The world's second-largest economy expanded an annualized 2.6 percent in the three months ended Sept. 30 from a revised 1.6 percent contraction in the previous period, the Cabinet Office said in Tokyo today. The median forecast of 41 economists surveyed by Bloomberg News was for a 1.8 percent increase.
Consumer spending, accounting for more than half the economy, grew 0.3 percent from 0.2 percent in the second quarter. The Bank of Japan is expected to keep interest rates on hold today as the biggest drop in housing construction in a decade and slowing exports weigh on growth.
The yield on the benchmark 10-year bond fell 2 basis points to 1.495 percent, the lowest since February 2006, at 11:06 a.m. in Tokyo. The yen traded at 110.25 against the dollar from 109.63 before the report was released.
From the previous quarter the economy grew 0.6 percent, more than the 0.5 percent forecast by economists. Second-quarter growth was revised from an earlier estimate of an annualized 1.2 percent contraction.
Consumer spending is at risk of weakening because wages fell in nine of the 10 months to September and unemployment rose to 4 percent from 3.6 percent two months earlier.
Bank of Japan Governor Toshihiko Fukui and his policy board conclude a two-day rate-setting meeting today. None of the 37 economists surveyed by Bloomberg News expect the bank to raise its key rate from 0.5 percent, the lowest among the 30 members of the Organization for Economic Cooperation and Development.
Net exports, or the difference between exports and imports, contributed 0.4 percentage point to growth, less than the 0.5 percentage point expected by economists. Capital spending added 0.3 percent to growth.
Investment in housing fell 7.8 percent from the second quarter after the government enforced stricter rules for building permits in response to a 2005 scandal involving faked earthquake-engineering data.