Japan's economy rebounds after quake

Gross domestic product grew by 1.5% in the three months to the end of September, compared with the previous three months, the Cabinet Office said.

The gain comes after three quarters of contraction, and indicates an annualised rate of growth of 6%. However, some analysts said the strength of the yen and global economic problems may hurt further recovery. Japan's economy was dragged into a recession after the earthquake, which caused severe damage to the northeast of the country.

It also damaged factories and disrupted supply chains. However, the latest figures show that exports are improving, helping economic growth pick up. Net exports accounted for just over a third of the growth in the third quarter, according to the Cabinet Office data.

"The return to growth in the third quarter reflects the recovery in supply chains, which lifted factory output and consumption," said Yasuo Yamamoto from Mizuho Research Institute. However, analysts said there were a number of threats to Japan's fragile recovery. Problems include the strength of the yen, slowing global growth and the impact of the floods in Thailand on the supply chain of Japanese exporters.

"Growth in the fourth quarter is likely to slow partly due to the flooding in Thailand," said Yamamoto. "External demand isn't likely to contribute much to Japan's growth in the future due to Europe's problems." This view was backed up by Hiromichi Shirakawa of Credit Suisse who said in a report that Japan's economy had "already lost upward momentum since August".