JapanÔÇÖs economy grows, but will sales tax hike curb future spending?

The country’s GDP rose 1.5 percent in the January-to-March period, against a revised 0.1 percent in the prior quarter. The figure, led by a rise of 2.1 percent in consumer spending, beats previous forecasts of 1.0 percent growth and came ahead of a sales tax increase introduced at the beginning of April. Capital spending by businesses also outperformed, rising by 4.9 percent, which was more than double analyst expectations.

Private consumption accounts for about 60 percent of Japan's economy, however, economists have warned that spending may taper off now that the April tax hike has been introduced.

"Japan's economy expanded rapidly ahead of the sales tax hike, but is set to slump thereafter," Marcel Thieliant, Japan economist at Capital Economics, said. "Looking ahead, the economy will certainly contract in the second quarter of the year, as consumers rein in spending after the tax hike, and residential investment is set to plunge."

Japanese Prime Minister Shinzo Abe has been trying to revive growth in the world's third-largest economy. His policy of "Abenomics" has helped Japan's economy grow faster, but concerns remain about whether the recovery is durable.

Figures released earlier this week highlight that exports grew six percent quarter-on-quarter as a weaker yen made Japanese goods cheaper to overseas buyers.