Getting the Japanese back into the shops will help drive the recovery

Imports rose 6.5% from February and 12% from a year earlier lifted by demand for European-made cars and electronics.

Exports gained 1.3% from the previous month and 13% on the year. Sales of cars, chips and steel, especially to China, were the main drivers of growth.

The Bank of Japan said there was "no question" of the economy stalling.

Wary

The bank's governor Toshihiko Fukui sounded a cautious note, however, warning that any recovery this year was unlikely to continue at its previous breakneck pace.

Growth in the first three months of this year had probably slowed from the 6.4% expansion rate seen in the fourth quarter of 2003, he said.

Follow the ups and downs of the Nikkei index

Miyako Suda, a BoJ board member, was even more wary, adding that the rebound would be limited and consumer spending is likely to remain flat.

She cited higher raw material costs that may prompt companies to delay hiring and cap wage increases.

That may not be too much of a problem, economists said, as long as export growth continues. That way, any increase in consumer spending would act as a bonus.

"Imports were higher than expected, but if you take out that factor, it's clear that exports remain the a main driver of Japan's economic recovery," said Soichi Okuda of Sumitomo.

Spending spree?

Domestic demand has been one of the missing ingredients in Japan's rebound, but that may now be set to change.

Recent surveys have indicated growing optimism among Japanese companies about the outlook for their businesses, while Japanese consumers also seem more upbeat.

Japanese shares, meanwhile, are doing well, with the benchmark Nikkei index continuing a run that saw it have the best year for more than two decades in 2003.

Earlier this month, Economy Minister Heizo Takenaka said that growth for the financial year just ended might have been 3% - well up on the government's 2% forecast.