This constitutes an upward revision from the 2.3 percent growth reported earlier.

On a nominal basis, GDP for the April-June quarter grew 0.3 percent, up from the 0.1 percent expansion reported on a preliminary basis.

Nominal GDP grew 0.009 percent in the January-March quarter.

The office attributed this GDP expansion to brisk capital investment, especially among midsize companies capitalized between 10 million yen and 100 million yen.

The rise in capital investment was revised upward to 4.7 percent from 1.3 percent in real terms, while the increase was revised upward to 2.7 percent from 0.5 percent on a nominal basis.

The real 1 percent expansion in GDP means that even if growth remains flat for the remaining three quarters, it will stand at 1.9 percent for fiscal 2003, well above the government’s target of 0.6 percent, the Cabinet Office said.

But the GDP deflator, a major inflation barometer, dipped 2.5 percent in the April-June quarter on a year-on-year basis, against the 2.1 percent decline cited in the preliminary report.

This marked the deflator’s 21st consecutive fall on a year-on-year basis.

Chief Cabinet Secretary Yasuo Fukuda said the government is pleased with the latest GDP data, which show that Japan’s economy “appears to be on a steady path to recovery.”

“It’s a welcome development, especially with the fact that the upward revision was brought about by private-sector capital expenditure,” Fukuda told a news conference.

But Fukuda also cited the disparity between capital investment growth rates and personal spending.

According to the revised data, personal spending, which accounts for about 60 percent of Japan’s GDP, rose a real 0.4 percent, up from the 0.3 percent increase envisioned in the preliminary report.

“Such an imbalance has to be corrected,” he said. “We are not overly optimistic.”

Meanwhile, housing investment contracted 0.3 percent, a slight improvement from the 0.4 percent decline reported initially.

Exports rose 0.8 percent, marking a downward revision from the 1 percent increase cited in the preliminary report. Meanwhile, imports shrank 1.6 percent, marking a downward revision from the 1.1 percent decline reported initially.

Takahide Kiuchi, a senior economist at the Nomura Research Institute, said that the annualized growth rate of 3.9 percent in real terms “surpassed expectations and is a fairly strong figure.”

Domestic demand led this growth, particularly demand from businesses that had previously reined in their capital spending, Kiuchi said, citing replacement demand for semiconductor-manufacturing devices as one of the main items driving up capital expenditure.

“Exports have begun to pick up (following the April-June quarter) and the Japanese economy is expected to be propped up by exports and capital spending toward the end of the year,” he said.

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