Japan's economy is back to pre-earthquake levels, as capital and consumer spending rises.

The cabinet office said gross domestic product grew by a revised 1.2 per cent in the first quarter of the year from the previous three months, up from a preliminary figure of one per cent expansion.

In an effort to boost the economy, public works projects pay the salaries of workers rebuilding the northeast, while companies receive grants and near zero-interest loans to build factories and keep jobs in Japan.

Shoppers receive discounts to replace their cars and appliances with more energy efficient models.

Yet this may all come to an end if the prime minister sees through his plan of raising sales tax from five per cent to 10 per cent.

As far as ratings companies are concerned, however, Japan has no choice, as it owes more than twice what it earns.

Al Jazeera's Mike Firn reports from Tokyo.

Source: Al Jazeera English