"It's 'green shoots' in the sense that if you throw large amounts of fertiliser on very barron soil you may get something coming through"

Steve Keen,
University of Western Sydney

Steve Keen, associate professor of economics and finance at the University of Western Sydney, told Al Jazeera there was little sign as yet that the recovery was sustainable.

"It's 'green shoots' in the sense that if you throw large amounts of fertiliser on very barron soil you may get something coming through," he said.

"But this is in response to the largest coordinated fiscal stimulus in global history and to come up with a growth figure as small as this – 0.9 per cent - is a fairly anaemic response to a large amount of fertiliser."

Japanese investors were pessimistic about the news, with the benchmark Nikkei index down 3.1 percent on Monday in its biggest one-day fall in nearly five months.

Analysts said investors were locking in profits after the GDP announcement failed to produce a positive surprise.

The Japanese economy had sunk to its worst ever quarterly contraction in the three months to December last year, when its GDP, or the value of a nation's goods and services, shrank at an annual pace of 13.1 per cent.

Economists warn the recovery may founder if high unemployment persists [EPA]
But manufacturers have benefited from recovering demand in China and other emerging markets while government cash handouts and incentives to boost the purchase of ecological products have also helped.

Exports grew 6.3 per cent quarter-on-quarter, marking the highest growth since the second quarter of 2002 when Japanese shipments expanded 6.4 per cent.

Kyohei Morita, an economist with Barclays Capital, told the AFP news agency that "this is still a recovery underpinned by government policy measures and far from a self-sustaining turnaround".

Export-dependent Japan was hard-hit by the global financial crisis as demand for its cars and electronics dried up in many industrialised countries.

Jobs cut

Major companies such as Toyota and Sony cut back on production and slashed thousands of jobs, causing the country's jobless rate to hit 5.4 per cent in June, a six-year high.

That unemployment figure continues to worry politicians and economists, who warn that the recovery could quickly run out of steam because salaries are plunging and the lift in spending from ecological incentives is not expected to last for long.

Compensation for employees dipped 1.7 per cent in the April-June quarter, while consumer spending edged up a weak 0.8 per cent.

Hiroshi Watanabe, an economist with Daiwa Institute of Research in Tokyo, told the Associated Press that "with payments falling, it's really hard to expect individual spending to hold up".

Yoshimasa Hayashi, the economy and fiscal policy minister who said the economy has been recovering despite the "tough environment", conceded that "risk factors" remain, including high unemployment and sluggish production, Kyodo News reported.

Still, the rebound is welcome news for Taro Aso, the prime minister, whose long-ruling party risks being swept from power in an election at the end of this month amid discontent about the country's worst recession in decades.