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The nation’s economy grew by a less-than-expected 0.3 percent in the April-June quarter, the government said Friday, but economists said better business and consumer spending, along with strong exports, suggest Japan’s recovery this time may last.

Japan’s price-adjusted gross domestic product has now grown for three straight quarters. The latest quarterly GDP figure translates into an annualized rate of 1.1 percent, the Cabinet Office said.

“Consumption is good, capital spending is good, exports are strong,” said Takehiro Sato, senior economist at Morgan Stanley Japan. “Inventories fell, but this just means Japan is crouching now before the spring, which will last through 2006.”

Household consumption rose 0.8 percent in real terms from the previous quarter, while business spending rose 2.2 percent in the same period.

Exports slowed in January-March due to slackening demand in China, but overseas demand recovered in the reporting quarter, due to a rise in car sales in the United States.

“I’m looking for potential weaknesses in the economy, and the only real risks I see going forward are external or political,” said Masaaki Kanno, managing director of economic and rates research at J.P. Morgan Securities Asia. “I think it’s safe to say that growth will continue.”

Inventory adjustments dragged GDP down 0.5 percent in the April-June quarter. Without them, real GDP would have grown an annualized 3.1 percent.

Information technology firms are preparing for future drawdowns in inventory, but they won’t be enough to dent the pace of recovery, Kanno said.

The release of the GDP figures comes on the heels of optimistic assessments issued Tuesday by the Cabinet and the Bank of Japan. Both declared the economy was about to “come out of a lull.”

Friday’s data seemed to confirm that view. Private-sector spending, which accounts for some 60 percent of the economy, rose 0.7 percent in the April-June quarter. Incomes are growing and the job market is improving as companies’ earnings rise, said Takashi Imamura, chief economist at Marubeni Research Institute.

But it’s too early to say that the recovery is sustainable, because Japan remains heavily dependent on overseas demand, he said.

“I’ll believe the hype when household spending can maintain a quarterly growth rate of 2 percent,” Imamura said, pointing out that household spending remains vulnerable to a downturn in wages or government discussion about future tax hikes.

Meanwhile, deflation remains entrenched. The GDP deflator fell 0.8 percent from the same quarter a year earlier.

This prompted Heizo Takenaka, minister for economic and fiscal policy, to say Friday that “persistent” deflation continues to affect the economy and that both the government and the Bank of Japan will need to enhance cooperation to bring about growth of around 2 percent in fiscal 2006 on a nominal basis.

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